Two key indicators of a company’s financial health

Wilson Asset Management

Wilson Asset Management

I find one of the best indicators of a company’s health is its ability to convert a majority of its accountings earnings to operating cash. Due to nature of accrual accounting and revenue recognition policies, statutory numbers can over or understate actual future profitability. It is a lot harder for a company to manipulate an operating cash number, which makes it a key number for investors to focus on. Free cash is also a very useful metric to watch as it demonstrates the company’s ability to finance growth and reinvestment within its current capital structure.


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Wilson Asset Management

Wilson Asset Management has a track record of making a difference for shareholders and the community for more than 20 years. As the investment manager for eight leading LICs – WAM Capital (ASX: WAM), WAM Leaders (ASX: WLE), WAM Global (ASX: WGB),...

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