Record Keeping and the Accounting Process | Money Instructor Accounting is a process-oriented task that follows a prescribed series of steps in order to keep track of, and record, the balances of the various accounts. When a business makes a transaction, the effect of that transaction is recorded in the accounting system. According to the fundamental accounting equation, each transaction will affect at least two accounts and the balances in those accounts will change. Accounting is the process of keeping track of those changes and recording and then reporting them. The Accounting Process Transaction Example: On August 2, 2005 Tom’s Plumbing purchased a truck for $25,000 with a $5,000 cash deposit and a $20,000 bank loan. The asset account “Truck”The asset account “Cash”The liability account “Bank Loan” These specific accounts can be found in what is called the Chart of Accounts. Chart of AccountsThe Chart of Account is list of all the accounts used by an entity to record financial transactions. Tom’s PlumbingChart of Accounts The General Journal
How to Calculate Intrinsic Value for Stock Warren Buffet Way How to Calculate Intrinsic ValueDiscounted Earnings, Instead of Just Cash Flow Summarized Overview You will find information about why you should calculate intrinsic value in stock market investing, and step by step guide on how to do it. You will also find information about which key financial ratios to use and what you have to do after calculating intrinsic value. Why You should Calculate Intrinsic Value Simply because, you don't buy any stock at any price, do you? The price you are paying is the ultimate determinant for the rate of return that you'll be earning. However, buying a stock simply because it is cheap is not the right approach either. How to Calculate Intrinsic Value The way to go is, search for stocks whose prospects you believe in ( with good stock pick method ) and then use a valuation technique to ensure the purchase price is acceptable. How to do it? From 13 years historical data, you get the information as above. Let's start calculating intrinsic value of stock ABC.
150 Free Online Business Courses Find over 150 courses, many from leading universities, that will deepen your professional education. Topics include finance, technology, entrepreneurship and much more. Note: If you sign up for a Massive Open Online Course (MOOC), select the “Full Course, No Certificate” (edX) or “Audit” (Coursera) option when you enroll in order to take the course for free. Note: This section includes a lot of Massive Open Online Courses (MOOCs). For a complete list of online courses, please visit our complete collection, 1,700 Free Online Courses from Top Universities. For a list of online certificate programs, visit 200 Online Certificate & Microcredential Programs from Leading Universities & Companies, which features programs from our partners Coursera, Udacity, FutureLearn and edX.
How to Value a Stock with Benjamin Graham’s Formula How to value stocks series For other posts in the series, follow the links below. Quick Word on the Science and Art of Valuation Valuation is an art. Assumptions are needed to perform any type of analysis as the whole topic of stock valuation is forward looking. Throughout these valuation exercises, it’s important to understand that the final stock value will vary based on the assumption of scenarios. Instead of trying to pinpoint one number, the science behind valuing stocks is to come up with a range of values. Now, let’s see how Graham valued stocks. Using Benjamin Graham’s Formula to Value a Stock The Benjamin Graham Formula was Created by this man. The second method I use to value a stock is by using Benjamin Graham’s formula from The Intelligent Investor. With the extremely popular free Ben Graham stock spreadsheet I offer, the stock valuation method deserves a closer look. Benjamin Graham Formula The original formula from Security Analysis is (credit to wikipedia for the formula images)
Discounted Cash Flow & Stock Valuation The purpose of the Discounted Cash Flow (DCF) valuation is to find the sum of the future cash flow of the business and discount it back to a present value. I use the F Wall Street method of valuing a business along with some tweaks here and there to suit my tastes in the free and best valuation spreadsheets you can find on this site. The advantage of this method is that it requires the investor to think about the stock as a business and analyze its cash flow rather than earnings. The first and foremost reason a business exists is to make money where money = cash, not earnings. The disadvantage is that DCF is not suitable for start ups, growth companies or capital intensive companies where the cash flow cannot be accurately determined. I’ll go through the many assumptions to consider with a DCF and how to effectively use it with the stock valuation calculator . Free Cash Flow FCF = Cash from Operations – Capital Expenditure Expected Growth Discount Rate Terminal Value Discounted Cash Flow
Stock Picker's Delight - AlphaClone If there is one overriding theme this year for investors, it is uncertainty. Unsure about the staying power of the recovery in the US and debt woes both here and in Europe, investors have flocked to emerging markets and have been well rewarded. The iShares emerging markets index ETF is up 12% on the year, nearly double the return in the S&P500. For investors who took a more selective approach, the returns were even better. The iShares South Africa and Korea ETFs are up 25% and 15% respectively year-to-date. With an uneven recovery that has been neither global nor broad, 2010 has been a year where being selective and being right has really paid off – this market is a stock picker's delight. For those of you familiar with our international core investment approach, you know it invests quarterly in the ten ADR stocks that appear most often amongst the largest 20 holdings across our hedge fund universe.
Understandings Earnings Estimates In the video above, Hewitt Packard’s CEO Leo Apotheker said the following: Carl: Before we let you go, Leo, I don’t know if there’s been a quarter since you joined where the company beat, if you will, I wonder you’ve got to be looking forward to that day.Leo Apotheker: We’ve beat this quarter.Carl: But with accompanied by guidance that was very disappointing. Every quarter has had some level of disappointment. Are you looking forward to one where there is none?Leo: Of course. But I just want to make sure we get the facts right. The transcript cannot convey the frustration in Apotheker’s voice when he was accused of missing expectations for the current quarter. Gamed Earnings As the next two charts show, beating earnings and revenues expectations is nothing new. The chart below highlights the inception of SEC regulation “FD” (aka, Fair Disclosure). Click on chart for a larger image At first blush revenues appear to offer a more honest view of companies’ financial outlooks than earnings.
Research and Valuation Process How to Invest in the Stock Market: Part 1 | Part 2 | Part 3 | Part 4 | Part 5 Here is the process I follow which is rooted in the Graham and Dodd approach: Search I usually scan for ideas reading print media such as the Wall Street Journal, Barrons, and websites such as Google Finance and blogs looking at 52-wk lows lists looking for headlines that just spell “bad news” and articles that may lead to ideas with catalysts, event driven ideas and sometimes macro-event driven ideas. I’ll use screens if I don’t find anything in the headlines. If I think I can profit off the situation, I’ll really do some due diligence. Analysis Financial Reports and Statements At this point, I would grab at least the last three years of annual reports, 10K/Q’s, 8-K’s, proxies, conference calls transcripts and sometimes trade journals or magazines for additional information not included in the public documents. Management Discussion & Analysis Lastly, I finish up the MD&A by looking for liquidity information. A. or