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Cir ating Trading 2. 0 is a way of thinking that it captures fraudulent risks that show big sales by turning real-world transactions with multiple companies.
It is important for investors to check not only "sales growth", but also descriptions of sales cash flow, receivables and transaction contents.
If you decide only the appearance of sales, you may be able to see the weakness of cash collection and transaction.
Cir ating Trading 2. What is 0?
Cir ating trading is a trade where only sales are swelling because the products and services are substantially circulating.
Traditionally, paper s, overhead orders, unrealistic goods transactions were centered on.
On the other hand, circulating transactions referred to in this article 2. 0 refers to risks that are easy to occur in areas where it is difficult to recognize the actual body from outside such as advertising, points, digital products, business consignment, SaaS, and AI related services.
| See | Normal trading | Cir ating Trading Risks |
|---|---|---|
| Sales | Easy to collect cash | Easy to sell |
| Products | Clear physical and deliverables | Pro s are ambiguous |
| Company | Distributed | E er to specific destinations and agency networks |
| Profit | Business structure | Easy to understand |
The important thing is that sales grow.
Is the sales、d by actual demand, delivery, usage and cash collection?
Why investor is important
Sales growth is an indicator that is easy to base stock evaluation.
In growth companies, PER, PSR, growth rate, and future profits are evaluated based on the growth of sales.
If the sales look bigger than the actual situation, the following judgment will be distorted.
- Growth rate
- Profit
- Corporate Value
- Fundraising
- Evaluation of M&A
In the short term, the results may be seen better by circulating transactions.
However, the following effects will be easier after a覚.
- 決算訂正
- Stock Price
- Dec ed credit
- Increased audit costs
- Review of Internal Control
- Deterioration of relationships with business partners and financial institutions
For investors, it is not just an accounting point, but a risk directly linked to stock price and credit.
Three Points to See in Financial Results
1. View Sales Cash Flow
First of all, I want to check the sales cash flow.
The sales cash flow indicates how much cash was actually generated in the business.
If sales or profits are increasing, but sales cash flow may not be cashed.
Of course, growth companies may have a lower operating cash flow due to the increase of pre-investment and operational funds.
Therefore, we will check the following points side by side without judgement only one year.
| ation | Reasons to See |
|---|---|
| Sales | See how growth looks |
| Operating income | Check Accounting Profits |
| Cash Flow | Check the actual status of cash collection |
| Inc ing sales credits | Check the increase in unrecovered sales |
If sales growth and sales cash flow are out of long term, we would like to confirm the reason with the explanation.
2. View Account
Next is the receivable.
The receivable amount is the amount that has been recorded as sales, but has not yet been recovered.
If the receivable is higher than sales, check the following possibilities:
- Longer recovery sites
- High dependence on specific suppliers
- Sales at the end of the term
- Increased unrecoverable risk
- The timing on the sales record is too early
In particular, you need to look at the quality of your sales, as the receivables increase in rapidly growing companies.
Even though sales are increasing, companies that do not increase cash will increase the risk of recurring funds and additional procurement.
3. View Trade Details
Lastly, the description of the transaction.
The expression of "marketing support", "advertising operation", "business outsour。", "consulting" and "system usage fee" may be natural as business contents.
However, if the explanation is abstract, only sales are suddenly increased, I want to check the actual body.
The following points are:
| ation | Notes |
|---|---|
| Main Customers | Is it not biased to the specific destination? |
| Profit Reco tion | At what point is the sales record |
| Contact Us | Are there any upstream and downstream demands? |
| Related parties | Is it unbiased in the group or close to the relationship |
| Products | Is there a delivery record, usage record, advertising delivery record? |
The abstract word itself is not bad.
The problem is that there is no explanation of actual demand and recovery for sales scale and growth rate.
Checklist
When viewing the financial results, it becomes easier to organize by checking in the following order.
1. Is sales growing?
2. Does the sales cash flow grow?
3. Is the receivable amount more than sales?
4. the business partner is not biased to the specific destination
5. Is the description of the transaction specific
6. Is growth story and cash recovery matched?Even if you check this 6 points, the view of sales growth is quite different.
In particular, beginners are important to have a habit to see not only sales and operating income, but also cash flow statements and balance sheets.
- No investment decisions only with sales growth
- Check the sales cash flow, receivables, and customer concentration
- Quick growth companies with a large number of abstract trade names look carefully
- Check the growth story and cash collection
- Behavior: Check sales and sales cash flow by financial statement
Cir ating Trading 2. 0 risk is an area that is difficult to see completely from the outside.
That’s why investors need to check their cash, collection and transaction status as a set instead of the size of their sales.
This article is an explanation of the purpose of education and is not recommended to buy or sell specific symbols.