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RandomInvestor

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Hey guys so I got a bunch of questions espically when it comes to the accounting stuff, I'm gonna try keep it on just this on post. I am still analyzing Dickers data, and looking at their annual report:

https://www.dickerdata.com.au/CMS/DD/media/DD/PDFs/DDR/77797-DD_AnnualReport-LR.pdf

Page 29

I made a post already about the negative numbers, but I don't get it on certain items, for example on that page we have:

Payments to suppliers and employees (inclusive of GST)

Interest and finance costs paid

Income tax paid

All of these are red in brackets which means negative is this good or bad?

If for example payments to suppliers and employees was positive number and say it was in 2009 500,000, then in 2010 1,000,000, wouldn't this be bad because we are paying more money?

What does the negative indicate then? Did they take out a loan in order to fulfill this obligation?

Also income tax paid is also negative how does that make sense ? Thanks.
 
Hey mate

I think you're getting yourself tied up in knots here.

Take a step back and think about what you are reading. It's a statement of cashflows. All it's attempting to show is how much money came in and how much money went out of the business.

In this case, they received money from customers. That is the money came in to their bank account. They also received some interest on the money they have sitting in their bank accounts.

Every business has expenses. In this case the big one is paying their suppliers and employees. This item is negative and in red because money went out of the business. They have about $29m in debt which you can see on their balance sheet. This debt needs to be serviced which is represented by cash going out under "interest and finance costs paid". Finally, like any business that makes a profit the ATO wants their share of it. This is represented by income tax paid, which again is negative because cash left the company's bank account to pay the ATO.

In order to get operating cash flow, you take all the money that came in during the year (payments from customers + interest) and subtract all the money that went out (payments to suppliers/employees + finance costs + tax paid).

RandomInvestor said:
If for example payments to suppliers and employees was positive number and say it was in 2009 500,000, then in 2010 1,000,000, wouldn't this be bad because we are paying more money?
Click to expand...

No, if payments to suppliers and employees was a positive number that would mean your employees are paying you money to work there. And your suppliers are paying you to take their products.
 
McLovin said:
Hey mate

I think you're getting yourself tied up in knots here.

Take a step back and think about what you are reading. It's a statement of cashflows. All it's attempting to show is how much money came in and how much money went out of the business.

In this case, they received money from customers. That is the money came in to their bank account. They also received some interest on the money they have sitting in their bank accounts.

Every business has expenses. In this case the big one is paying their suppliers and employees. This item is negative and in red because money went out of the business. They have about $29m in debt which you can see on their balance sheet. This debt needs to be serviced which is represented by cash going out under "interest and finance costs paid". Finally, like any business that makes a profit the ATO wants their share of it. This is represented by income tax paid, which again is negative because cash left the company's bank account to pay the ATO.

In order to get operating cash flow, you take all the money that came in during the year (payments from customers + interest) and subtract all the money that went out (payments to suppliers/employees + finance costs + tax paid).



No, if payments to suppliers and employees was a positive number that would mean your employees are paying you money to work there. And your suppliers are paying you to take their products.
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Yeah I think I am getting tied in knots finance is some confusing stuff. Oh I think I get it! So on statement of cash flows it showing money going in and out. Red is negative and means money going out of the business, and normal numbers is money going into the business?

I need to learn some accounting basics, I was doing it before but was quite boring.
 
McLovin said:
Yes. Exactly. They usually just use brackets to indicate negative, not red.
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Ah ok thanks a bunch man you are seriously a legend. One very last thing I am still reading the annual report does this negative numbers cash going out and positive numbers cash going in, rules also apply when reading other financial statement or only the cash flows?
 
RandomInvestor said:
Ah ok thanks a bunch man you are seriously a legend. One very last thing I am still reading the annual report does this negative numbers cash going out and positive numbers cash going in, rules also apply when reading other financial statement or only the cash flows?
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it's accounting standard and applies uniformly to all financial statements.
The only proviso: the red colour is not mandatory. Brackets or a minus sign (an older standard even allowed the minus being placed AFTER the amount) will do. Not everybody has a colour printer.
 
pixel said:
it's accounting standard and applies uniformly to all financial statements.
The only proviso: the red colour is not mandatory. Brackets or a minus sign (an older standard even allowed the minus being placed AFTER the amount) will do. Not everybody has a colour printer.
Click to expand...

Ah ok yeah I saw that just now, thanks :)
 
RandomInvestor said:
Ah ok thanks a bunch man you are seriously a legend. One very last thing I am still reading the annual report does this negative numbers cash going out and positive numbers cash going in, rules also apply when reading other financial statement or only the cash flows?
Click to expand...


Note too that not all outflow are bad, particularly the outflows stated in the Statement of Cashflows.

I mean, bills got to be paid, employees better be paid etc.

So what you'd want to look for are businesses where the net operating cash flow is positive (it's making income after operating expenses), then this net operating income more than able to pay the other investing and financing cash.

In general, you don't want to see too much positive inflow in financing, not year after year; you'd want to see more negative investing (depends on business, but it's good that a business invests).
 
I suggest you try reading the book I linked you to in another thread, you seem to be making a habit of starting threads to ask the most basic of maths/accounting/finance question and its pretty obvious its an area you need significant self education. Hope that doesnt come across as snarky, but honestly you come across as being a long way from being in a position to make any investment decisions.
 
galumay said:
I suggest you try reading the book I linked you to in another thread, you seem to be making a habit of starting threads to ask the most basic of maths/accounting/finance question and its pretty obvious its an area you need significant self education. Hope that doesnt come across as snarky, but honestly you come across as being a long way from being in a position to make any investment decisions.
Click to expand...

A person got to start somewhere, Mr. Learner.

We aren't all born with Damodaran's Discounted Cash Flow excels. :D
 
galumay said:
I suggest you try reading the book I linked you to in another thread, you seem to be making a habit of starting threads to ask the most basic of maths/accounting/finance question and its pretty obvious its an area you need significant self education. Hope that doesnt come across as snarky, but honestly you come across as being a long way from being in a position to make any investment decisions.
Click to expand...

Ah ok thanks for feedback. My maths is pretty bad I been working on it. Also I'm a beginner investor so I'm not going to be asking advanced questions. Or should I already know this stuff?
 
We all have to learn most of it, school doesnt teach much in the line of finance and economics so if you dont have a tertiary background in the area then you have to start from the beginning. Maybe I did come across as too harsh, but I sort of get the feeling that a lot of the questions you are starting separate threads for, could be found with a little google fu! Maybe one thread for all your questions might make more sense? Then if you cant find the answer to something online you can add it to the thread.

As you implied in your pm to me, questions and discussion are the life blood of a forum so I dont want to appear rude, or to be suggesting that you shouldnt post questions, but a separate thread for each question is probably unnecessary.

Its great that you want to learn - and that you recognise there is a level of knowledge you should have before you start investing - that already puts you well ahead of the pack. There are also some great investing threads here on ASF you could learn from, there is a fantastic one started by craft about DCF valuations that helped me a lot.

https://www.aussiestockforums.com/threads/present-value-of-future-cash-flows.23385/
 
galumay said:
We all have to learn most of it, school doesnt teach much in the line of finance and economics so if you dont have a tertiary background in the area then you have to start from the beginning. Maybe I did come across as too harsh, but I sort of get the feeling that a lot of the questions you are starting separate threads for, could be found with a little google fu! Maybe one thread for all your questions might make more sense? Then if you cant find the answer to something online you can add it to the thread.

As you implied in your pm to me, questions and discussion are the life blood of a forum so I dont want to appear rude, or to be suggesting that you shouldnt post questions, but a separate thread for each question is probably unnecessary.

Its great that you want to learn - and that you recognise there is a level of knowledge you should have before you start investing - that already puts you well ahead of the pack. There are also some great investing threads here on ASF you could learn from, there is a fantastic one started by craft about DCF valuations that helped me a lot.

https://www.aussiestockforums.com/threads/present-value-of-future-cash-flows.23385/
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No problem man. Since you haven't noticed this is already all on one thread :p I'm not making any more threads relating to accounting keeping it all here. Also did you even read my first post lol? I said I'll keep it on one post.

I also already spoke to McLovin about this.
 
Guys quick question I am reading an annual report on Xero and it doesn't show net income on its income statement, usually then I would refer to net profit after tax or earnings but that doesn't show either. Why do companies leave out information like this?

I can search it manually but am I supposed to do that? Thanks.
 
It doesnt show income because it didnt make any. It made a signifcant loss...again.

The income statement shows the income in every AR, a negative income is a loss!

Once again I am more than a little bemused that you couldn't work this out just from a glance at the financials in the AR. I am not trying to belittle you but that is a pretty obvious thing that you appear to have completely missed. As I have mentioned before it makes me think you are a long way from making decisions about investing in shares at this stage.
 
galumay said:
It doesnt show income because it didnt make any. It made a signifcant loss...again.

The income statement shows the income in every AR, a negative income is a loss!

Once again I am more than a little bemused that you couldn't work this out just from a glance at the financials in the AR. I am not trying to belittle you but that is a pretty obvious thing that you appear to have completely missed. As I have mentioned before it makes me think you are a long way from making decisions about investing in shares at this stage.
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For now I am just practicing, also Galumay there is alot of small things that I don't know but it doesn't matter because it can be quickly learned, there is alot of things I do know. Doesn't mean I am clueless if I don't know a few things ( I know you didn't imply this, just saying) alot of these stuff I wasn't taught or never stumbled across in books or anything so I end up discovering these things on the way.

Also what figure am I supposed to be looking at? Is it net loss?
 
RandomInvestor said:
For now I am just practicing, also Galumay there is alot of small things that I don't know but it doesn't matter because it can be quickly learned, there is alot of things I do know. Doesn't mean I am clueless if I don't know a few things ( I know you didn't imply this, just saying) alot of these stuff I wasn't taught or never stumbled across in books or anything so I end up discovering these things on the way.

Also what figure am I supposed to be looking at? Is it net loss?
Click to expand...

Another lesson is to never really need to explain yourself to anyone.
 
dannycoyne said:
Hey mate! If you have any doubts on accounting process and everything, maybe you could ask for professional help though. You can look for help here for accounting tips.
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Or use DangInvestor where you just enter the financial statement data and have it all charted, with tips for interpretation, analysis and valuation. :xyxthumbs

I thought it's awesome. And that's not just because I wrote it :D
 
Hey guys I got another question so I am currently learning accounting basics and something doesn't make sense it says "
When a company receives cash, the Cash account is debited.

When the company pays cash, the Cash account is credited.
"

But then it says

"
A debit is an accounting entry that either increases an asset or expense account,
or decreases a liability or equity account. It is positioned to the left in an accounting entry.
A credit is an accounting entry that either increases a liability or equity account, or decreases an asset or expense account."

Then I am doing a quiz and it says "Generally when an expense is involved in a transaction, an expense will be" debited or credited? The answer is debited but how? Shouldn't it be credited since an expense is money going out you are paying for something?
 
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