Q&A: Comparing CFO and PAT, Frequency of Bull and Bear Market Cycles

Modified: 02-Jul-20

The current article in this series provides responses related to:

  • Comparing cash flow from operations (CFO) with net profits (PAT)
  • Frequency of bull and bear market cycles

 

Comparing cash flow from operations (CFO) with net profits (PAT)

Hello Vijay,

Could you please confirm how you relate Inventory and receivables with CFO & PAT?

As per my understanding PAT is outstanding balance from customer after sale of product, CFO is balance received against product sale.

I think it is very basic question but I don’t know how to relate this. I try to google it but I can’t understand.

Regards

Author’s Response:

Hi,

Thanks for writing to me!

The outstanding money to be received from product sales is called account/trade receivables. To understand the relationship between PAT and CFO, I would suggest you to read the cash flow statement in the annual report of any company, which would show step by step calculation of CFO from PAT/PBT.

This calculation would clearly show how the profits/funds get stuck in or get released working capital and the impact of depreciation. It would be a good learning exercise for you to understand in which cases PAT would be higher than CFO and in which cases it would be lower.

Read: Understanding Cash Flow from Operations (CFO)

In case after reading and analysing the cash flow calculation of company from its annual report, you have any query, then I would be happy to provide my inputs on your analysis and query resolution.

All the best for your investing journey!

Regards,

Vijay

 

Frequency of bull and bear market cycles

Respected Vijay sir,

In a time frame of 5 years how many bull & bear phases does the stock market face? The cycle is same or it changes?

Author’s Response:

Hi,

Thanks for writing to me!

There is no certainty of any fixed period of cycles. I do not try to adjust my investing pattern to match it with expected turn of business/market cycles and do not advise it to other investors as well.

Moreover, you may find many articles about it on the internet, which would have views of many other investors on market cycles.

All the best for your investing journey!

Regards,

Vijay

P.S.

 

DISCLAIMER

  • The above discussion is only for educational purpose to help the readers improve their stock analysis skills. It is not a buy/sell/hold recommendation for the discussed stocks.
  • I am registered with SEBI as an Investment Adviser under SEBI (Investment Advisers) Regulations, 2013.
  • Currently, I do not own stocks of the companies mentioned above in my portfolio.

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