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In this post we will understand the pitfalls of using EBITDA as a barometer of  a company's business strength and will also understand how Cash Flow from Operations and FCF can help to have better insights in a  company's business strength Analysts often use EBIDTA to evaluate company financials. EBIDTA is essentially earnings before interest, tax, depreciation and amortization and is commonly referred to as operating profit. The operating profit is a measure of how well a company is able to manage expenses in running the day-to-day operations. But EBIDTA may not give the complete picture of a company's business strength.  More often than not companies try to dress up financial statements using EBIDTA and such companies are more likely to do fraudulent transactions.  Since EBIDTA excludes a number of non-cash charges, it does not give a true picture of a company's financial standing . One of the non-cash charge excluded is depreciation. In reality, depreciation entai...

Q.1  What does one mean by Family Business ?  Ans : Family Business refers to a company /firm where the majority voting rights are in the hands of the controlling family; including the founders who intend to pass the business to their descendants. Q.2 What are the strength of  Family Business ?  Ans :  Several studies have shown that family-owned companies outperform their non-family counterparts in terms of sales, profits, and other growth measures. 1.Commitment . The family—as the business owner—shows the highest dedication in seeing its business grow, prosper, and get passed on to the next generations. As a result, many family members identify with the company and are usually willing to work harder and reinvest part of their profits into the business to allow it to grow in the long term VCS TIP -  We  have observed that the commitment level keeps on reducing as the generations pass unless something concrete is done to maintain such high levels of Co...

I n a welcoming ruling favoring women in the country, the Income Tax Appellate Tribunal (ITAT), Jaipur on 21st Oct 2021, has held that penalty under section 271D of the Income Tax Act, 1961 cannot levied on wife for receiving money from her husband for purchase of family property.  The Tribunal bench comprising Judicial Member Sandeep Gosain and Accountant Member Vikram Singh Yadav was considering an appeal filed by an individual assessee Smt Meeradevi Kumavat, against the penalty order passed by the income tax authorities which was later confirmed by the first appellate authority. "Women’s purchase of asset should be seen as an empowering measure: ITAT - Jaipur" If a woman has borrowed money from her husband to buy a property, it will not attract a tax penalty, the Income Tax Appellate Tribunal (ITAT) has ruled. This is the second woman-friendly ruling by the tribunal, the first being the precedent set by ITAT, Agra that cash deposits up to ₹2.5 lakh made by housewives durin...

What is Debt ? Debt mean a loan, a liability that you need to pay legally, no matter whether you have the resources to pay it or not. Debt, when managed prudently, can help you accomplish your financial goals and satisfy your needs. That said, one small misstep and you can quickly find yourself trapped under mounting debt. In addition to causing you loads of financial stress, overwhelming debt can also significantly affect your mental health. Such high levels of debt are what most financial experts call a ‘ debt trap .’  What is meant by a debt trap ? Technically, a  debt trap  is a situation where you’re forced to take fresh loans to repay your existing debt obligations. And before you know it, you get stuck in a situation where the amount of debt that you owe takes a turn for the worse and spirals out of control. Such a situation typically arises when your debt obligations exceed your repayment capacity.  For instance, when the income that you generate is not enoug...

In this post I have listed down some STEPS. TIPS to be considered while doing Equity Analysis.I have assumed that the reader is well aware of Fundamental &Technical Analysis along with Valuations -   1. Separate the business from the balance sheet        How is the business capitalized? Is it sustainable? Is it relatively efficient/optimal?         What are the assets worth? Liquidation value and reproduction value         Are there any “hidden” assets or liabilities?         Excess cash, real estate, LIFO, etc.         Pension, legal liability, litigation, operational malfeasance, funding/liquidity puts, etc. 2. Separate the business from the cash flows        What are the cash flows saying, regardless of the broader business stereotypes/assumptions?        How much cash can be taken out of the business every year? Owner’s earning (net inc...

  Many of us have this question .So, let me start by listing some details of the two instruments. The  Employees’ Provident Fund , or EPF, is a retirement fund for organised sector employees, managed by the Employees’ Provident Fund Organization, or EPFO. Under the EPF scheme, a salaried employee pays 12% of basic salary (plus dearness allowance) every month, and an additional 12% is contributed by the employer. In total, 24% goes towards the EPF account. The interest rate is currently fixed at 8.5%. The  Public Provident Fund , or PPF, is a government-backed small-saving scheme. Though started in 1968 with the objective of providing social security during retirement to workers in the unorganized sector and for self-employed individuals, it has become a very popular tax-saving instrument. The interest rate is 7.1%; this is fixed every quarter. Are these debt instruments? A debt investment is one that offers a fixed return to the investor with a promise to repay the princi...