Investment Valuation in India

Investment decisions often rely on Cash flows rather than profits. While profits are the key measure of financial success from an accountant’s perspective, finance professionals (especially investment analysts) prefer evaluating investment decisions based on cash flows. One may wonder that while studying Accounting (which is the first step in understanding finance) we were first introduced the concept of Cash Basis of Accounting where all receipts and payments were recorded, then we were told that the right measure of evaluating business performance was through Accrual Accounting. However, we’re again talking about Cash Flows – which is a subset of or is similar to Cash Basis of Accounting. Well, let’s not get into that right now as Life is hard to understand. But the concept of Cash flows is not. Let’s understand how the cash flows and profits are related First, as we have discussed already, Profits are arrived at based on Accrual basis of accounting. Revenues are reco

Check out this article on LinkedIn authored by me. http://www.linkedin.com/pulse/article/20140930022220-18488130-fundamental-analysis-where-to-search-for-information