Shortlist Quality Companies For Long-Term Investing

If you’ve landed on this page, it means you’ve searched for quality companies to invest in for the long term. In this article, we learn how to shortlist such companies. We’ll know the process of finding such stocks on our own. There are seven golden steps that will help us find shares of quality companies available […]

Return on Equity (ROE) – Understanding & Interpretation of The Ratio

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What is Return on Equity (ROE)? It is a financial ratio that is calculated by dividing net profit (PAT) by the total shareholder’s funds (Net Worth – NW) of a company. ROE is the measure of the company’s efficiency that highlights how well the company is using shareholder’s capital to yield net profits. Suppose there […]

ROCE Formula | Two Components | EBIT | Capital Employed

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ROCE (Return on Capital Employed) is a financial ratio. ROCE formula has two components, EBIT and Capital Employed. EBIT represents the profit, and Capital Employed represents the funds used to generate the profit. The ratio between EBIT and Capital Employed shows how much profit is being generated for every Rupee of the employed capital.  The […]

Sustainable Growth Rate (SGR): Deeper Understanding and Interpretation of SGR

Sustainable Growth Rate (SGR) is the growth rate that a firm’s current profit levels can sustain on its own (Self financeable growth). Suppose a company’s SGR comes out to be 8% per annum. It means the company can grow its sales, profit, share price at this rate just by reinvesting its earnings. For such a […]

Return On Invested Capital (ROIC) – Definition, Formula & Interpretation

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The invested capital is the total funds generated by the company by issuing equity and debt in the market. People who subscribe to equity are called shareholders, and the latter are bondholders or borrowers (like banks). The sum of funds raised through and bond is called invested capital. The return generated by the business on […]

Free Cash Flow (FCF) – Formula, Calculation & Types

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Free cash flow (FCF) is more valuable than the net profit (PAT) of a company. We will see how. To understand it, we will use a hypothetical example and calculate the free cash flow for an individual. Suppose you won a prize in a car rally. The gift is payable in cash worth Rs.5,00,000. But […]

Cash Flow Ratios: To Analyze Cash Sufficiency of Companies

We already have multiple financial ratios emanating from the balance sheet and profit and loss accounts. Why do we need to add cash flow ratios to the list? Profit and profitability are a measure of the company’s ability to yield cash. Cash is king. No matter how big the quantum of profit and profitability is, […]

Stock Selection Criteria – Fundamental Analysis For Beginners [A Guide]

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Value investors estimate the intrinsic value of stocks more accurately. But there are more than 5000 listed stocks in the market. Even the experts cannot go about calculating the intrinsic value of all stocks. What do they do? They apply stock selection criteria, to shortlist potential stocks. [Note: I got the inspiration for this article […]

Measure The Profitability – How To Tell If A Company Is Profitable?

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This article is about how to measure the profitability of companies. We will learn how to tell if a company is profitable. We’ll see which numbers can measure profitability. We can perform such an analysis by the use of ratios. These ratios highlight the ability of a company to generate profits relative to its sales […]

Operating Profit Margin: Its Utility In Stock Analysis of A Company

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Why operating profit margin is critical for investors? Because it highlights the profitability of operations of the company. A high operating profit margin is a strong indicator of an inherently profitable business. Investors always strive to buy stocks of such companies. Operating profit margin highlights the capability of the core business (its operations) to generate income for its creditors, taxman, and […]