Advantages & Disadvantages of Debt for Companies
Why do the big companies have debt? Are there disadvantages to being a debt-free company? Debt is Good or Bad for Companies? We often see companies carry debt on their balance sheet. For example, here is data for companies in the BSE-500 index. Out of all stocks in this index, only 19% are debt-free. About […]
Shareholder Equity – Meaning, Basics, Examples, & Interpretation
A more common term for shareholder equity is Net Worth. It is visible on the company’s Balance Sheet. This number highlights an approximate liquidation value, net of liabilities, of a company. It is the capital receivable at the hands of the shareholders after the company’s assets are sold and all debts are repaid. In terms […]
Price To Earnings Ratio [P/E] – Basics, Formula, Calculation, & Interpretation
P/E ratio in its basic form (trailing P/E) may not be as useful. But there can be multiple derivaties of it. P/E ratio seen through the lens of ‘earning yield’ or ‘PEG ratio’ gives good insights into price valuation. I personally love valuing high P/E stocks using the ‘forward P/E’ method.
Debt To Equity Ratio – Basics, Formula, Calculations, and Interpretation
The debt-Equity ratio (DE) is easy to calculate. But its interpretation is not as straightforward as we think. We generally assume that a DE ratio of 2 is acceptable. But for analysts, this number is too high. Let’s look at the DE ratio from an analyst’s perspective.
Bonus Shares and Stock Split: The Concept, Formula, and Examples
Bonus issue and stock splits make news for good companies. Long-term shareholders like this corporate action as it can increase the demand for their holding stock.
What is Value Investing? The Basics & Principles Explained For Beginners
With value investing comes a few synonymous terms like reading financial statements, intrinsic value, over and undervaluation, Benjamin Graham, Warren Buffett, long-term holding, etc.
Smart Investors: What They Know And Will Not Share With us?
Smart investors would not ignore the three investment rules described in this article. This blog is inspired from a book called “The Intelligent Investor” written by the Guru of Warren Buffett, Benjamin Graham
Realizations About Shares Portfolio: How To Build A Winner
Stock market investing is not only about buying and selling stocks. After a stage, the investors begin to see the investments as a collection of stocks. Single stocks transform themselves into a shares portfolio. A stage comes when the investor starts to pay less attention to individual stocks. For him/her, more important is the present […]
Best Sectors To Invest In The Indian Stock Market [2022]
In this article, we’ll see an approach to identify the best sectors to invest in the Indian stock market. The good sectors are the ones that are intrinsically profitable. So, this analysis is totally based on the concept of profitability. The best sectors will be the ones that are most profitable. In this article, we’ll […]
Working Capital Use: How To Calculate & Interpret It [Formula]
The formula of working capital (WC) has two components, current assets, and current liabilities. Both are the numbers of the past. Though it is derived from the past numbers, the working capital use is in the future. This is the reason why it is a vital number in both corporate finance and valuation. Companies report […]
What Does Negative Shareholders Equity Mean On Balance Sheet
Recently I was reviewing a list of stocks from the BSE-500 index. I found some stocks showing negative shareholders’ equity. I wondered, what caused the negativity? The companies I’m talking about are these: None of the above companies are financially healthy. To cross verify, I checked their overall scores in my stock analysis worksheet. These […]
Value Trap: How to Identify & Avoid it in Stock Investing?
People who are hunting for bargains in the stock market may fall prey to the value trap. A stock whose price is falling or is trading at a low PE ratio may prove to be a trap instead of an investment. Fans of Warren Buffett would love to emulate his investment style. But his style […]