Earnings Per Share May Be Dangerous To Your Financial Health

Earnings Per Share May Be Dangerous To Your Financial Health [pub company health]

There's a serious and completely preventable problem occurring in the financial investing arena these days.

This threat to one's financial well-being comes from the sole focus on "earnings per share" triumphantly trumpeted by companies in their quarterly financial press releases. And the financial media doesn't help any with their superficial thirty second blurbs informing the investing public of the same thing. Even more alarming is that this novice mistake is frequently made by "expert" and "veteran" investors, as well.

The unfortunate truth is, failure to address this common oversight can cause painful repercussions to your investing portfolio. And also hinder you from identifying companies worthy of your long-term financial best interests.

What is this critical investing component? It's the Cash Flow Statement, kin to the more popular balance sheet and income statement. How does the free cash flow statement help you with your investing oversight? A company's free cash flow helps to answer three very fundamental questions - When to buy? When to sell? And at what prices?

The fact is, free cash flow is what should be monitored first and foremost as a shareholder in any business. Most everyone knows that "cash is king". Free cash flow is the lifeblood of any company. [pub company health]

The problem when paying sole attention to "earnings per share" is that it is formulated using "generally accepted accounting principles". Commonly known as "GAAP", this accounting methodology is a flexible representation of the company's revenues and expenses, mainly formulated for tax reporting purposes. The sticking point is that "GAAP" consists of many non-cash items - sometimes considered as "accounting fictions". And because of the permissible leeway in how GAAP can be implemented, it's subject to manipulation.

In contrast, the cash flow statement is less prone to being manipulated than the other two financial statements. That's because it mainly boils down to what money came in and what money went out. Not unlike an individual's monthly budget.

When analyzing a company it's critical to understand how much cash flow it is earning from its operations. This amount represents the excess cash that can be taken out of the company to be used for dividend payments, share buy-backs, new investments and acquisitions; all activities geared to the benefit of shareholders.

With GAAP earnings on the other hand, companies often take significant "one-time" charges against current earnings, usually after some adverse event, like a company acquisition gone bad. As a result, future earnings are then susceptible to being inflated artificially.

The income statement also includes many non-cash allocations and accounting conventions that don't reflect a company's true cash position. [pub company health]

A further example of an ongoing non-cash "cost" is depreciation and amortization, which can add up to significant amounts. In reality, the cash has already been spent for these assets. GAAP adjusts these one-time payments over a period of years to smooth out the companies earnings over time so they don't appear too lumpy or erratic.

Another flaw might be using the balance sheet for liquidity analysis because the data represents only a specific period in time. By contrast, liquidity analysis derived from the cash flow statement can be used to provide a more dynamic picture of what cash resources are available, and can be evaluated over a chosen period.

One can also see whether cash spend is at levels that the company is going have to incur debt, slow its spending rate, or both. This is especially important for new companies that are not generating profits yet. Do they have enough cash to remain in business?

Changes in cash flow can be reveal much about a company's accounting practices, too. Cases where cash flow is not rising, or declining, as fast as earnings may warn of possible accounting shenanigans.

These are just a few of the many insights and potential advantages that analyzing the cash flow statement will bring forth. And it's freely accessible at the Security and Exchange Commission's EDGAR financial statements web site.

by Scott Jackson

Use Press Releases in Your Internet Marketing Program

Use Press Releases in Your Internet Marketing Program [pub online company]

If you've ever felt reluctant to submit a press release because you weren't sure how to write an effective release, pay attention to the following advice. Writing a good press release is simpler than you may think.

A good press release is essentially a good news story. Any time your business releases a new product or does anything newsworthy you should create a press release to tell the world about it. The press release will be welcomed by journalists and internet writers whose job it is to educate and inform. They will either use your press release intact or use it as the basis for an article that they will write about your news and your company. The result? Publicity, credibility, and a stream of customers.

Therefore, you'll want to write as many press releases as you can. A good press release can be more valuable than an advertisement, generating more potential customers. [pub online company]

The elements of a good press release include three essential parts, the headline, the introduction, and the body. It is recommended that you put a lot of thought and attention into the headline. It should be informative and make the reader want to learn more. The introduction is short and interesting The body contains all of the who, what, where, why and when answers that a good news story requires. Since good news stories are people centered, these elements should be focused on the people aspect of the story.

Take care that the press release is timely, relating to something that has just occurred. It should also be brief and to the point, around 400 to 500 words in length. Be sure that the grammar and the spelling are standard and correct or else the press release will not be published. Lastly, make certain that the press release is factual and truthful.

It's a good idea to keep the paragraphs of the body short, about three or four sentences in length. This length will make the press release easier to read. Also, it is wise not to send extra material such as photos with the press release. If photos are important they can be posted on a website which is referenced in the body of the press release.

A couple of additional elements are commonly included at the end of good press releases. A short "about us" section provides some background information about your business and yourself. Some media contact information gives your contact person the information they need to be able to contact you. [pub online company]

The press release traditionally should close with the symbol, "###," which signifies that it is complete.

by Garry Gamber

My first post

This is my first post for Online PUB Companies!