How to pick stock (part 8)

Cash flow statement

Cash flow statement is increasinly important when you come to do the analysis. Basically it is divided by three elements,

CFO - operating cash flow
CFI - investing cash flow
CFF - financial cash flow

Of course, with these three elements, we are able to tell which stages is the company now. For a company which CFO minus CFI equal positive means that it has a very strong cash flow to support it, and it has some certain competetive advantage so that other competitor cannot overtake it.

With the positive cash flow, the management can decide whether to invest in bigger project or return back the excess cash to the shareholders.

So far from what I observe, cash flow statement is the most accurate part in the financial statement. I would strongly recommend you to focus more on this part.