Just like we all care about our personal health, managers and investors care about the health of their company. How can they perform a “check-up” on their business in order to determine its progress and financial health? Instead of weight or blood pressure, analysts use financial ratios. We’ll talk about three categories of ratios: profitability, liquidity, and solvency.
The balance sheet is a financial snapshot of the firm on a specific date. Read more to find out why a balance sheet is important, to see an example of one, and to learn how to find a specific company’s balance sheet.
The Income Statement is one of the financial statements that all publicly traded companies share with their investors, which shows the company’s sales, expenses, and net profit (or loss) over a period of time–usually 3 months, year-to-date, and twelve months. This article describes the basics on understanding a income statement.
This article defines asset allocation as how you have divided up your investments across different assets, and explains how to allocate your assets.
The Moving Average Convergence-Divergence (MACD) indicator is one of the easiest and most efficient momentum indicators you can get. The MACD moves two trend following indicators and moving averages into a momentum oscillator by subtracting the longer moving average from the shorter moving average. The result is that the MACD gives the best of both worlds: trend following and momentum. Click on this post for more details!
The Black-Scholes formula is the most popular ways to calculate the true price of an option.
Free Cash flow is the cash available to all the capital providers of a company. There are two types of free cash flows: 1) Cash flow available to pay out to all capital providers and 2) Free Cash Flow to Equity (FCFE). Read this post for the equations of both types of free cash flows and an explanation of how they are used.
The Form-8K is a SEC-mandated report filed by public companies to report unexpected events or transactions that are material in nature, and thus have an impact on the share prices of the company. This article explains why Form-8K reports are important, and what material events are.
Fixed income analysis is the process of evaluating and analyzing fixed income securities for investment purposes. Read this article to discover the elements of fixed income analysis.
Discounted Cash Flow (DCF) is a valuation technique or model that discounts the future cash flows of a business, entity, or asset for the purposes of determining its value. Click on this post to read about the uses and roles of DCF, how DCF is performed, and its advantages and disadvantages.