Strong cash flow. But a business that generates negative cashflow is not a good business to invest in.

Quantus: profit is based on item called deprecitaiton. That expense is concocted and invented by accountants. Expense is based on what company paid for plane 20 years ago. But if we replace it new accounting entry: provision for income. If we replace it with provision for replacement cost of aircraft, expense increase. Cost higher. Expense 2 or 3 times higher-> we look at cash flow. ARB-> Bloke stock. 4 wheel drive. Something that is boring. Biggest ball bearer manufacturer in the world. Evaluate capital history. R/s between Qantas and its shareholder over 10 years. Red bar represents the debt Qantas has each year. Grey bar represents the equity that owners have contributed to the company. It is how much money you have put in to the company to keep it moving. Blue line is ROE. Green line is profit. Go back to 2002, say dont invest. Sole owner of Qantas. Put in 4.2b. Borrow 4.4b. Run the business and end of a year. Profit $439m. 10% ROE. Run for another decade. Capital reserve $4.2b. What we are trying to measure if we wanna own the biz for 10 years. Now 307m less than what you earned. Tipped in another $1.7b. Very bad. Put in more $ to earn less. Debt $6b as well. Telstra Corp: Debt and equity same 10 years ago. More debt, less equity. Why? Paid dividends > earnings. Not forecast to earn, profit then 10 years old. Interest rate is low, World printing money such that people are forced to find yield somewhere. Telstra second high yield. Calculate high payout ratio, Therefore, share price increase but not value. Embelton limited/EMB Makes hardwood flooring and distributes in Australia. Profit increase for the last 10 years. CEO 3rd generation. Intrinsic value increase. Trade by appointment. No liquidity. Funding surplus line to be above zero. Some co pay dividends> cashflow, acquired> cashflow. Cash flow ratio> 0.8 But if you find a biz that generates Elders Green line, find share price track performance of the biz. Share price collapse. Primarily biz spending more than it earns. Green line below zero. Tell u co borrow or raise capital. Great quality + attractive share price => reduce risk for permanent capital/loss. Cant mitigate risk but can reduce it a bit. ARB I.V increase every year. If it fell 10-15%, we would buy ARB. Does model quantitative? No qualitative. It does not matter who runs the boat. If they have big holes at the side, they will perpertually leak. Criteria: Little or no debt, net cash, positive earnings per share growth, ROE >20%, companies IV growing in the future.