summerfuel finance 2016 class 4 7 12
TRANSCRIPT
Summerfuel FinanceClass 4: 7-12-2016
Shark Tank http://abc.go.com/shows/shark-tank/episode-guide/season-07/10-week-1
0-leaux-racing-trikes-glow-recipe-sarah-oliver-handbags-trunkster
The Capitalists One company’s right side of the balance sheet
liabilities and equity
Is another's company's left side of the balance sheetassets
Assets ( stuff you have to run the business)
= Liabilities + Equity (how its paid for)
Wow !
DebtA loan in a number of different ways to a
companyThe loaned amount will repaid at some
defined timeAn interest rate will be assessed as the
cost for the use of the moneyNo ownership stakeBut senior to equity stake
EquityOwnership (equity) in a
corporation
Dividends paid or notResidual claim
Riskier than debt from investors’ perspective
© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
RiskThe greater the risk, the
greater the potential reward.
© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Sources of Risk
© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
A Look at Google Financehttps://www.google.com/finance
The Cost of Debt vs. the Cost of Equity
Debt Its known and easier to determine A cost / interest rate is charged to your company
Plus the interest is tax deductible
Based on the riskiness of your company
Equity (Stock) The cost is based on investors expectations for return.
If you fail to deliver the return , then your stock price will drop and you will trouble attracting investors
Because there is more risk in equity to an investor, the expected return will always be higher than the interest rate charged for a loan Unless you have too much debt
Financial RatiosA tool to assess a company’s financial
structure and healthReally only useful when companies to other
companies or past numbers of the same company
Price to Earnings Earnings per share Debt to Equity Return on Equity
Price to EarningsThe price-earnings ratio (P/E Ratio) is the ratio
for valuing a company that measures its current share price relative to its per-share earnings.
The price-earnings ratio can be calculated as:Market Value per Share / Earnings per ShareFor example, suppose that a company is
currently trading at $43 a share and its earnings over the last 12 months were $1.95 per share. The P/E ratio for the stock could then be calculated as 43/1.95, or 22.05.
Earnings per shareEarnings per share (EPS) is the portion of a
company's profit allocated to each outstanding share of common stock. Earnings per share serves as an indicator of a company's profitability.
Net Income / Shares of Stock
Debt to EquityThe D/E ratio indicates how much debt a
company is using to finance its assets relative to the amount of value represented shareholders’ equity.
Debt /Equity Ratio = Total Liabilities/Shareholders' Equity
Return on EquityReturn on equity (ROE) is the amount of
net income returned as a percentage of shareholders equity.
Return on equity measures a corporation's profitability by revealing how much profit a company generates with the money shareholders have invested.
Return on Equity = Net Income/Shareholder's Equity
BetaBeta is a measure of the volatility, or
systematic risk, of a security or a portfolio in comparison to the market as a whole
Market CapMarket capitalization is the total
dollar market value of all of a company's outstanding shares.
Market capitalization is calculated by multiplying a company's shares outstanding by the current market price of one share.
The investment community uses this figure to determine a company's size, as opposed to sales or total asset figures.
Stock Pick ReportThe Easy Stuff Current Stock Price 52 Week Low 52 Week High Price to Earnings Ratio Earnings Per Share Beta: Market Cap: Last Financial Statement Date: Total Assets: Net Income: Debt to Equity Ratio: Total Liabilities / Shareholders' Equity Return on Equity: Net Income/Shareholder's Equity
The Stuff You Have to Think About1. Company Background- What is the business, what do they sell ,
where ?2. Buy Rationale – Why do you like it? Why do you think the stock
price will go up?, or will it go down less than the rest of the market?