tag:blogger.com,1999:blog-76607067027399747722024-03-10T12:13:07.207-07:00FInancial Reports for InvestmentInvestBeginnershttp://www.blogger.com/profile/15457001456091778616noreply@blogger.comBlogger27125tag:blogger.com,1999:blog-7660706702739974772.post-1926705606039785852017-07-13T21:19:00.000-07:002014-12-08T05:07:16.639-08:00Step by Step for Beginners<span style="font-size: large;">Welcome to Financial Reports to Beginners...</span><br />
<span style="font-size: large;">If you know nothing about Financial Report and eagerly want to learn about it, I highly recommend you to follow <span style="color: red;"><span style="font-size: x-large;">step by step</span></span> proposed in this post to master Financial Reports.</span><br />
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http://www.vroozi.com/blog/procurement-leaders-4-steps-transform-purchasing-performance<br />
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<span style="font-size: large;">There are some signs used in this blog make the thing simpler and clearer.</span><br />
<span style="font-size: large;"><span style="color: blue;">Blue</span> means <span style="color: blue;">Title</span></span><br />
<span style="font-size: large;"><span style="color: blue;"><span style="color: red;">Red</span> <span style="color: black;">means</span> <span style="color: red;">Keyword</span></span></span><br />
<span style="font-size: large;"><span style="color: blue;"><span style="color: red;"><span style="color: #38761d;">Green <span style="color: black;">means</span> Further Info</span> </span></span></span><br />
<span style="font-size: large;"><span style="color: blue;"><span style="color: red;">"</span></span></span><span style="font-size: large;"><span style="color: blue;"><span style="color: red;"><span style="color: black;"><span class="st">double quotation marks</span></span>" <span style="color: black;">means hyperlink </span></span> </span></span><br />
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<span style="font-size: large;"><span style="color: #351c75;"><span style="font-size: x-large;"><u>Lesson 1: Learning The Basic of Financial Report</u></span></span><br /> </span><br />
<span style="font-size: x-large;"><span style="color: blue;">Step 1 </span></span><br />
<span style="font-size: large;">Before start jumping into formal learning process, we first come across an interesting story with the name <span style="font-size: x-large;"><a href="http://beginnersfinancialreport.blogspot.com/2014/07/a-story-about-financial-report.html" target="_blank"><span style="color: red;">"A Story About Financial Reports"</span></a></span>. </span><br />
<span style="font-size: large;">Next, click into the <a href="http://beginnersfinancialreport.blogspot.com/2014/07/an-introduction-to-financial-reports.html" target="_blank"><span style="color: red;"><span style="font-size: x-large;">"Introduction of Financial Reports"</span></span></a>. It will brief you about what you need to learn for basic.</span><br />
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http://www.ellenfinkelstein.com/pptblog/a-good-introductionopener/</div>
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<span style="color: blue;"><span style="font-size: x-large;">Step 2 </span></span><br />
<span style="font-size: large;">There are four main accounts that you need to know. You can click into each account below to master it.</span><br />
<a href="http://beginnersfinancialreport.blogspot.com/2014/09/balance-sheet-also-called-statement-of.html"><span style="color: red;"><span style="font-size: x-large;">1 "Balance Sheet"</span></span></a><br />
<a href="http://beginnersfinancialreport.blogspot.com/2014/07/income-statement.html" target="_blank"><span style="color: red;"><span style="font-size: x-large;">2 "Income Statement"</span></span></a><br />
<a href="http://beginnersfinancialreport.blogspot.com/2014/07/change-of-eqity-statement.html" target="_blank"><span style="color: red;"><span style="font-size: x-large;">3 "Change of Equity Statement"</span></span></a><br />
<a href="http://beginnersfinancialreport.blogspot.com/2014/07/cash-flow-statement-records-only-cash.html" target="_blank"><span style="color: red;"><span style="font-size: x-large;">4 "Cash Flow Statement"</span></span></a><br />
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http://xbrl.squarespace.com/</div>
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<span style="font-size: large;"><span style="font-size: x-large;"><span style="color: blue;">Step 3 </span></span></span><br />
<span style="font-size: large;">Teach you how to use the data in financial reports to compute more informative ratio. Click into the title below to know more.</span><br />
<span style="font-size: large;"> <a href="http://beginnersfinancialreport.blogspot.com/2014/07/financial-ratio.html" target="_blank"><span style="color: red;"><span style="font-size: x-large;">"Financial Ratio" </span></span></a></span><br />
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http://www.isoscelesfinance.co.uk/accounts-finance-outsourcing/financial-reporting-right-information-right-time/ </div>
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<span style="font-size: large;">Congratulation. Now you had mastered the basic of financial reports. But this is not the end, instead it is just a starting point. Now you would like to practice the knowledge you learned to discover potential company that you want to invest in.</span><br />
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<span style="font-size: large;"><span style="color: blue;"><span style="font-size: x-large;">Step 4 </span></span></span><br />
<span style="font-size: large;">More Story to Tell</span><br />
<span style="font-size: large;"><a href="http://beginnersfinancialreport.blogspot.com/2014/09/story-about-depreciation.html"><span style="color: red;">"Story About Depreciation" </span></a></span><br />
<a href="http://beginnersfinancialreport.blogspot.com/2014/09/story-of-different-incomes.html"><span style="color: red;"><span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;"> "Story of Different Incomes"</span></span></span></a><span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;"> </span></span><br />
<a href="http://beginnersfinancialreport.blogspot.com/2014/10/story-of-different-expenses.html"><span style="color: red;"><span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;">"Story of Different Expenses"</span></span></span></a><br />
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<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"><span style="color: #351c75;"><u><span style="font-size: x-large;">Lesson 2: Searching Potential Company</span></u></span> </span></span><br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjqF5I6-ID7UuQDjo6Ide2cGvxzfiQ5aPkCx2g3zf74_MoMWSjHvFyZha-rL_c4nwkmQ3otVJmZA4_UWDsBEyQic1qERv6XwIekgOBoUMr3iM3ThyphenhyphenTMYUmbssFsPrIO2xfE04kjrZKfb68/s1600/images3.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><br /></a></div>
<span style="font-family: Arial,Helvetica,sans-serif; font-size: x-large;"><span style="font-size: large;"><span style="font-size: x-large;"><span style="color: blue;">Step 1</span></span><span style="color: red; font-size: x-large;"> </span></span></span><br />
<span style="font-family: Arial,Helvetica,sans-serif; font-size: x-large;"><span style="font-size: large;"><span style="color: red; font-size: x-large;"><span style="color: black;"><span style="font-size: large;">Is there any systematic way to search for good company? Yes by eliminate the bad company and keep the good company. But first, scope down your searching area to a few good industries. A bad company in a good industry performs better than a good company in a bad industry. Don't know anything about industry? Click the link below: </span></span> </span></span></span><br />
<a href="http://beginnersfinancialreport.blogspot.com/2014/09/industry-analysis.html" target="_blank"><span style="font-family: Arial,Helvetica,sans-serif; font-size: x-large;"><span style="font-size: large;"><span style="color: red; font-size: x-large;">"The poorest among the rich is better than the richest among the poor (Industry Analysis)"</span></span></span></a><br />
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<span style="font-family: Arial,Helvetica,sans-serif; font-size: x-large;"><span style="font-size: large;"><span style="color: red; font-size: x-large;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj-Z3jBHmZOk8YB02GZ9LAHtKaCXrcWHg2FBspfqd16ycbwXbXP6AMEcG5vzwso0sSB9BJTgtKZ8hl1anSi7UluDOxgK9FYTzeSyHgTwj6e1rs6GOkh3KHy1yOTJxlbu6kLZiXaRQ1Unek/s1600/petrochemical-industry-green-grass-field-good-environment-file-31187102.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj-Z3jBHmZOk8YB02GZ9LAHtKaCXrcWHg2FBspfqd16ycbwXbXP6AMEcG5vzwso0sSB9BJTgtKZ8hl1anSi7UluDOxgK9FYTzeSyHgTwj6e1rs6GOkh3KHy1yOTJxlbu6kLZiXaRQ1Unek/s1600/petrochemical-industry-green-grass-field-good-environment-file-31187102.jpg" height="223" width="400" /></a><span style="color: black;"><span style="font-size: x-small;"> </span></span></span></span></span></div>
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<span style="font-family: Arial,Helvetica,sans-serif; font-size: x-large;"><span style="font-size: large;"><span style="color: red; font-size: x-large;"><span style="color: black;"><span style="font-size: x-small;"> </span></span></span></span></span><span style="font-family: Arial,Helvetica,sans-serif; font-size: x-large;"><span style="font-size: large;"><span style="font-size: x-large;"><span style="font-size: x-small;"> http://www.dreamstime.com/stock-photography-petrochemical-industry-green-grass-field- good-environment-file-image31187102 </span></span></span></span></div>
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<span style="font-family: Arial,Helvetica,sans-serif; font-size: x-large;"><span style="font-size: large;"><span style="color: blue;"><span style="font-size: x-large;">Step 2</span></span></span></span><br />
<span style="font-family: Arial,Helvetica,sans-serif; font-size: x-large;"><span style="font-size: large;"><span style="color: blue;"><span style="font-size: x-large;"><span style="color: black;"><span style="font-size: large;">Want to buy high intrinsic value<span style="color: blue;"><span style="font-size: x-large;"> <span style="font-size: large;"><span style="color: black;">stock with cheap price? Click the link below: </span></span></span></span></span></span> </span></span></span></span><br />
<span style="font-family: Arial,Helvetica,sans-serif; font-size: x-large;"><span style="font-size: large;"><span style="font-size: x-large;"><a href="http://beginnersfinancialreport.blogspot.com/2014/09/valuation.html" target="_blank"><span style="color: red;">"Cheap company doesn’t always cheap (Valuation)"</span></a></span></span></span><br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiv6AGvhz751KCr7ecvnXPwrTguT8CGUY_PnFKPR-tlKLfS0WyRS4FvWxcJO0yn8l9WQh972PvYHIHXwMZrP5uEVcH3MtDSUXEfYviWogTH2F32v4aV6zBDCnA6gkg_mNHk2i_jXpsrrRg/s1600/10232782-buy-cheap-foreclosure-retire-early.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiv6AGvhz751KCr7ecvnXPwrTguT8CGUY_PnFKPR-tlKLfS0WyRS4FvWxcJO0yn8l9WQh972PvYHIHXwMZrP5uEVcH3MtDSUXEfYviWogTH2F32v4aV6zBDCnA6gkg_mNHk2i_jXpsrrRg/s1600/10232782-buy-cheap-foreclosure-retire-early.jpg" height="290" width="400" /></a></div>
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<span style="font-family: Arial,Helvetica,sans-serif; font-size: x-small;"><span style="color: blue;"><span style="color: black;"> http://www.prlog.org/10232782-how-to-buy-foreclosures-cheap-and-retire-early.html</span></span></span></div>
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<span style="font-family: Arial,Helvetica,sans-serif; font-size: x-large;"><span style="font-size: large;"><span style="color: blue; font-size: x-large;">Step 3</span></span></span><br />
<span style="font-family: Arial,Helvetica,sans-serif; font-size: x-large;"><span style="font-size: large;"><span style="color: blue; font-size: x-large;"><span style="font-size: large;"><span style="color: black;">What determines stock price </span><span style="color: black;">to increase? Many investors buy it. What determine investors buying stock? Profit. Click the link below to know more about profit: </span></span></span><br /><span style="font-size: x-large;"><a href="http://beginnersfinancialreport.blogspot.com/2014/09/profitability-practical-experience.html" target="_blank"><span style="color: red;">"Profit is always the king (Profitability)"</span></a></span><span style="color: blue;"><span style="font-size: x-large;"> </span></span></span></span><br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjZkYp__-kcs3pKgTYSirXQPq5q0NXdZQXd3Nk5XOWkngcvhY6-_-nmUTKlRvb1ywu88bec0Xx2B_IVuOqnhBBCoVb0MB6d-Y07lp0mnKhXjw2-hN83aElZZMajUoFUsjEVAsQ1D914WRQ/s1600/buzz-profits.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjZkYp__-kcs3pKgTYSirXQPq5q0NXdZQXd3Nk5XOWkngcvhY6-_-nmUTKlRvb1ywu88bec0Xx2B_IVuOqnhBBCoVb0MB6d-Y07lp0mnKhXjw2-hN83aElZZMajUoFUsjEVAsQ1D914WRQ/s1600/buzz-profits.png" height="320" width="320" /></a></div>
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<span style="font-family: Arial,Helvetica,sans-serif; font-size: x-small;"> http://www.podiatryhive.com/profit-is-king</span></div>
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<span style="font-family: Arial,Helvetica,sans-serif; font-size: x-large;"><span style="font-size: large;"><span style="color: blue;"><span style="font-size: x-large;">Step 4</span></span></span></span><br />
<span style="font-family: Arial,Helvetica,sans-serif; font-size: x-large;"><span style="font-size: large;"><span style="color: blue;"><span style="font-size: x-large;"><span style="font-size: large;"><span style="color: black;">Do you know some profits are not real? Check it out through Truthmeter by clicking the link below: </span></span> </span></span><br /><span style="font-size: x-large;"><a href="http://beginnersfinancialreport.blogspot.com/2014/09/cash-flow-practical-experience.html" target="_blank"><span style="color: red;">"Fake Profit vs Real Profit (Cash Flow)"</span></a></span><br /><span style="color: blue;"><span style="font-size: x-large;"></span></span></span></span><br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhex_6L8mgvf-nB80WehS9l6DibmYvOztGeF0zLIO4CJuEHcWhUcn3TiM_LaohbTFAjr_F1itYeMbtK4k2jCW5zc5XfKcC7SMsxa3UcNQnJsvSfjz5nmXlQbPWa5gpYezuAOr80I7rHuY0/s1600/photos_Truth-O-Meter_Plan.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhex_6L8mgvf-nB80WehS9l6DibmYvOztGeF0zLIO4CJuEHcWhUcn3TiM_LaohbTFAjr_F1itYeMbtK4k2jCW5zc5XfKcC7SMsxa3UcNQnJsvSfjz5nmXlQbPWa5gpYezuAOr80I7rHuY0/s1600/photos_Truth-O-Meter_Plan.jpg" /></a></div>
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<span style="font-family: Arial,Helvetica,sans-serif; font-size: x-small;"> http://www.politifact.com/truth-o-meter/statements/2009/sep/29/ginny-brown-waite/aarp-insurance-health-reform-conflict/</span></div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEijkUziRIXsM2NsCwj8_OsRluQRnkPxKcnvChecDPrMkuZXisj0SODdztVXrbmEnDS57YcZNb9wsEbhoLZLtQVTzIwCd5FjUqnOETFsEfouv3oBSkBxVlUQ73G78Qos_1vHZP-ynP998j0/s1600/bankruptcy.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><br /></a></div>
<span style="font-family: Arial,Helvetica,sans-serif; font-size: x-large;"><span style="font-size: large;"><span style="color: blue;"><span style="font-size: x-large;">Step 5</span></span></span></span><br />
<span style="font-family: Arial,Helvetica,sans-serif; font-size: x-large;"><span style="font-size: large;"><span style="color: blue;"><span style="font-size: x-large;"><span style="font-size: large;"><span style="color: black;">Do you know what happen to share when a company bankrupt? It becomes toilet paper. Check the link below to prevent yourself investing in a bankrupt company: </span></span> </span></span> <br /><span style="font-size: x-large;"><a href="http://beginnersfinancialreport.blogspot.com/2014/09/liquidity-practical-experience.html" target="_blank"><span style="color: red;">"I don’t want a bankrupt company (Liquidity)"</span></a></span><br /><span style="color: blue;"><span style="font-size: x-large;"></span></span></span></span><br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEijkUziRIXsM2NsCwj8_OsRluQRnkPxKcnvChecDPrMkuZXisj0SODdztVXrbmEnDS57YcZNb9wsEbhoLZLtQVTzIwCd5FjUqnOETFsEfouv3oBSkBxVlUQ73G78Qos_1vHZP-ynP998j0/s1600/bankruptcy.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEijkUziRIXsM2NsCwj8_OsRluQRnkPxKcnvChecDPrMkuZXisj0SODdztVXrbmEnDS57YcZNb9wsEbhoLZLtQVTzIwCd5FjUqnOETFsEfouv3oBSkBxVlUQ73G78Qos_1vHZP-ynP998j0/s1600/bankruptcy.jpg" height="268" width="320" /></a></div>
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<span style="font-family: Arial,Helvetica,sans-serif; font-size: x-small;"> http://www.politifact.com/truth-o-meter/statements/2009/sep/29/ginny-brown-waite/aarp-insurance-health-reform-conflict/</span></div>
<br />
<span style="font-family: Arial,Helvetica,sans-serif; font-size: x-large;"><span style="font-size: large;"><span style="font-size: x-small;"><span style="color: blue;"><span style="font-size: x-large;">Step 6</span></span></span></span></span><br />
<span style="font-family: Arial,Helvetica,sans-serif; font-size: x-large;"><span style="font-size: large;"><span style="font-size: x-small;"><span style="color: blue;"><span style="font-size: x-large;"><span style="color: black;"><span style="font-size: large;">After spotting a good company, what to do next? Click the link below to know more: </span></span> </span></span> </span><br /><a href="http://beginnersfinancialreport.blogspot.com/2014/09/technical-analysis.html" target="_blank"><span style="color: red; font-size: x-large;">"Fundamental is just half way (Technical Analysis)"</span></a></span></span></div>
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<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh3PPz15s5tCj2n9VxLfGdErDBR_jVsSVxPamGotQms7kbdznp9Uy9a16yoWqFP3HFSUIU9VPqgBi7W9YE5JKE1QtNcjMx9p5Aa3jgyLwdV765QrkCTYh9ZU8ATI9Y_Y2OHM-f6l29h8eI/s1600/images5.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh3PPz15s5tCj2n9VxLfGdErDBR_jVsSVxPamGotQms7kbdznp9Uy9a16yoWqFP3HFSUIU9VPqgBi7W9YE5JKE1QtNcjMx9p5Aa3jgyLwdV765QrkCTYh9ZU8ATI9Y_Y2OHM-f6l29h8eI/s1600/images5.jpg" height="400" width="359" /></a></div>
<div style="text-align: center;">
http://www.theforexcabin.com/overview/</div>
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<span style="color: blue;"><span style="font-size: x-large;">Summary</span></span><br />
<span style="font-size: large;">I had summary a few criteria to shortlist the potential company based on financial report. You only require less than <span style="color: red;">30 min</span> to shortlist the company you willing to invest in based on following summary.</span> <span style="font-size: large;">Click the link below: </span><br />
<a href="http://beginnersfinancialreport.blogspot.com/2014/09/summary.html" target="_blank"><span style="color: red;"><span style="font-size: x-large;">"Criteria to Shortlist Company"</span></span></a>InvestBeginnershttp://www.blogger.com/profile/15457001456091778616noreply@blogger.com35tag:blogger.com,1999:blog-7660706702739974772.post-81900273721787405872014-10-01T05:01:00.001-07:002014-10-01T05:01:20.827-07:00Story of Different Expenses<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjOL8JZQ1yLhJ6VuSme49_ON54pqOc78qG_BDbT-u51Ds_XXjC-OUI5G0ADJhMxV0rx7UFs54f3yP4P0IVgbdcqEYoCdViG-3fEIZH_pyI_96TAsFFPK20mdciIe3dcVrAwDPIh0mv8adI/s1600/expense-claims.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjOL8JZQ1yLhJ6VuSme49_ON54pqOc78qG_BDbT-u51Ds_XXjC-OUI5G0ADJhMxV0rx7UFs54f3yP4P0IVgbdcqEYoCdViG-3fEIZH_pyI_96TAsFFPK20mdciIe3dcVrAwDPIh0mv8adI/s1600/expense-claims.jpg" height="129" width="320" /></a></div>
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<span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;">There are many expenses when you develop a company. Just like the burger production company opened by Moonitez, there are too much different expenses to be recorded.<br /><br />- RM100 of Raw Material cost to produce the burger.<br />- RM300 of Salary to the Worker that producing burger. <br />- RM100 of Electric Bill in factory.<br />- RM400 of Depreciation of Machine in factory.<br />- RM200 of Salary to Salesman that selling burger.<br />- RM100 of Interest Payment to the debtor.<br />- RM150 of loss from the investment.<br />- RM1000 loss of sell off his non-profit sausage production division<br />- RM50 of Foreign Exchange Rate loss<br /><br />Moonitez now becomes headache. It is too much for him. Luckily he knows something about financial reports. So he starts to fill in the expense accordingly in the financial reports.<br /><br /><span style="font-size: x-large;"><span style="color: red;">Cost of goods sold</span></span><br />Raw Material, Salary of Worker, Electric Bill and Deprecation of Machine are all direct costs to produce the burger. Therefore, all of these expenses are recorded in cost of goods sold.RM900 (RM100+RM300+RM100+RM400)<br /><br /><span style="color: red;"><span style="font-size: x-large;">Operating Expense</span></span><br />Salary for salesman is not direct cost to the business, it is recorded as selling expense in the section of operating expense.<br /><br /><span style="color: red;"><span style="font-size: x-large;">Financial Expense</span></span><br />Interest payment and loss for investment are recorded in financial expense.<br /><br /><span style="color: red;"><span style="font-size: x-large;">Loss from discontinued activities</span></span><br />Selling off sausage production division is one time loss. Therefore it is recorded in loss from discontinued activities.<br /><br /><span style="color: red;"><span style="font-size: x-large;">Other Comprehensive Income/Loss</span></span><br />Foreign Exchange Rate is often recorded away from the normal annual operation activities to ease the process of addition/deduction every year. RM50 loss from Foreign Exchange Rate is recorded in Other Comprehensive Income/Loss.<br /><br /></span></span>InvestBeginnershttp://www.blogger.com/profile/15457001456091778616noreply@blogger.com15tag:blogger.com,1999:blog-7660706702739974772.post-44925237435951544362014-09-24T00:28:00.006-07:002014-09-24T00:28:42.092-07:00Story of Different Incomes<span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;">Let say Moonitez opens a burger production factory. He is a smart guy. He wants to earn income as much as possible. Therefore, beside selling the burger he manufactures, he rents the extra space of his factory to other people to earn some incomes. Besides that , he uses the extra cash to make investment. He even sells off his sausage production section to earn one time profit. <br /><br />At the end of the year, Moonitez has earned</span></span><br />
<ul>
<li><span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;"> RM1000 for selling the burger (RM1*1000)</span></span></li>
<li><span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;"> RM200 for renting the space of factory.</span></span></li>
<li><span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;"> RM500 for investment</span></span></li>
<li><span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;"> RM2000 for selling his sausage production section.</span></span></li>
<li><span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;"> RM100 for foreign exchange rate gain</span></span></li>
</ul>
<span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;"><br />Here the problems come, how should Moonitez record his income in Income Statement?</span></span><br />
<ul>
<li><span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;">Selling burger is the main operation. So the RM1000 for selling burger should be recorded in <span style="color: red;">Revenue</span>.</span></span></li>
<li><span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;">Renting space of factory considered a part of operating activities but not the main. So the RM200 of renting space of factory should be recorded in <span style="color: red;">other operating incomes</span>.</span></span></li>
<li><span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;">Gain from investment in not operating income. So the RM500 earned from investment should be recorded in <span style="color: red;">financial income</span> (Non-operating Income)</span></span></li>
<li><span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;">Selling sausage production line is one time profit. So RM2000 will be recorded in <span style="color: red;">net profit from discontinued activities</span>.</span></span></li>
<li><span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;">Foreign Exchange Rate is often recorded away from the normal annual Income Statement to ease</span></span><span style="font-family: Calibri; font-size: 11.0pt;"> <span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">the process of
addition/deduction every year. RM100 for foreign exchange rate should be
recorded in <span style="color: red;">Other Comprehensive Income</span>.</span></span></span></li>
</ul>
<div style="font-family: Calibri; font-size: 11.0pt; margin-left: .375in; margin: 0in;">
<span style="mso-spacerun: yes;"> </span></div>
InvestBeginnershttp://www.blogger.com/profile/15457001456091778616noreply@blogger.com5tag:blogger.com,1999:blog-7660706702739974772.post-15524630441640042832014-09-21T23:40:00.006-07:002014-09-21T23:46:34.972-07:00Story About Depreciation<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgHdfj6HZIB_gNbspawN5fwTpI3BjYEq3vMIE3YdIc2PBshJzrVzkf4nu5z7CYDsuccABDCsDeHhbf3Wt1hRVm-_5Agzt0cTr1nLnwvMLBVnpNZFfA8aHjk5pm5gM3jTxk8EZ-Yx1r4zYk/s1600/car-on-coins.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgHdfj6HZIB_gNbspawN5fwTpI3BjYEq3vMIE3YdIc2PBshJzrVzkf4nu5z7CYDsuccABDCsDeHhbf3Wt1hRVm-_5Agzt0cTr1nLnwvMLBVnpNZFfA8aHjk5pm5gM3jTxk8EZ-Yx1r4zYk/s1600/car-on-coins.jpg" /></a></div>
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<br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">Let say in the
beginning of Year 1, Moonitez want to sell burger.
Besides learning the way to produce a delicious burger and buying the material
to produce a burger, the most important thing is he needs a <span style="color: red;">burger stall</span>.</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<br /></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">The selling price of
a burger stall is <span style="color: red;">RM10 000</span>, and a burger stall can be used for <span style="color: red;">10 years</span>. In the
1st year, Moonitez pays RM10 000 for <span style="color: red;">cash</span> to buy the burger stall. But he
thinks that, if he records RM10 000 as <span style="color: red;">expense</span> this year, then most probably the
year's profit will be <span style="color: red;">negative</span>.(not beautiful
to apply loan).</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<br /></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">Moonitez is a smart
guy. Since the burger can be used for 10
years, so he decides to divide this RM10 000 expenses into 10 years, and <span style="color: red;">each
year</span> records a <span style="color: red;">RM1000 expense</span> in Income Statement.</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<br /></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">So how should
Moonitez record the value of burger stall in balance sheet? Since burger stall
can be used for 10 years, therefore the value of burger stall <span style="color: red;">depreciates RM1 000 each year.</span></span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<br /></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">In the beginning of
Year 1, Moonitez records burger stall as
PPE, In non-current asset part as RM10 000 <span style="color: red;">(Historical Value)</span>.</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<br /></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">In the beginning of
Year 2, Moonitez records RM9 000 which equals to RM10 000 (Historical Value)-
RM1 000 <span style="color: red;">(Total Depreciation )</span></span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<br /></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">In the beginning of
Year 3, Moonitez records RM8 000 which equals to RM10 000 (Historical Value)-
RM2 000 (Total Depreciation) </span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">*Rm2000 <span style="color: red;">(Total
Depreciation)</span> = RM1000 <span style="color: red;">(Accumulate Depreciation)</span> + RM1000 <span style="color: red;">(Depreciation
Current Year)</span></span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<br /></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">In the beginning of
Year 4, Moonitez records RM7 000 which equals to RM10 000 (Historical Value)-
RM3 000 (Total Depreciation) </span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">*Rm3000 (Total
Depreciation) = RM2000 (Accumulate Depreciation) + RM1000 ( Depreciation
Current Year)</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<br /></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">If the depreciation
expense is the <span style="color: red;">same</span> for each year, it is called <span style="color: red;">straight line depreciation
method</span>. However, there are some assets are difference which using different
types of appreciation method. For example, car.</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">The value of car
depreciates <span style="color: red;">faster</span> in the <span style="color: red;">early years</span> and then slows down in the latter years,
so <span style="color: red;">accelerated depreciation method</span> is more appropriate. </span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<br /></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">As a result,
depreciation value not only depends on how many years an asset can be used, but
also concerns about how much the asset can be sold in the market <span style="color: red;">(market value)</span> for each year. If there is a
difference between the value recorded in financial report (carrying amount) and
the value that the asset can be sold (market value), <span style="color: red;">written off</span> will be
occurred.</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<br /></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">For example, let says
in the beginning of Year 4, he want to <span style="color: red;">sell off</span> the burger stall. According to
the record of the financial report above, the value of burger stall is RM7000.
Moonitez go to meet a professional price evaluator. The price evaluator says the burger stall
only worth <span style="color: red;">RM5000</span>. </span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<br /></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">Now the burger stall
record as RM5000 in balance sheet, which equals to RM10 000 (Historical Value)-
RM3 000 (Total Depreciation)- Rm2000
<span style="color: red;">(Write-off)</span></span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<br /></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"><span style="color: red;">Expenses</span> in income
statement also <span style="color: red;">increase by RM2000</span> for written off. </span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"> </span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span>InvestBeginnershttp://www.blogger.com/profile/15457001456091778616noreply@blogger.com4tag:blogger.com,1999:blog-7660706702739974772.post-24465074183157337732014-09-19T20:11:00.001-07:002014-09-19T20:11:54.469-07:00Balance Sheet<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"><span style="color: red;">Balance Sheet </span>(also called Statement of Financial Position) consists of three things:<br /> 1 <span style="color: red;">ASSET</span> : Total valuable things that company owned<br /> 2 <span style="color: red;">LIABILITY</span> : Money borrowed from debtors<br /> 3 <span style="color: red;">EQUITY</span>: Money received from shareholders and previous years earnings<br /><br />The relationship between these three things are:<br /><br /><span style="color: red;">ASSET= LIABILITY+ EQUITY</span><br /><br />*A company use the money borrowed from creditors (<span style="color: red;">LIABILITY</span>) and money received from shareholders and previous years earnings(<span style="color: red;">EQUITY</span>) to buy valuable things (<span style="color: red;">ASSET</span>)<br /><br /><span style="color: red;">ASSET</span> can be further divided into 2 parts:<br /> 1 <span style="color: red;">NON-CURRENT ASSET</span> : Asset that can not be turned into money within one year<br /> 2 <span style="color: red;">CURRENT ASSET</span> : Asset that can be turned into money within one year<br /><br /><span style="color: red;">LIABILITY</span> can be further divided into 2 parts:<br /> 1 <span style="color: red;">NON-CURRENT LIABILITY</span> : Liability that must be paid off to debtors in more than one year<br /> 2 <span style="color: red;">CURRENT LIABILITY </span>: Liability that must be paid off to debtors within one year.</span></span><br />
<span style="font-family: Arial,Helvetica,sans-serif;"></span>
<span style="font-family: Arial,Helvetica,sans-serif;"><br /></span>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: x-large;"><span style="color: blue;">Balance Sheet Template</span></span></span><br />
<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgFCRat81QKasOK_36e67hbw0hKLQnSISk2dHLGhEW3TGXIwvU8Sud3rlgfxyT54HZkK-hO3I71w-AIYrzdgWqL9LNI3EtY5lSpK5ciyrBc79ZoqSGF_5xMk_i1mPwVrfPJazcQTadIevc/s1600/Balance+Sheet.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgFCRat81QKasOK_36e67hbw0hKLQnSISk2dHLGhEW3TGXIwvU8Sud3rlgfxyT54HZkK-hO3I71w-AIYrzdgWqL9LNI3EtY5lSpK5ciyrBc79ZoqSGF_5xMk_i1mPwVrfPJazcQTadIevc/s1600/Balance+Sheet.png" height="361" width="640" /></a></div>
<br />
<br />
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: x-large;"><span style="color: blue;"><span style="color: red;"><span style="color: #38761d;">Furher Info: </span></span><br />
<a href="http://beginnersfinancialreport.blogspot.com/2014/07/assets.html" target="_blank">"Asset" </a><br />
<a href="http://beginnersfinancialreport.blogspot.com/2014/07/liability.html" target="_blank">"Liability" </a><br />
<a href="http://beginnersfinancialreport.blogspot.com/2014/07/equity.html" target="_blank">"Equity"</a> </span></span></span>InvestBeginnershttp://www.blogger.com/profile/15457001456091778616noreply@blogger.com5tag:blogger.com,1999:blog-7660706702739974772.post-76374211412869787322014-09-03T06:19:00.001-07:002014-09-03T06:25:50.145-07:00Criteria to Shortlist Company<span style="font-family: Arial,Helvetica,sans-serif;"><br /></span>
<br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">I would like to make
a summary on how I shortlist potential companies based on financial report.
Shortlist means eliminate companies which do not fulfill the requirement.</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="color: blue;"><span style="font-size: x-large;">1 Valuation</span></span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">For bull market
third period</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">Dragon Head of
industry: <span style="color: red;">PE<25</span></span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">Second and third
line company: <span style="color: red;">PE< PE of Dragon Head-5</span></span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">Penny Stock: <span style="color: red;">PE<
PE of Dragon Head-10</span></span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><br /></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="color: blue;"><span style="font-size: x-large;">2 Profitability</span></span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">There are three
options:</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">Revenue <span style="color: red;">increases</span>
and Profit Margin constants or</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">Revenue constants
and Profit Margin<span style="color: red;"> increases</span> or</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">Both Revenue and
Profit Margin <span style="color: red;">increase</span>.</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">(Non-recurring item
and one-time profit should be excluded)</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><br /></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="color: blue;"><span style="font-size: x-large;">3 Cash Flow</span></span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">There are two
options:</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">Net Cash Flow
<span style="color: red;">positive</span> and <span style="color: red;">increase</span> or</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">Net Cash Flow
<span style="color: red;">positive</span> and <span style="color: red;">decrease</span> (used in long term investment or paying debt)</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><br /></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="color: blue;"><span style="font-size: x-large;">4 Liquidity</span></span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">Current Ratio more
than<span style="color: red;"> 2</span></span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">Quick Ratio more
than <span style="color: red;">1</span></span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><br /></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"><span style="font-size: x-large;"><span style="color: blue;">5 <span style="color: red;">Take note any
sudden large changes of numbers in any particular section in financial report
comparing across year. (Find out the reason)</span></span></span><span style="color: red;"><span style="font-size: x-large;"> </span></span>
</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><br /></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span>InvestBeginnershttp://www.blogger.com/profile/15457001456091778616noreply@blogger.com4tag:blogger.com,1999:blog-7660706702739974772.post-83450354546231243442014-09-03T01:30:00.004-07:002014-09-03T01:37:49.513-07:00A Brief Story about Technical Analysis<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">Many investors
(especially fundamentalist) always have a question: "If I manage to choose
a good company, why should I need to know technical analysis? Stock price of a
good company(increasing profit) will definitely go up". You are right
about it, buy not exactly right.</span></span><br />
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">There are two<span style="font-size: x-large;"> <span style="color: red;">loop
holes</span></span> about this statement.</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="color: blue; font-size: x-large;"><span style="font-family: Arial,Helvetica,sans-serif;">1 High profit will
not necessary followed by stock price increases.(at least in the short run) </span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">Stock prices are
caused by the buying power of investors. There are too many stocks in the
market nowadays. Investors will not monitor every stock every time. There will
be some stock left over for certain reason. Therefore even with high profit, if
not spotted by investors will not have any impact on the price.</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="color: blue; font-size: x-large;"><span style="font-family: Arial,Helvetica,sans-serif;">2 Maybe you are
wrong</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">There are many
criteria determine the fundamental of the company. And usually we will miss
some part. If the part that we miss is very critical, then we might judge the
future of company wrongly.</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">For me, technical
analysis has two <span style="color: red; font-size: x-large;">benefits</span><span style="font-size: x-large;"> </span>which will compensate for the disadvantages of
fundamental analysis.</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<br /></div>
<div style="margin: 0in;">
<span style="color: blue; font-size: x-large;"><span style="font-family: Arial,Helvetica,sans-serif;">1 Technical analysis
can tell you when the investors will pay attention to the stock.</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">By looking only the
volume, you can know more investors are joining the stocks.</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<br /></div>
<div style="margin: 0in;">
<span style="color: blue; font-size: x-large;"><span style="font-family: Arial,Helvetica,sans-serif;">2 Technical analysis
give you the whole picture about the perspective of investors about the stock
(at least for now)</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">I emphasize on whole
picture because stock price alone is the result of the perspective of all
investors about the value of the stock currently. If there are investors think
the price is cheap, they will buy more and cause the price to increase. Unlike
fundamental analysis, price will not have bias or hidden secret.</span></span><br />
<br />
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">I only mention why
we need technical analysis in this article since the main focus of this blog is
on financial report. The teaching of technical analysis will in my next blog
which is on the way of writing.</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span>InvestBeginnershttp://www.blogger.com/profile/15457001456091778616noreply@blogger.com13tag:blogger.com,1999:blog-7660706702739974772.post-65917038570002460132014-09-03T00:46:00.004-07:002014-09-03T01:33:53.379-07:00A Brief Story Industry Analysis<br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">Before searching for
good industry, first we need to know what is a good industry stand for. A good
industry usually has two characteristics:</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="color: blue; font-size: x-large;"><span style="font-family: Arial,Helvetica,sans-serif;">1 Demand increasing
and larger than supply (increasing revenue)</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">When there are
higher demands, revenue of the company in the industry will increase together.
They also have better price bargaining power with customers since customers are
desperately demand for the goods. Higher revenue will cause higher profit.</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<br /></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="color: blue; font-size: x-large;"><span style="font-family: Arial,Helvetica,sans-serif;">2 Material input
cost decreasing (Improve profit margin)</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">Every product
required input material to process. When the price of material becomes cheaper
due to abundant of supply, company can gain more profit with each of products
sold. The profit margin of company will increase.</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<br /></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">Benefit of company
in good industry</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="color: blue; font-size: x-large;"><span style="font-family: Arial,Helvetica,sans-serif;">1 High probability
increases in profit</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">When a company is
inside a good industry, its revenue will increase due to the increasing demand
towards that particular industry. Even the small company can gain a larger pie
without competing with others since the size of whole pie is increasing. Price
war will not happen since there are many potential new customers to search for.</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<br /></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="color: blue; font-size: x-large;"><span style="font-family: Arial,Helvetica,sans-serif;">2 Spillover effect</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">The dragon head in a
good industry usually easily spotted by investors. Because it usually will
spread many good news and perform good results in financial statements. When
its stock price moves higher and higher, investors will start to realise that
it is too expensive. Then, investors will start to look for other stocks in the
same industry with dragon head but their
stock prices haven't increase much. This spillover effect will cause prices of
other penny stocks in the same industry to increase too. </span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<br /></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">How to search for
good industry practically?</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="color: blue; font-size: x-large;"><span style="font-family: Arial,Helvetica,sans-serif;">1 Logical thinking</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">Human always prefer
to comfortable, portable, fast life. By
logic, you will know digital camera will definitely substitute camera with
film, laptop will substitute computer, smart phone will substitute phone,
internet will substitute newspaper and so on. There is human nature.</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<br /></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="color: blue; font-size: x-large;"><span style="font-family: Arial,Helvetica,sans-serif;">2 Looks for figure</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">There are many free
source of statistics in internet. For example, export of E&E increases 20%
last year then you know you will look for E&E industry. Petrol price
increases then you will know don’t invest in airline industry. Electric price
increases then don’t invest in steel industry. </span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<br /></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="color: blue; font-size: x-large;"><span style="font-family: Arial,Helvetica,sans-serif;">3 Looks for
government policy</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">Government will
announce policy from time to time and this will strongly affect the growth of
industry. Such as giving more compensation and subsidies to green technology,
tax exemption for E&E export. Stricter rules to beat house price. All of
these information give you the clue to select a good industry or at least
avoiding bad industry.</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<br /></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif; font-size: large;">I only discuss briefly about industry analysis in this article </span><span style="font-family: Arial,Helvetica,sans-serif; font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;"><span>since the main focus of this blog is
on financial report. The teaching of <span style="font-size: x-large;"><span style="color: red;">Industry Analysis</span></span> will in my next blog
which is on the way of writing.</span></span> </span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span>InvestBeginnershttp://www.blogger.com/profile/15457001456091778616noreply@blogger.com28tag:blogger.com,1999:blog-7660706702739974772.post-78019910833272659892014-09-02T06:51:00.000-07:002014-09-03T05:59:46.070-07:00Liquidity (Practical Experience)<span style="font-family: Arial,Helvetica,sans-serif;"><br /></span>
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">Liquidity is used to
assess whether a company can repay its loan in short period. If company cant
pay out its loan in time, it will face big problems ( borrow loans with high
interest or sell assets to repay its loan).</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">To be safe, cash
ratio should be more than one. Current ratio should be more than 2. for a
constant profitable company.</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><br /></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">There are two
different opinions when considering using high debt ratio. Aggressive investors
prefer high debt because high debt means <span style="font-size: x-large;"><span style="color: red;">high leverage</span></span> which in turn means high
growth of revenue and profit in the future. However, high debt ratio also means
high danger because <span style="font-size: x-large;"><span style="color: red;">higher interest expense</span></span> need to be paid for debt (fixed
cost).</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><br /></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">My advise is, if you
are going to investigate the company thoroughly, then you can choose company
with high debt ratio. Because it needs better understanding of company itself
and the whole industry in order to predict the successfulness of the company using
debt.</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">If you are not going
to do so, better play safe and choose the company with low debt ratio.</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span>InvestBeginnershttp://www.blogger.com/profile/15457001456091778616noreply@blogger.com0tag:blogger.com,1999:blog-7660706702739974772.post-80935145675787434402014-09-02T06:50:00.000-07:002014-09-03T06:00:26.602-07:00Cash Flow (Practical Experience)<span style="font-family: Arial,Helvetica,sans-serif;"><br /></span>
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">Cash Flow is the
second most important thing after profit. If a company attains high profit
constantly but has low or negative cash
flow, something maybe going wrong.</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><br /></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">There are some
reasons where a company attains<span style="color: red;"> high profit but low cash flows</span>.</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><br /></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: x-large;"><span style="color: blue;">1 Long Term Capital Investment </span></span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">Company will use
cash earned from profit to invest in long term assets such as buying building,
factory or machine for future expansion.
Long term assets usually require total cash payment initially and
expensed in income statement across its living year. Therefore, when a company
invest in long term assets, it will cause a large outflow of cash in that
particular year. </span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">Long term capital
investment can be traced by monitoring the cash flow from investing activities
in cash flow statement.</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><br /></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: x-large;"><span style="color: blue;">2 Short Term Capital Investment</span></span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">Company will use
their cash in buying materials to produce product (inventory) or borrow to the
customers (Receivable). It is reasonable for inventory and receivables to
maintain specific ratio with revenue.(revenue increases 5%, inventory and
receivables increase 5%). If inventory and receivables increase too much(more
than revenue), it is not a good sign because it may cause a writeoff
afterwards.(cause by obsolesce of inventory or bad debt of receivables )</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">Short term capital
investment can be traced by monitoring the adjustment of working capitals in
cash flow fro operating activities section in cash flow statement.</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><br /></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: x-large;"><span style="color: blue;">3 Paying Dividend</span></span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">Company can use the
profit to pay dividend. If company has a 100% dividend payout ratio policy, it
means company will pay all the profits as dividend to shareholders, and no cash
flow will retain from the profit.</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><br /></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="color: blue;"><span style="font-size: x-large;">4 Paying Debts</span></span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">Company can use
extra cash generated from profit to pay off its debts. The good thing of paying
debt is the net profit margin in the following years will be increased due to
the reduction of interest expense.</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span>InvestBeginnershttp://www.blogger.com/profile/15457001456091778616noreply@blogger.com0tag:blogger.com,1999:blog-7660706702739974772.post-27171087624609223992014-09-02T06:48:00.004-07:002014-09-03T06:01:25.062-07:00Profitability (Practical Experience)<span style="font-family: Arial,Helvetica,sans-serif;"><br /></span>
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">The purpose for a
company to exist is to earn a <span style="color: red;"><span style="font-size: x-large;">Profit</span></span>. A good and safe company should provide
continuously stable and increased profit. </span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><br /></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">A company can
improve its profits by two means: <span style="color: red;"><span style="font-size: x-large;">Revenue</span></span> and <span style="color: red;"><span style="font-size: x-large;">Profit Margin</span></span>. Increasing
revenue means company expand its business and sells more products. Increasing
profit margin means company find a way to cut down its total cost.</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><br /></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">From my previous
experiences, increasing profit caused by increasing revenue will have instant
effect on share price whereas increasing profit caused by increasing profit
margin will have a delay in time for its share price to increase but the
increment impact will be higher.</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">To play safe, it is
wise to set a minimum profit margin for the company you want to invest. </span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><br /></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">I usually set more
than <span style="color: red;">5% profit margin (more than 10% is better)</span>. This is because investors
usually will overreact if a profitable company suddenly has incurred loss. A
low profit margin company such as less than 5% profit margin easily result in
loss if anything happened (for example material cost increased or decrease in
sales) and this will cause the share price to drop dramatically.</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><br /></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">Different types of
profit can be used to calculate profit margin. Different profit margin will
tell different story about the company. If we want to calculate profit margin,
the denominator with definitely be revenue. For numerator, we need to decide
which profit to use. There are several profits to choose from: </span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="color: red;"><span style="font-size: large;">1 Gross profit</span></span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="color: red;"><span style="font-size: large;">
</span></span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="color: red;"><span style="font-size: large;">2 Operating profit</span></span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="color: red;"><span style="font-size: large;">
</span></span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="color: red;"><span style="font-size: large;">3 Profit before tax</span></span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="color: red;"><span style="font-size: large;">
</span></span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="color: red;"><span style="font-size: large;">4 Net profit</span></span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><br /></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"><span style="color: red; font-size: x-large;">Gross Profit</span> only
deducts the direct costs involved in
producing products. Examples are
materials, direct labour, factory overhead such as electricity bill and
depreciation of machines.</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">Gross profit margin
shows the maximum profit margin that a company can earn from its revenue
because the costs involved are imperative costs to produce the product and
cannot be cut. Gross profit of a company can only be improved through technology advancement(use high tech
machine to reduce cost per unit) or through human capital management (increase
efficiency of workers) or reduce waste.</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><br /></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"><span style="color: red; font-size: x-large;">Operating Profit</span><span style="font-size: x-large;">
</span>includes some important but flexible costs which can be cut down during crisis
such as: general & administrative expenses, sales & distribution
expenses, promotion expenses, research expenses. </span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">Operating Profit
represent the real profit that come from its main business(excluding gain from
interest or investment)</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><br /></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"><span style="color: red; font-size: x-large;">Profit Before Tax</span> is
often used instead of Net profit to compare profit across country with
different tax. </span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><br /></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"><span style="color: red; font-size: x-large;">Net Profit</span>
represents the total profit that a company get during that year. It is very
important because it represents the total return that shareholders can get from
the company. It is the final result. However when you want to use net profit to
calculate profit margin, remember to exclude profit or lose from non-recurring
items or discontinued activities because it is unlikely to occur in the future.</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><br /></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><br /></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span>InvestBeginnershttp://www.blogger.com/profile/15457001456091778616noreply@blogger.com0tag:blogger.com,1999:blog-7660706702739974772.post-83976822732944697362014-09-02T06:45:00.003-07:002014-09-03T06:03:06.720-07:00Valuation (Pratical Experience)<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">If you know about Warren Buffet or his teacher Benjamin Graham, you probably come across a term so called: "Intrinsic Value". Intrinsic Value can be defined as the "Real Value" of a company. Benjamin Graham tell us that, when the price of a stock is lower than its intrinsic value, we should buy it. One day in the future, both price will converge.The difference between price and intrinsic value is "safety margin". The bigger the safety margin, the safety we are.<br /><br />My friend once ask me, is there any formula that can calculate the intrinsic value of a stock. If there is such a standard formula, there will not be a gap between price and intrinsic value. Because every investor will go search for one.<br /><br />Although there is no such a formula, there are still some guides to discover the intrinsic value. Now I introduce a guide that I usually use to find misplaced price stock.<br /><br />Firstly, we discuss why we create a company? Profit! Profit!! and Profit!!!<br />If a company cant earn a profit, no one will buy it. A company that earn a lot should have higher value. There is a measure that directly link the profit to its value which is PE.<br /><span style="color: red;"><br /><span style="font-size: x-large;">PE= Share Price/ Earning per Share </span></span><br />The best example to indicate what is <span style="font-size: x-large;"><span style="color: blue;">PE</span></span>.<br />Let say PE of a company is 10, it means if you buy that company, and the earning remains constant in future, you will get your money back in 10 years. <br /><br />Therefore, if we value a company only by the profit it makes, the PE of all company should be the same. The price of a large company with profit 100m should be equal to the price of 10 company with profit 10m. If this is the case, then all company PE should be equal and problem solved.<br /><br />However, in our reality, it is not exactly like that (not exactly does not mean not at all.) <br />Firstly, we as investors always hope that the profits will be stable and most importantly will not suffer a lose. If a company can offer a more stable profit, we maybe willing to pay higher price for that company (higher PE).<br /><br />How to ensure<span style="color: red; font-size: x-large;"> stability of profit</span> of a company?<br />There are three particular ways to justify it.<br /><span style="color: red;"> </span></span></span><br />
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"><span style="color: blue;"><span style="font-size: x-large;">1 Looking for its past record</span></span><br />If the company has long past record of stable profits(>10years) , then we can probably predict that its future profit will be stable too.<br /><span style="color: red;"> </span></span></span><br />
<span style="font-size: x-large;"><span style="color: blue;"><span style="font-family: Arial,Helvetica,sans-serif;">2 Firm size </span></span></span><br />
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">A big company is usually considered has higher profit stability than a small company if other things remain the same. Besides have longer experiences in its few, a large company also has other advantages such as brand recognition, customer loyalty, market power to influence price, connection and the others.<br />All this advantages usually give a company with larger firm size a higher PE compared to small company.<br /> </span></span><br />
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"><span style="color: blue;"><span style="font-size: x-large;">3 Industry the company involved in</span></span><br />Industry can be divided in cyclic industry and non-cyclic industry. An industry is whether cyclic depends on the supply and demand condition and the types of products. Non-cyclic industry such as consumer product has more stable profits(higher PE) because of the continuous demand of consumer product. <br /><br />Besides stability, there is another important factor which can affect value and PE of a company, which is growth of the profit.<br />The profit used to calculate PE is profit gained by company from the past. If the profit has higher tendency to grow in the future, investors are willing to pay more for that company which means a higher PE for now.<br /><br />How to predict company with <span style="color: red;"><span style="font-size: x-large;">higher growth</span></span>?<br /><span style="color: red;"> </span></span></span><br />
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"><span style="font-size: x-large;"><span style="color: blue;">1 Looking for its past record</span></span><br />Unlike stability, we look for long term past profit of a company(10years), for profit growth, we should look at its short term past record(<5years). This is because high growth usually will not last long.<br /><br /><span style="color: blue;"><span style="font-size: x-large;">2 Industry</span></span><br />For some production company (such as industrial product)cannot has high growth in short period because it need time to build new factory or building in order to expand its revenue. Its revenue is highly depend on its customers and capacity of production line. However, there are some industries do not have such a lead time. For example technology sector, if they can find many customers, they can increase their production in short period. <br /><br /><span style="color: blue;"><span style="font-size: x-large;">3 Any reason for high growth</span></span><br />Every high growth will have its own reason. Whether the demand of industry increase, or the ability of company to find customers. However before the actual financial report coming out, it will have signs. For industry, look for the statistics such as gdp, industry, exports and others. <br /><br /><span style="color: blue;"><span style="font-size: x-large;">Conclusion</span></span><br />Theoretically, all company should have same PE.<br />Exceptionally, for company with high profit stability or high profit growth, higher PE is reasonable. </span></span>InvestBeginnershttp://www.blogger.com/profile/15457001456091778616noreply@blogger.com0tag:blogger.com,1999:blog-7660706702739974772.post-45539154949615966402014-07-23T02:22:00.000-07:002014-07-23T02:31:39.203-07:00Revenue Recognition<span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;">Revenue is one of the key data when we analyze one company. Big company with higher revenue usually produce higher profit than small company (not necessary). A company can only increase its profit by two means, which are increase revenue or increase profit margin. It is similar if a person want to increase its saving, either by increase his income or decrease his expense.<br /> </span></span><br />
<span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;">Since revenue is such an important data in financial statement, then the way company quantifies its revenue is also very important. Many scandals of company arise from boosting the revenue.<br /><br />There is a few <span style="font-size: x-large;"><span style="color: red;">criteria</span></span> for revenue recognition according to IFRS:<br />For company that <span style="font-size: x-large;"><span style="color: red;">selling products</span></span><br /></span></span><br />
<ol>
<li><span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;">Risk and Rewards of the product have been transferred to customers. In simple word, if the product break down now, company does not have the responsibility to compensate the customers.(warranty is another issue)</span></span></li>
<li><span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;">Company does not have continuing managerial involvement or control on the product. In simple word, customer has totally freedom and power on how to use the product.</span></span></li>
<li><span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;">The amount of revenue can be quantify reliably. Since the revenue is recorded as number in financial statement, the value of revenue should be measurable.</span></span></li>
<li><span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;">The money from selling the product can probably received by company from customers.(not necessary immediately)</span></span></li>
<li><span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;">The cost incurred can be measured reliably. </span></span></li>
</ol>
<span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;"><br />For company that <span style="font-size: x-large;"><span style="color: red;">providing services</span></span><br /></span></span><ol>
<li><span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;">The amount of revenue can be quantify reliably. Since the revenue is recorded as number in financial statement, the value of revenue should be measurable.</span></span></li>
<li><span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;">The stage of completion can be measured reliably.</span></span></li>
<li><span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;">The money from selling the product can probably received by company from customers.(not necessary immediately)</span></span></li>
<li><span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;">The cost incurred can be measured reliably. </span></span></li>
</ol>
<span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;"><br />Below are several <span style="font-size: x-large;"><span style="color: red;">special cases</span></span><br /><span style="font-size: x-large;"><span style="color: red;">Special Case One: Long Term Contract</span></span><br />Long Term Contract is contract which is more than one year . There are basically 2 methods to recognise revenue for long term contract.<br />a) Percentage of Completion Method<br />Revenue will be recognised on how much percentage of the project that have been completed in current year. For example, the total revenue for whole project is RM10m. This year complete 20% which means revenue for this year is RM2m<br />b) Completed Contract Method<br />Revenue will be recognised only when the whole contract is completed. No revenue will be recognised in previous year for that contract.<br /><br /><span style="font-size: x-large;"><span style="color: red;">Special Case Two: Installment Sales</span></span><br />Installment Sales means customer will not pay full money when buy the product. Instead, customer will pay the money separately each month after the buying with or without charging of interest. Under IFRS, revenue for selling the product according to the product price will be recognised at the date when selling the product whereas interest will be recognised each month when installment is paid.<br /> </span></span><br />
<span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: x-large;"><span style="color: red;">Special Case Three: Barter</span></span><br />Barter means exchange of goods. If company sell a product to a customer and at the same time receives goods and services with same value from the customer, no cash will be involved in system barter, should this transaction be included as revenue?<br />Under IFRS, barter transaction can be measured based on fair value of similar non-barter transaction with other party. For example, company exchanges an apple with an orange with customer A, company sells an apple for RM1 for customer B, so the apple exchange with customer A will be included in revenue with value of RM1.<br /><br /><span style="font-size: x-large;"><span style="color: red;">Special Case Four: Agent Selling</span></span><br />If a company buys a product from supplier and directly sell it to the customers , how should the revenue of the company be recognised? There are two different methods to recognise the revenue.<br />a) Gross Reporting<br />Gross Reporting means company report the total of selling price of the product as revenue.<br />There is a few criteria for revenue to recognise based on gross reporting.</span></span><br />
<ol>
<li><span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;">Company bear the inventory risk and credit risk. In simple word, if the product break down during the storing process or customer do not pay the money, company itself have to pay the bill.</span></span></li>
<li><span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;">Company can choose supplier.</span></span></li>
<li><span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;">Company can fix the product price.</span></span></li>
</ol>
<span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;">If the above 3 criteria are not met, revenue will be recorded based on net reporting.<br />b) Net Reporting<br />Revenue is reported as the difference between product selling price and cost that incurred (profit).</span></span><br />
<span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;">
</span></span>InvestBeginnershttp://www.blogger.com/profile/15457001456091778616noreply@blogger.com0tag:blogger.com,1999:blog-7660706702739974772.post-42254820060728794102014-07-16T06:21:00.002-07:002014-07-25T00:06:25.942-07:00A Story About Financial Reports <div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjg0E2D9lsHwS-rxLPPO7tlVDm4CciSvP8aOlZLtMzW07mWwVhMFuYSVkcbk0D6I4FgUFz-0XufFyB1X4Gudd4GdgruycJLe2qRFo7jtfmOfrqi3hkshuCll9A3K13xLWViySd_LK33tCw/s1600/book.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjg0E2D9lsHwS-rxLPPO7tlVDm4CciSvP8aOlZLtMzW07mWwVhMFuYSVkcbk0D6I4FgUFz-0XufFyB1X4Gudd4GdgruycJLe2qRFo7jtfmOfrqi3hkshuCll9A3K13xLWViySd_LK33tCw/s1600/book.png" height="220" width="320" /></a></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"> <span style="font-size: x-small;">http://storiestastegood.com/2013/05/23/stories-stories-everywhere-and-not-a-drop-to-drink/</span></span></span><br />
<br />
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">Firstly, imagine you as a company.</span></span><br />
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">You now have a house
and a car.</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">These are your
<span style="color: red;">ASSET</span>.</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">The car's value will
decrease every year,</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">this is called<span style="color: red;">
DEPRECIATION</span>. </span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">However, you do not
buy this house and car by cash.</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">You borrows the
money from bank.</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">This borrowing is
your <span style="color: red;">LIABILITY</span>.</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">Before you can work
to earn money,</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">You need to survive,</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">So you need to find
someone that can support your livings.</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">Your parents are
your shareholders.</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">The money they
support you is <span style="color: red;">SHARE CAPITAL</span> which is
recorded under <span style="color: red;">EQUITY</span>.</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"><span style="color: red;">ASSET, LIABILITY
& EQUITY</span> are recorded in <span style="color: red;">BALANCE SHEET</span>.</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><br /></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">Now you are working,</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">the income you
earned is <span style="color: red;">REVENUE</span>.</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">Every day you need
to spend some money for living so that you can continue working,</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">These are called
<span style="color: red;">EXPENSE</span>.</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">Sometimes you go out
to eat but you forget to bring money,</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">So you tell the
tauke that you will pay next time,</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">this is called
<span style="color: red;">PAYABLE</span>.</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">Sometimes you go out
with your friends,</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">you help your friend
to pay first because your friend does not bring enough money,</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">this is called
<span style="color: red;">RECEIVABLE</span>,</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">If your friend do
not pay you later,</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">this is called <span style="color: red;">BAD DEBT WRITTEN OFF</span>.</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">If you already know
your friend will not pay you,</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">This is called
<span style="color: red;">PROVISION FOR BAD DEBT</span>.</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">Your income after
deduction for all the expenses is called <span style="color: red;">PROFIT</span>.</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">All of the things
above which happen every year are recorded in <span style="color: red;">INCOME STATEMENT</span>.</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><br /></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">Finally you have
some money left after daily expenses,</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">You think you want
to repay your parents.</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">So you give some
allowances to your parents,</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">This is called
<span style="color: red;">DIVIDEND</span>.</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">After working for
many years,</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">You have accumulated
some money,</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">this is called
<span style="color: red;">RETAINED EARNINGS</span>.</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"> You want to buy a house for your parents ,</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">This is called <span style="color: red;">BONUS
ISSUE</span>.</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">All of these above
are recorded in <span style="color: red;">CHANGE OF EQUITY STATEMENT</span>.</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><br /></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">However, although
you earn a lot,</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">But you find that
your money disappear without reason,</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">So you decide to
find out what is happening.</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"> You record every money that you get and
expense.</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">This is called <span style="color: red;">CASH
FLOW STATEMENT</span>.</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"> </span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">Reading until here,
you find that a company is just like a person. It is easier to learn <span style="color: red;">FINANCIAL
REPORTS</span> by good imagination. So have a enjoyable learning journey.</span></span><br />
<br />
<span style="color: #38761d;"><span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">Further Info: </span></span></span><span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-weight: normal;"> </span></span></span><br />
<a href="http://beginnersfinancialreport.blogspot.com/2014/07/an-introduction-to-financial-reports.html" target="_blank"><span style="color: red;"><span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-weight: normal;">"An Introduction to Financial Reports"</span></span></span></span></a></div>
InvestBeginnershttp://www.blogger.com/profile/15457001456091778616noreply@blogger.com1tag:blogger.com,1999:blog-7660706702739974772.post-26476008545292537472014-07-15T07:06:00.001-07:002014-07-24T23:31:32.465-07:00Valuation Ratio<br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"><span style="font-size: x-large;"><span style="color: blue;">VALUATION RATIO</span></span> : To
measure stock price of a company whether undervalues/overvalues relative to its
value.</span></span></div>
<div style="margin: 0in;">
<br /></div>
<div style="margin: 0in;">
</div>
<div style="margin: 0in;">
<span style="font-size: x-large;"><span style="color: blue;"><span style="font-family: Arial,Helvetica,sans-serif;">Examples of
Valuation Ratio: </span></span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"> 1) <span style="color: red;"></span></span></span><span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"><span style="color: red;">P/E</span></span></span><br />
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"><span style="color: purple;"><span style="font-size: large;">P/E = PRICE PER SHARE / EARNING PER SHARE</span></span> </span></span><br />
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">Link the stock price
and earning of company together . Higher PE means the stock is expansive if
compared to its earning.</span></span></div>
<div style="margin: 0in;">
<br /></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"> 2) </span></span><span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"><span style="color: red;">P/CF</span></span></span><br />
<span style="color: purple;"><span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"><span style="font-size: large;">P/CF = PRICE PER SHARE / CASH FLOW PER SHARE</span> </span></span></span><br />
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">Cash flow is used
instead of earning because earning without cash received is not ascertained
yet. </span></span></div>
<div style="margin: 0in;">
<br /></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"> 3) </span></span><span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"><span style="color: red;">P/S </span></span></span><br />
<span style="color: purple;"><span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"><span style="font-size: large;">P/S = PRICE PER SHARE / SALES PER SHARE</span> </span></span></span><br />
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">Used by the company
without positive income yet.</span></span></div>
<div style="margin: 0in;">
<br /></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"> 4) </span></span><span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"><span style="color: red;">P/BV</span></span></span><br />
<span style="color: purple;"><span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"><span style="font-size: large;">P/BV = PRICE PER SHARE / BOOK VALUE PER
SHARE</span> </span></span></span><br />
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">Price is compared
with the net asset of company. It is the most conservative calculation when the
company is liquidated, how much cash can received from the company.</span></span></div>
<div style="margin: 0in;">
<br /></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"> 5) <span style="color: red;">EPS</span></span></span><br />
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"><span style="color: purple;"><span style="font-size: large;">EPS = NET PROFIT / TOTAL COMMON SHARES</span></span> </span></span><br />
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">To indicate how much
earning can be imaginary earned by possess one share of company.</span></span></div>
<div style="margin: 0in;">
<br /></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"> 6) </span></span><span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"><span style="color: red;">DIVIDEND PAYOUT RATIO</span></span></span><br />
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"><span style="color: purple;"><span style="font-size: large;">DIVIDEND PAYOUT RATIO = TOTAL DIVIDEND
PAID / NET PROFIT</span></span> </span></span><br />
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">To indicate the
percentage of net profit that paid out as dividend to shareholders.</span></span></div>
<div style="margin: 0in;">
<br />
<span style="color: #38761d;"><span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">Other Info: </span></span></span><br />
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"><a href="http://beginnersfinancialreport.blogspot.com/2014/07/activity-ratio.html" target="_blank"><span style="color: red;">"ACTIVITY RATIO"</span></a> </span></span></div>
<div style="font-family: Calibri; font-size: 11.0pt; margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"><a href="http://beginnersfinancialreport.blogspot.com/2014/07/liquidity-ratio.html" target="_blank"><span style="color: red;"><span style="color: red;">"LIQUIDITY RATIO</span>"</span></a></span></span><br />
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"><a href="http://beginnersfinancialreport.blogspot.com/2014/07/solvency-ratio-toevaluate-whether.html" target="_blank"><span style="color: red;"><span style="color: red;">"SOLVENCY RATIO</span>" </span></a></span></span><br />
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"><a href="http://beginnersfinancialreport.blogspot.com/2014/07/profitability-ratio.html" target="_blank"><span style="color: red;">"PROFITABILITY RATIO"</span></a></span></span><br />
<br /></div>
InvestBeginnershttp://www.blogger.com/profile/15457001456091778616noreply@blogger.com1tag:blogger.com,1999:blog-7660706702739974772.post-12592598526856186952014-07-15T06:06:00.001-07:002014-07-24T23:30:53.566-07:00Profitability Ratio<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"><span style="color: blue;"><span style="font-size: x-large;">PROFITABILITY RATIO</span></span>
: To measure how much profit that a company can generate from its resources.</span></span></div>
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">
</span></span><br />
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"><span style="color: blue;"><span style="font-size: x-large;">Examples of Profitability Ratio :</span></span> <br /> 1) <span style="color: red;"></span></span></span><span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"><span style="color: red;">NET PROFIT MARGIN</span></span></span><br />
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"><span style="color: purple;">NET PROFIT MARGIN = NET PROFIT / REVENUE</span><br />To evaluate from 1 unit revenue, company can earn how much profit. Higher profit margin than peer companies shows that company very efficient in manage cost and maintain the lowest waste.<br /><br /> 2) </span></span><span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"><span style="color: red;">PRETAX MARGIN</span></span></span><br />
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"><span style="color: purple;">PRETAX MARGIN = EARNING BEFORE TAX / REVENUE</span><br />Since tax rebate will affect the true net profit , pretax margin employs earning before tax instead of net profit.<br /><br /> 3) </span></span><span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"><span style="color: red;">OPERATING PROFIT MARGIN</span></span></span><br />
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"><span style="color: purple;">OPERATING PROFIT MARGIN = OPERATING PROFIT / REVENUE</span><br />To eradicate the effect of one-time profit earned through selling financial securities, operating profit is used.<br /><br /> 4) </span></span><span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"><span style="color: red;">GROSS PROFIT MARGIN</span></span></span><br />
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"><span style="color: purple;">GROSS PROFIT MARGIN = GROSS PROFIT / REVENUE</span><br />To investigate minimum percentage of profit that can be earned because gross profit only involve the crucial expenses that need to produce revenue. <br /><br /> 5) </span></span><span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"><span style="color: red;">RETURN ON ASSET</span></span></span><br />
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"><span style="color: purple;">RETURN ON ASSET = NET PROFIT / TOTAL ASSET</span><br />To evaluate efficiency of a company using their assets to generate income.<br /><br /> 6) </span></span><span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"><span style="color: red;">RETURN ON EQUITY</span></span></span><br />
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"><span style="color: purple;">RETURN ON EQUITY = NET PROFIT / TOTAL EQUITY</span><br />To evaluate the rate of return that provided to shareholders who invest capital into the company.</span></span><br />
<br />
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"><span style="color: #38761d;">Other Info: </span></span></span><br />
<a href="http://beginnersfinancialreport.blogspot.com/2014/07/activity-ratio.html" target="_blank"><span style="font-size: large;"><span style="color: red;">"ACTIVITY RATIO"</span></span></a><br />
<a href="http://beginnersfinancialreport.blogspot.com/2014/07/liquidity-ratio.html" target="_blank"><span style="font-size: large;"><span style="color: red;"><span style="font-size: large;"><span style="color: red;">"LIQUIDITY RATIO</span>"</span></span></span></a><br />
<a href="http://beginnersfinancialreport.blogspot.com/2014/07/solvency-ratio-toevaluate-whether.html" target="_blank"><span style="font-size: large;"><span style="color: red;"><span style="font-size: large;"><span style="font-size: large;"><span style="color: red;">"SOLVENCY RATIO</span></span>" </span></span></span></a><br />
<span style="font-size: large;"><a href="http://beginnersfinancialreport.blogspot.com/2014/07/valuation-ratio.html" target="_blank"><span style="color: red;"><span style="font-size: large;"><span style="color: red;">"VALUATION RATIO"</span></span> </span></a> </span><br />
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"><span style="color: #38761d;"> </span> </span></span>InvestBeginnershttp://www.blogger.com/profile/15457001456091778616noreply@blogger.com0tag:blogger.com,1999:blog-7660706702739974772.post-83612715880250181752014-07-15T02:50:00.002-07:002014-07-24T23:30:28.698-07:00Solvency Ratio<br />
<div style="margin: 0in;">
<span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;"><span style="color: blue;"><span style="font-size: x-large;">SOLVENCY RATIO</span></span> : To
evaluate whether a company can pay its long term debts.</span></span></div>
<span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;">
</span></span><br />
<span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: x-large;"><span style="color: blue;">Examples of Solvency Ratio: </span></span><br /> 1) <span style="color: red;"></span></span></span><span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;"><span style="color: red;">DEBT-TO-ASSET-RATIO</span></span></span><br />
<span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;"><span style="color: purple;">DEBT-TO-ASSET-RATIO = TOTAL DEBT / TOTAL ASSET</span><br />To measure the percentages of asset financed by debt.<br /><br /> 2) </span></span><span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;"> <span style="color: red;">DEBT-TO-EQUITY-RATIO</span></span></span><br />
<span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;"><span style="color: purple;">DEBT-TO-EQUITY-RATIO = TOTAL DEBT / TOTAL SHAREHOLDERS' EQUITY</span><br />To measure proportions of capital that are financed by debt and equity.<br /><br /> 3) </span></span><span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;"><span style="color: red;">FINANCIAL LEVERAGE RATIO</span></span></span><br />
<span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;"><span style="color: purple;">FINANCIAL LEVERAGE RATIO = TOTAL ASSET / TOTAL EQUITY </span><br />To measure the amount of assets that can be created by one unit of equity. Higher financial leverage ratio means company uses more financial leverage such as debt and borrowing to finance its assets.<br /><br /> 4) </span></span><span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;"><span style="color: red;"><span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;">INTEREST COVERAGE</span></span> </span></span></span><br />
<span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;"><span style="color: purple;">INTEREST COVERAGE = EARNING BEFORE INTEREST & TAX / INTEREST PAYMENT</span><br />To determine whether the profit earned by company enough or not to pay off interest from borrowing.</span></span><br />
<br />
<span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;"><span style="color: #38761d;">Other Info: </span></span></span><br />
<a href="http://beginnersfinancialreport.blogspot.com/2014/07/activity-ratio.html" target="_blank"><span style="font-size: large;"><span style="color: red;">"ACTIVITY RATIO"</span></span></a><br />
<a href="http://beginnersfinancialreport.blogspot.com/2014/07/liquidity-ratio.html" target="_blank"><span style="font-size: large;"><span style="color: red;"><span style="font-size: large;"><span style="color: red;">"LIQUIDITY RATIO</span>"</span></span></span></a><br />
<a href="http://beginnersfinancialreport.blogspot.com/2014/07/profitability-ratio.html" target="_blank"><span style="font-size: large;"><span style="color: red;">"PROFITABILITY RATIO"</span></span></a><br />
<span style="font-size: large;"><a href="http://beginnersfinancialreport.blogspot.com/2014/07/valuation-ratio.html" target="_blank"><span style="color: red;"><span style="font-size: large;"><span style="color: red;">"VALUATION RATIO"</span></span> </span></a> </span>InvestBeginnershttp://www.blogger.com/profile/15457001456091778616noreply@blogger.com0tag:blogger.com,1999:blog-7660706702739974772.post-46919479699784463182014-07-15T02:26:00.000-07:002014-07-24T23:29:58.841-07:00Liquidity Ratio<br />
<div style="margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"><span style="color: blue;">LIQUIDITY RATIO</span> : To
evaluate whether a company will be able to pay its short term debts and
interests.</span></span></div>
<div style="margin: 0in;">
<br /></div>
<div style="font-size: 11pt; margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"><span style="color: blue;"><span style="font-size: x-large;">Examples of Liquidity Ratio: </span></span><br /> 1) <span style="color: red;"></span></span></span><span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"><span style="color: red;">CURRENT RATIO</span></span></span><br />
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"><span style="color: purple;">CURRENT RATIO = CURRENT ASSET / CURRENT LIABILITY</span><br />To determine there are enough current asset to pay off current liability.</span></span></div>
<div style="font-size: 11pt; margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"><br /> 2) </span></span><span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"><span style="color: red;">QUICK RATIO</span></span></span><br />
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"><span style="color: purple;">QUICK RATIO = (CASH + SHORT TERM MARKETABLE SECURITY + RECEIVABLES) / CURRENT LIABILITY</span><br />More conservative compared to CURRENT RATIO because inventory and prepaid expense which hard to liquidate are neglected.</span></span></div>
<div style="font-size: 11pt; margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"><br /> 3) <span style="color: red;"></span></span></span><span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"><span style="color: red;">CASH RATIO</span></span></span><br />
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"><span style="color: purple;">CASH RATIO = (CASH + SHORT TERM MARKETABLE SECURITY ) / CURRENT LIABILITY</span><br />The most conservative method since only CASH and SHORT TERM MARKETABLE SECURITY that can fully liquidate to its fair value in short time.</span></span></div>
<div style="font-size: 11pt; margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"><br /> 4) </span></span><span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"><span style="color: red;"><span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">DEFENSIVE INTERVAL RATIO</span></span> </span></span></span><br />
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"><span style="color: purple;">DEFENSIVE INTERVAL RATIO = (CASH + SHORT TERM MARKETABLE SECURITY ) / DAILY EXPENDITURE</span><br />To evaluate new or highly dangerous company how many days the company can survive only based on its cash.</span></span></div>
<div style="font-size: 11pt; margin: 0in;">
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"><br /> 5) <span style="color: red;"></span></span></span><span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"><span style="color: red;">CASH CONVERSION CYCLE</span></span></span><br />
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"><span style="color: purple;">CASH CONVERSION CYCLE = DAYS OF INVENTORY ON HAND + DAYS OF SALES OUTSTANDING - NUMBER OF DAYS OF PAYABLE</span><br />To calculate number of days between cash paid to suppliers and cash received from customers.</span></span><br />
<br />
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"><span style="color: #38761d;">Other Info: </span></span></span><br />
<a href="http://beginnersfinancialreport.blogspot.com/2014/07/activity-ratio.html" target="_blank"><span style="font-size: large;"><span style="color: red;">"ACTIVITY RATIO"</span></span></a><br />
<a href="http://beginnersfinancialreport.blogspot.com/2014/07/solvency-ratio-toevaluate-whether.html" target="_blank"><span style="font-size: large;"><span style="color: red;"><span style="font-size: large;"><span style="font-size: large;"><span style="color: red;">"SOLVENCY RATIO</span></span>" </span></span></span></a><br />
<a href="http://beginnersfinancialreport.blogspot.com/2014/07/profitability-ratio.html" target="_blank"><span style="font-size: large;"><span style="color: red;">"PROFITABILITY RATIO"</span></span></a><br />
<span style="font-size: large;"><a href="http://beginnersfinancialreport.blogspot.com/2014/07/valuation-ratio.html" target="_blank"><span style="color: red;"><span style="font-size: large;"><span style="color: red;">"VALUATION RATIO"</span></span> </span></a> </span><br />
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"><span style="color: #38761d;"> </span> </span><br /> </span></div>
InvestBeginnershttp://www.blogger.com/profile/15457001456091778616noreply@blogger.com0tag:blogger.com,1999:blog-7660706702739974772.post-63956320789350788862014-07-15T00:06:00.004-07:002014-07-24T23:28:19.806-07:00Activity Ratio<br />
<div style="margin: 0in;">
<span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;"><span style="color: blue;"><span style="font-size: x-large;">ACTIVITY RATIO</span></span> : To
measure efficiency of a company perform its daily main operations.</span></span></div>
<div style="margin: 0in;">
<br /></div>
<div style="margin: 0in;">
</div>
<div style="margin: 0in;">
<span style="font-size: x-large;"><span style="color: blue;"><span style="font-family: Arial,Helvetica,sans-serif;">Examples of Activity
Ratio</span></span></span></div>
<span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;"> 1) </span></span><span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;"><span style="color: red;"><span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;"><span style="color: red;">INVENTORY TURNOVER</span></span></span> </span></span></span><br />
<span style="color: purple;"><span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-family: Arial,Helvetica,sans-serif;">INVENTORY TURNOVER = COST OF GOODS SOLD /
AVERAGE INVENTORY</span> </span></span></span><br />
<span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;">To measure how fast
inventory being cleared compared to cost of goods sold.</span></span></div>
<span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;"> </span></span></div>
<div style="margin: 0in;">
<span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;"> 2) <span style="color: red;"></span></span></span><span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;"><span style="color: red;">DAYS OF INVENTORY ON HAND</span></span></span><br />
<span style="color: purple;"><span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-family: Arial,Helvetica,sans-serif;">DAYS OF INVENTORY ON HAND = 365 /
INVENTORY TURNOVER</span> </span></span></span><br />
<span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;">To measure how many
days need to clear inventory.</span></span></div>
<div style="margin: 0in;">
<br /></div>
<span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;"> 3) <span style="color: red;"></span></span></span><span style="color: red;"><span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;">RECEIVABLES TURNOVER</span></span></span><br />
<span style="color: purple;"><span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-family: Arial,Helvetica,sans-serif;">RECEIVABLES TURNOVER = REVENUE / AVERAGE
RECEIVABLES</span> </span></span></span><br />
<span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;">To measure how fast
to receive money from customers compared to revenue.</span></span></div>
<div style="margin: 0in;">
<br /></div>
<span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;"> 4) <span style="color: red;"></span></span></span><span style="color: red;"><span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;">DAYS OF SALES OUTSTANDING</span></span></span><br />
<span style="color: purple;"><span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-family: Arial,Helvetica,sans-serif;">DAYS OF SALES OUTSTANDING = 365 /
RECEIVABLES TURNOVER</span> </span></span></span><br />
<span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;">To measure how many
days need to receive cash from customers.</span></span></div>
<div style="margin: 0in;">
<br /></div>
<span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;"> 5) </span></span><span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;"><span style="color: red;"><span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;"><span style="color: red;">PAYABLE TURNOVER</span></span></span> </span></span></span><br />
<span style="color: purple;"><span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-family: Arial,Helvetica,sans-serif;">PAYABLE TURNOVER = PURCHASES / AVERAGE
TRADE PAYABLE</span> </span></span></span><br />
<span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;">To measure how fast
company pays money to suppliers.</span></span></div>
<div style="margin: 0in;">
<br /></div>
<span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;">
</span></span><br />
<div style="margin: 0in;">
<span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;"> 6) </span></span><span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;"><span style="color: red;"><span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;"><span style="color: red;">NUMBER OF DAYS OF PAYABLE </span></span></span></span></span></span><br />
<span style="color: purple;"><span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-family: Arial,Helvetica,sans-serif;">NUMBER OF DAYS OF PAYABLE = 365 /
PAYABLE TURNOVER</span> </span></span></span><br />
<span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;">To measure how many
days company pays money to supplier.</span></span></div>
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<span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;"> 7) <span style="color: red;"></span></span></span><span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;"><span style="color: red;">WORKING CAPITAL TURNOVER</span></span></span><br />
<span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;"><span style="color: purple;"><span style="font-family: Arial,Helvetica,sans-serif;">WORKING CAPITAL TURNOVER = REVENUE /
AVERAGE WORKING CAPITAL</span></span> </span></span><br />
<span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;">To measure how
efficient company use working capital to generate revenue.</span></span></div>
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<span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;"> 8) <span style="color: red;"></span></span></span><span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;"><span style="color: red;">TOTAL ASSETS TURNOVER</span></span></span><br />
<span style="color: purple;"><span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-family: Arial,Helvetica,sans-serif;">TOTAL ASSETS TURNOVER = REVENUE / AVERAGE
TOTAL ASSETS</span> </span></span></span><br />
<span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;">To measure how
efficient company use total assets to generate revenue.</span></span></div>
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<span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;"><span style="color: #38761d;">Further Info: </span></span></span><br />
<a href="http://beginnersfinancialreport.blogspot.com/2014/07/liquidity-ratio.html" target="_blank"><span style="font-size: large;"><span style="color: red;"><span style="font-size: large;"><span style="color: red;">"LIQUIDITY RATIO</span>"</span></span></span></a><br />
<a href="http://beginnersfinancialreport.blogspot.com/2014/07/solvency-ratio-toevaluate-whether.html" target="_blank"><span style="font-size: large;"><span style="color: red;"><span style="font-size: large;"><span style="font-size: large;"><span style="color: red;">"SOLVENCY RATIO</span></span>" </span></span></span></a><br />
<a href="http://beginnersfinancialreport.blogspot.com/2014/07/profitability-ratio.html" target="_blank"><span style="font-size: large;"><span style="color: red;">"PROFITABILITY RATIO"</span></span></a><br />
<span style="font-size: large;"><a href="http://beginnersfinancialreport.blogspot.com/2014/07/valuation-ratio.html" target="_blank"><span style="color: red;"><span style="font-size: large;"><span style="color: red;">"VALUATION RATIO"</span></span> </span></a> </span></div>
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InvestBeginnershttp://www.blogger.com/profile/15457001456091778616noreply@blogger.com0tag:blogger.com,1999:blog-7660706702739974772.post-25669175262755914612014-07-14T23:47:00.004-07:002014-07-24T23:23:59.602-07:00Financial Ratio<br />
<span style="font-size: large;"><span style="font-size: x-large;"><span style="color: blue;">Financial Ratio</span></span> have 2 functions:<br /><br /> 1) transfer financial data in financial reports into ratio which can provide valuable information to us about the company.<br /> 2) allow financial data of a company becomes comparable with other company. <br /><br /><span style="font-size: x-large;"><span style="color: blue;">Financial Ratio</span></span> basically can be divided into 5 sections based on functions:<br /> 1) <span style="color: red;">ACTIVITY RATIO</span> : To measure efficiency of a company perform its daily main operations.<br /> 2) <span style="color: red;">LIQUIDITY RATIO</span> : To evaluate whether a company will be able to pay its short term debts and interests.<br /> 3) <span style="color: red;">SOLVENCY RATIO</span> : To evaluate whether a company can pay its long term debts.<br /> 4) <span style="color: red;">PROFITABILITY RATIO</span> : To measure how much profit that a company can generate from its resources.<br /> 5) <span style="color: red;">VALUATION RATIO</span> : To measure stock price of a company whether undervalues/overvalues relative to its financial performance.</span><br />
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<span style="color: lime;"><span style="font-size: large;"><span style="color: #38761d;">Further Information for: </span> </span></span><br />
<a href="http://beginnersfinancialreport.blogspot.com/2014/07/activity-ratio.html" target="_blank"><span style="font-size: large;"><span style="color: red;">"ACTIVITY RATIO"</span></span></a><br />
<a href="http://beginnersfinancialreport.blogspot.com/2014/07/liquidity-ratio.html" target="_blank"><span style="font-size: large;"><span style="color: red;"><span style="font-size: large;"><span style="color: red;">"LIQUIDITY RATIO</span>"</span></span></span></a><br />
<a href="http://beginnersfinancialreport.blogspot.com/2014/07/solvency-ratio-toevaluate-whether.html" target="_blank"><span style="font-size: large;"><span style="color: red;"><span style="font-size: large;"><span style="font-size: large;"><span style="color: red;">"SOLVENCY RATIO</span></span>" </span></span></span></a><br />
<a href="http://beginnersfinancialreport.blogspot.com/2014/07/profitability-ratio.html" target="_blank"><span style="font-size: large;"><span style="color: red;">"PROFITABILITY RATIO"</span></span></a><br />
<span style="font-size: large;"><a href="http://beginnersfinancialreport.blogspot.com/2014/07/valuation-ratio.html" target="_blank"><span style="color: red;"><span style="font-size: large;"><span style="color: red;">"VALUATION RATIO"</span></span> </span></a> </span>InvestBeginnershttp://www.blogger.com/profile/15457001456091778616noreply@blogger.com1tag:blogger.com,1999:blog-7660706702739974772.post-78082008003966592002014-07-14T20:27:00.000-07:002014-07-18T07:47:52.686-07:00Change of Equity Statement<br />
<span style="font-size: large;"><span style="font-size: x-large;"><span style="color: blue;">Change of Equity Statement</span></span> only focuses on the equity part in balance sheet but with detailed explanations about what happen to the equity in the whole year.<br /><span style="color: blue;"><br />Change of Equity Statement</span> basically consists of two part:<br /> 1) <span style="color: red;">NON-DISTRIBUTABLE</span> : Profit that cannot be distributed.<br /> 2) <span style="color: red;">DISTRIBUTABLE</span> : Profit that can be distributed to shareholders. </span><br />
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<span style="font-size: large;"><span style="font-size: x-large;"><span style="color: blue;">Change of Equity Statements Template</span></span></span><br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjUO2DbcA3R9fxr6XWK9hcS6VU7cxS-4TzMpDHPzepyohiHjrOTRXGpVkywnpTt5MuCcT6Yb3ZlYCyP0PeEGRbT5flaRsXxmKrzm0UozvKNL3W1hdYs0DA5L8KR6yt2ZL_-3vufjErGojA/s1600/Change+of+Equity.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjUO2DbcA3R9fxr6XWK9hcS6VU7cxS-4TzMpDHPzepyohiHjrOTRXGpVkywnpTt5MuCcT6Yb3ZlYCyP0PeEGRbT5flaRsXxmKrzm0UozvKNL3W1hdYs0DA5L8KR6yt2ZL_-3vufjErGojA/s1600/Change+of+Equity.png" height="138" width="640" /></a></div>
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<span style="color: blue;"><span style="font-size: x-large;">Components of Change Of Equity Statement :</span></span><br />
<span style="font-size: large;">1) <span style="color: red;">SHARE CAPITAL</span> : Money collected by issuing shares through IPO or right issues. <br /> 2) <span style="color: red;">SHARE PREMIUM</span> : Excess amount received by a firm over the par value of its shares during IPO.<br /> 3) <span style="color: red;">TREASURY SHARE</span>: Company repurchases its own shares.<br /> 4) <span style="color: red;">RESERVES</span> : Money reserved by company either mandated by regulation or for special purposes. Change in RESERVES with be recorded in OTHER COMPREHENSIVE INCOME in Income Statement. Examples are Capital Reserves, Currency Translation Reserves, Cash Flow Hedge Reserves & Fair Value Reserves for Security.<br /> 5) <span style="color: red;">RETAINED EARNINGS</span> : Cumulative earnings of company from previous years and can be distributed to shareholders through dividend and bonus issue.<br /> 6) <span style="color: red;">EQUITY ATTRIBUTE TO SHAREHOLDERS</span> : Net equity of company owned by company shareholders. <br /> 7) <span style="color: red;">MINORITY INTEREST (NON-CONTROLLING INTEREST)</span> : Equity interest owed by minority shareholders in subsidiaries firms which are not wholly owned by company.<br /> 8) <span style="color: red;">TOTAL EQUITY : EQUITY ATTRIBUTE TO SHAREHOLDERS + MINORITI INTEREST</span></span><br />
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<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"><span style="color: red;"><span style="color: #38761d;">Other Info: </span></span></span></span><br />
<a href="http://beginnersfinancialreport.blogspot.com/2014/07/balance-sheet.html" target="_blank"><span style="color: red;"><span style="font-size: x-large;">"Balance Sheet"</span></span></a><br />
<a href="http://beginnersfinancialreport.blogspot.com/2014/07/income-statement.html" target="_blank"><span style="color: red;"><span style="font-size: x-large;">"Income Statement"</span></span></a><br />
<a href="http://beginnersfinancialreport.blogspot.com/2014/07/cash-flow-statement-records-only-cash.html" target="_blank"><span style="color: red;"><span style="font-size: x-large;">"Cash Flow Statement"</span></span></a><br />
<span style="font-size: large;"><span style="color: red;"><span style="color: #38761d;"> </span> </span></span>InvestBeginnershttp://www.blogger.com/profile/15457001456091778616noreply@blogger.com1tag:blogger.com,1999:blog-7660706702739974772.post-52024510393162808222014-07-14T07:47:00.000-07:002014-07-18T07:48:05.795-07:00Cash Flow Statement<span style="font-size: large;"><span style="font-size: x-large;"><span style="color: blue;">Cash flow Statement</span></span> records only the cash that had been received or paid. Compared to other financial statements, Cash Flow Statement can be considered vary accurate because every record requires receipt as proof and involves little assumption.<br /><br />Cash flow Statement basically can be divided into three categories based on the classification of the function of cash:<br /> 1) <span style="color: red;">NET CASH FLOW FROM OPERATING ACTIVITIES</span><br /> 2) <span style="color: red;">NET CASH FLOW FROM INVESTING ACTIVITIES</span> <br /> 3) <span style="color: red;">NET CASH FLOW FROM FINANCING ACTIVITIES</span></span><br />
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<span style="font-size: large;"><span style="color: blue;"><span style="font-size: x-large;">Cash Flow Statement Template</span></span></span><br />
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<span style="font-size: large;"><span style="color: blue;"><span style="font-size: x-large;">Components of Cash Flow Statement :</span></span></span> <br />
<span style="font-size: large;"> 1) <span style="color: red;">ADJUSTMENT FOR NON-OPERATING INCOMES/EXPENSES</span> : Remove incomes or expenses that are not included in operating activities. Examples are financial incomes, financial costs. <br /> 2) <span style="color: red;">ADJUSTMENT FOR NON-CASH ITEMS</span> : Remove items that are included in calculating profit but not involve cash payment. Examples are depreciation, amortisation and impairment.<br /> 3) <span style="color: red;">ADJUSTMENT FOR WORKING CAPITALS</span>: Adjust profit with working capitals because the sales do not involve cash transfer. Examples are receivables, payables and inventories.<br /> 4) <span style="color: red;">NET CASH FLOW FROM OPERATING ACTIVITIES</span> : Cash flow earned by company main business.<br /> 5) <span style="color: red;">NET CASH FLOW FROM INVESTING ACTIVITIES</span> : Cash flow associated with acquiring and disposing non-current assets. Examples are property, equipment and security.<br /> 6) <span style="color: red;">NET CASH FLOW FROM FINANCING ACTIVITIES</span>: Cash flow related to obtain and repay capital and debt. Examples are interest paid and borrowing.<br /> 7) <span style="color: red;">NET INCREASE IN CASH AND CASH EQUIVALENTS</span> : Net cash flow received during this year.<br /> 8) <span style="color: red;">CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR</span> : Cash owned by company in last year financial report.<br /> 9) <span style="color: red;">CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR</span> : Total cash owned by company now. (or more accurate at the moment of preparing this financial report).</span><br />
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<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"><span style="color: blue;"><span style="font-size: x-large;">Further Explanation about Cash Flow Statement</span></span><br /><br />Cash Flow Statement is usually presented in indirect form. Indirect form means it is not direct form. The main reason indirect form is used is to show to shareholders how to link the cash flow that received with the income statement. It starts from <span style="color: red;">PROFIT BEFORE TAX (PBT)</span> to calculate the <span style="color: red;">OPERATING CASH FLOW (OCF)</span> or <span style="color: red;">NET CASH FLOW FROM OPERATING ACTIVITIES</span>.<br /><br />If we compared <span style="color: red;">PBT</span> with <span style="color: red;">OCF</span>,<br /><br /> 1) We can find that many item that is included in <span style="color: red;">PBT</span> which does not belong to <span style="color: red;">OCF</span>. The first one is <span style="color: red;">NON-OPERATING INCOMES/EXPENSES</span>. <span style="color: red;">PBT</span> includes <span style="color: red;">NON-OPERATING INCOMES/EXPENSES</span> such as interest received / interest paid that belong to <span style="color: red;">NET CASH FLOW FROM INVESTING ACTIVITIES</span> and <span style="color: red;">NET CASH FLOW FROM FINANCING ACTIVITIES</span>. This item needs to be deducted from <span style="color: red;">PBT</span> to calculate<span style="color: red;"> OCF</span>.<br /><br /> 2) We also can find that <span style="color: red;">NON-CASH ITEMS</span> are included in <span style="color: red;">PBT</span>, such as <span style="color: red;">DEPRECIATION</span>. When a company buys a machine, cash already been paid. So no cash involved afterwards. <span style="color: red;">OCF</span> only records items involved in cash transfer only. Therefore, this item need to be deducted.<br /><br /> 3) <span style="color: red;">PBT </span>only concerns how much products are sold in one year, but <span style="color: red;">OCF</span> concerns about how much cash that received in one year.Therefore, <span style="color: red;">PBT</span> need <span style="color: red;">ADJUSTMENT FOR WORKING CAPITALS</span> to calculate <span style="color: red;">OCF</span>.<br /><br />Firstly, when a product is sold for credit, which means <span style="color: red;">RECEIVABLES in BALANCE SHEET</span> will increase. This will cause <span style="color: red;">OCF</span> becoming less than <span style="color: red;">PBT</span>. Therefore the increases in RECEIVABLES have to be deducted from <span style="color: red;">PBT</span> to get <span style="color: red;">OCF</span>.<br /><br />Secondly, when a company buy materials from supplier in credit, the expense will be included in <span style="color: red;">PBT</span> and recorded in <span style="color: red;">COST OF GOOD SOLD</span>. This will cause <span style="color: red;">PAYABLES</span> in <span style="color: red;">BALANCE SHEET</span> to increase . However no cash is paid out. So it will cause <span style="color: red;">PBT</span> to be less than <span style="color: red;">OCF</span>. So the increase in <span style="color: red;">PAYABLES</span> should be added into <span style="color: red;">PBT</span> to calculate <span style="color: red;">OCF</span>.<br /><br />Thirdly, when a company use material in inventory to produce product to sell, the expense will be included in <span style="color: red;">PBT</span> and recorded in <span style="color: red;">COST OF GOOD SOLD</span>. This will cause <span style="color: red;">INVENTORY in BALANCE SHEET</span> to decrease. However no cash is paid out. So it will cause <span style="color: red;">PBT</span> to be less than <span style="color: red;">OCF</span>. So the decrease in <span style="color: red;">INVENTORY</span> should be added into <span style="color: red;">PBT</span> to calculate <span style="color: red;">OCF</span>.</span></span><br />
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<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"><span style="color: red;"><span style="color: #38761d;">Other Info: </span></span></span></span><br />
<a href="http://beginnersfinancialreport.blogspot.com/2014/07/balance-sheet.html" target="_blank"><span style="color: red;"><span style="font-size: x-large;">"Balance Sheet"</span></span></a><br />
<a href="http://beginnersfinancialreport.blogspot.com/2014/07/income-statement.html" target="_blank"><span style="color: red;"><span style="font-size: x-large;">"Income Statement"</span></span></a><br />
<a href="http://beginnersfinancialreport.blogspot.com/2014/07/change-of-eqity-statement.html" target="_blank"><span style="color: red;"><span style="font-size: x-large;">"Change of Equity Statement"</span></span></a><br />
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</span>InvestBeginnershttp://www.blogger.com/profile/15457001456091778616noreply@blogger.com0tag:blogger.com,1999:blog-7660706702739974772.post-7848736280222497892014-07-14T02:04:00.000-07:002014-07-23T23:56:17.140-07:00Income Statement<br />
<span style="font-size: large;">Income Statement is used to show business done by a company in one year.<br /><br />One formula can conclude the whole income statement.<br /><br /><span style="color: red;">Revenue - Expense = Profit</span><br /><br />For example, you own an company which selling apple. After one year, 1000 apples are sold with 2 dollar each.(Revenue= 1000 x2=2000) Suppliers provide apples with 1 dollar each. Salary for worker is 100 dollar per year and electricity cost per year is 50 dollar. (Expense= 1000 x1+100+50=1150) Your company earns a profit of 850 dollar. (Profit = 2000-1150 =850) </span><br />
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<span style="color: blue;"><span style="font-size: x-large;">Income Statement Template </span></span>
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<span style="color: blue;"><span style="font-size: x-large;">Components of Income Statement:</span></span><br />
<span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;"> 1) <span style="color: red;">REVENUE</span> : Price x Quantity<br /> 2) <span style="color: red;">COST OF GOOD SOLD</span> : Direct costs involved in producing products. Examples are materials, direct labour, factory overhead such as electricity bill and depreciation of machines.<br /> 3) <span style="color: red;">GROSS PROFIT : REVENUE - COST OF GOOD SOLD</span><br /> 4) <span style="color: red;">OTHER OPERATING PROFIT</span> : Other incomes from direct sales of products such as sales of electricity and rental fees from unused spaces from building used for operation.<br /> 5) <span style="color: red;">OPERATING EXPENSE</span> : Indirect expense incurred other than direct cost such as general & administrative expenses, sales & distribution expenses, promotion expenses, research expenses.<br /> 6) <span style="color: red;">OPERATING PROFIT : GROSS PROFIT + OTHER OPERATING PROFIT - OPERATING EXPENSE</span><br /> 7) <span style="color: red;">FINANCIAL PROFIT</span> (also called Non-Operating Profit) : Profit that are generated from non-operating activities. Examples are interest received, gain from selling securities.<br /> 8) <span style="color: red;">FINANCIAL EXPENSE</span> (also called Non-Operating Expense) : Expense that are not included in operating activities. Examples are interest paid, lost from selling securities.<br /> 9) <span style="color: red;">PROFIT BEFORE TAX (PBT) : OPERATING PROFIT + FINANCIAL PROFIT - FINANCIAL EXPENSE</span><br /> 10) <span style="color: red;">INCOME TAX</span> : Tax paid to government based on profit before tax (or more accurate taxable income)<br /> 11) <span style="color: red;">NET PROFIT FROM CONTINUING ACTIVITIES : PROFIT BEFORE TAX - INCOME TAX</span><br /> 12) <span style="color: red;">NET PROFIT FROM DISCONTINUED ACTIVITIES </span>: Gain/ Loss from liquidating one of the sectors of the company<br /> 13) <span style="color: red;">OTHER COMPREHENSIVE INCOMES</span> : Mainly consist of three factors that not added into the profit. Examples are Gain/ Loss from foreign currency, gain/loss from hedging, unrealised gain of available-for-sales securities.<br /> 14) <span style="color: red;">TOTAL COMPREHENSIVE INCOMES : NET PROFIT + OTHER COMPREHENSIVE INCOMES</span></span></span></div>
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<span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;"><span style="color: red;"><span style="color: #38761d;">Other Info: </span></span></span></span><br />
<a href="http://beginnersfinancialreport.blogspot.com/2014/07/balance-sheet.html" target="_blank"><span style="color: red;"><span style="font-size: x-large;">"Balance Sheet"</span></span></a><br />
<a href="http://beginnersfinancialreport.blogspot.com/2014/07/change-of-eqity-statement.html" target="_blank"><span style="color: red;"><span style="font-size: x-large;">"Change of Equity Statement"</span></span></a><br />
<a href="http://beginnersfinancialreport.blogspot.com/2014/07/cash-flow-statement-records-only-cash.html" target="_blank"><span style="color: red;"><span style="font-size: x-large;">"Cash Flow Statement"</span></span></a></div>
InvestBeginnershttp://www.blogger.com/profile/15457001456091778616noreply@blogger.com5tag:blogger.com,1999:blog-7660706702739974772.post-53503120310541277942014-07-14T01:43:00.001-07:002014-07-16T01:10:33.836-07:00An Introduction to Financial Reports<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">A financial report is a formal record of a company by using financial data. It is important and accurate because it consists only figures which is more objective than the announcement or statement consists of words.</span></span><br />
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<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;">There are two types of financial report: </span></span><br />
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"> 1)<span style="color: red;"> Interim Financial Report</span> : Normally published quarterly or semiannual. Usually unaudited and prepared in condensed form.</span></span><br />
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"> 2) <span style="color: red;">Annual Financial Report</span> : </span><span style="font-size: large;">Financial Report prepared for a period of one year. Required to be audited by an auditor from outside firms. </span></span><br />
<span style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"><br />A financial report can be divided into two parts: <br /><br /><span style="color: blue;"><span style="font-size: x-large;">A) </span><span style="font-size: x-large;">4 main accounts</span></span> are: <br /><span style="color: red;">1) Balance sheets<br />2) Income statements<br />3) Statement of change of equity<br />4) Statement of cash flows</span><br /><br /><span style="font-size: x-large;"><span style="color: blue;">B) Financial notes</span></span> present more detailed disclosures about the above 4 main accounts.</span></span>InvestBeginnershttp://www.blogger.com/profile/15457001456091778616noreply@blogger.com0tag:blogger.com,1999:blog-7660706702739974772.post-74280960542845451062014-07-13T20:52:00.000-07:002014-07-14T20:31:01.766-07:00Equity<span style="font-size: large;"><span style="color: blue;"><span style="font-size: x-large;">Components of Equity</span></span><br /> 1) <span style="color: red;">SHARE CAPITAL</span> : Money collected by issuing shares through IPO or right issues. <br /> 2) <span style="color: red;">SHARE PREMIUM</span> : Excess amount received by a firm over the par value of its shares during IPO.<br /> 3) <span style="color: red;">TREASURY SHARES</span> : Company repurchases its own shares.<br /> 4) <span style="color: red;">RETAINED EARNINGS</span> : Cumulative earnings of company from previous years.<br /> 5) <span style="color: red;">OTHER RESERVES</span> : Reserves that had been set aside for other purposes.<br /> 6) <span style="color: red;">NON-CONTROLLING INTEREST</span> : Equity interest owed by minority shareholders in subsidiaries firms which are not wholly owned by company.</span><br />
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<span style="color: lime;"><span style="font-size: large;">*Further Information for</span></span><br />
<span style="font-size: large;"><a href="http://beginnersfinancialreport.blogspot.com/2014/07/assets.html" target="_blank"><span style="color: blue;"><span style="font-size: x-large;">“Asset”</span></span></a></span>InvestBeginnershttp://www.blogger.com/profile/15457001456091778616noreply@blogger.com1