lots of the same item that is only distinguished by price.
- companies in commodity business are "price-takers"
- Product differentiation
- "Moat" = competitive advantage that repels others from stealing your product or idea.
- Perceived product differentiation
- Can charge a premium for its products
- "price setters"
1. Tenure with company
2. Relationship with company
3. Compensation (Salary/stock bonus)
4. Stock ownership
5. Past performance
- marketing tool
- can give a feel for forthrightness of management
reconciles changes in the company's cash positions due to operations, investing, and financing.
- very important in terms of "true" profit
- Proxy Report
- if investor holds more than 5%
Profit margin = NI / Sales
ROA = NI / Sales
ROE = NI / Stockholders Equity
Current Ratio = Current Assets / Current Liabilities (debt)
Quick Ratio = (CA - Inv.) / CL
Inventory Turnover = Sales / inventory
Receivables Turnover = Sales / AR
Fixed Asset Turnover (FAT) = Sales / FA
Total Asset Turnover (TAT) = Sales / TA
Leverage ratio = TA / SE
Coverage Ratio = EBIT / interest expense
Debt ratio = total debt / total assets
Debt to Equity ratio = Debt / Equity
(CA - Inv.) / CL
EBIT / interest exp.
Total Debt / Total Assets
(TL / TA)
Debt / equity
(TL / SE)
ROE = (NI / Se)
(NI / Sales) * (Sales / TA) * (TA / SE)
ROA = NI / TA
= (NI / Sales) * (Sales / TA)
- Total Return
- Requested Return
- Income + Capital Gain
- Discount Rate
- Average Annual total return of a bond
- Rate that balances price and CF's (outflows & inflows)
= "true return"
= approximated by the yield on similar bonds
Annual Coupon / Price of bond
= Income Component