ABC Investing

Class – 2 Analyzing Company

Shobha Narasimha

Rising Money

Any company can rise money in two ways

Debt (loan ) Equity

Debt – Corporate Bond

Debt Corporate Bond

AAA – low risk, low rate of return AA+,AA,AA-,--- BBB, BB , CCC+, CCC– Risk

and Rate of Return increases

AAA – is called high grade bondBB, ---- CC, are called Junk Bonds or high

yield

Equity

Primary Shares when company issue first time shares/stocks

Primary Shares Money Goes to Company

Secondary Shares that are trade in the market

Company is not involved in secondary Shares trade

Secondary Market

Buyer

Seller

Market Capitalization

Outstanding shares * Stock Price

Market Capitalization

Market Capitalization Fluctuates daily along with stock price

Simple Balance Sheet

Your Company - Balance Sheet28-Apr-10

Assets Cash 45Inventory 30Total current asset 75Property Plant and equipment 40Total asset 115

LiabilityAccount Payable 10Short term debt 5

current portion of short term debt 0

Total current liability 15Long term Debt 25Total liability 40

EquityCommon equity 75Total equity 75

Total liability and equity 115

Debt to Asset Ratio

Debt to Asset Ratio

Total Debt/Total Asset

This ration too much is not goodWhy?

Interest Expense

Find Out

Find Out what is Apple Market capitalization

Find out Debt /Total asset ratio for Starbucks

Pick a random company and find out what it is doing

Evaluate Company

What is a particular company doing

What is its debt / Total asset ratio

Pick company debt/asset ratio < 20%