Fundamentals

  1. The Most Accurate Way To Gauge Returns: The Compound Annual Growth Rate

    The compound annual growth rate, or CAGR for short, represents one of the most accurate ways to calculate and determine returns for individual assets, investment portfolios and anything that can rise or fall in value over time.
  2. Sinking Fund

    A sinking fund is a way for companies to pay off part of their bond issue before it reaches maturity. By eliminating its debt gradually, the bond issuer is more likely to attract investors concerned about default risk.
  3. The 4 R's Of Investing In Retail

    In retail, successfully managing return on investment (ROI) and other financial indicators is the key to a healthy business.
  4. EDGAR: Investors' One-Stop-Shop For Company Filings

    You can learn a lot about any listed company through this system - if you know how to use it.
  5. The Debt-Service Coverage Ratio (DSCR)

    The Debt-Service Coverage Ratio (DSCR) is a simple way to analyze whether a company can adequately manage its borrowing costs. The ratio helps banks evaluate the credit worthiness of an organization that is applying for a loan. It also tips off investors to companies carrying a debt level that could ...
  6. Contribution Margin

    Contribution margin is a cost accounting concept that allows a company to determine the profitability of individual products.
  7. The Operating Leverage And DOL

    Operating leverage tells investors about the relationship between a company's fixed and variable costs. The higher a company's fixed costs in relation to its variable costs, the greater its operating leverage, and vice versa.
  8. Reading The Inventory Turnover

    Inventory turnover is a ratio that shows how quickly a company uses up its supply of goods over a given time frame. Inventory turnover may be calculated as the market value of sales divided by ending inventory, or as cost of goods sold (COGS) divided by average inventory.
  9. The Return On Invested Capital (ROIC)

    Return on Invested Capital, or ROIC, is a fundamental method of determining a company's financial performance. It is used to measure how well a company is investing its capital. ROIC is calculated as: (Net Income - Dividends) / Invested Capital
  10. Decoding DuPont Analysis

    Get a deeper understanding of ROE with these three-step and five-step calculations.
  11. Assess Shareholder Wealth With EPS

    Find out if management is doing its job of creating profit for investors.
  12. Understanding The Cash Conversion Cycle

    Find out how a simple calculation can help you uncover the most efficient companies.
  13. Dividend Ratios: Payout And Retention

    The dividend payout ratio and retention ratio measure how much profit a company gives back to shareholders as dividends. When a business earns money, it must decide whether to use all of its earnings for future operations or to pass some of it along to stockholders through a quarterly dividend check.
  14. How to Value Companies With Negative Earnings

    For some investors, the possibility of stumbling upon a small biotech with a potential blockbuster drug, or a junior miner with a giant mineral discovery, makes the risk of investing in companies with negative earnings well worth taking.
  15. Financial Markets: Random, Cyclical Or Both?

    Are the markets random or cyclical? It depends on who you ask. Here, we go over both sides of the argument.
  16. Cash Flow Statement: Analyzing Cash Flow From Financing Activities

    The financing activity in the cash flow statement measures the flow of cash between a firm and its owners and creditors.
  17. Comparing The P/E, EPS And Earnings Yield

    P/E may be the established standard for valuation purposes, but the earnings yield is especially useful for comparing potential returns across different instruments.
  18. Challenges Faced When Analyzing Green Chip Stocks

    The fact that a green chip is not yet a blue chip should not alarm investors, but they need to be aware of the differences and challenges that can arise from assuming these are durable companies with sustainable competitive advantages.
  19. Cash Flow Statement: Analyzing Cash Flow From Investing Activities

    Reviewing investment activity is one of the most important exercises an individual can do to see how efficiently a company's management is using shareholder capital to run is operations.
  20. The Optimal Use Of Financial Leverage In A Corporate Capital Structure

    The amount of debt and equity that makes up a company's capital structure has many risk and return implications.
  21. Can Investors Trust The P/E Ratio?

    The P/E ratio is one of the most popular stock market ratios, but it has some serious flaws that investors should know about.
  22. The Common-Size Analysis Of Financial Statements

    Using common-size financial statements helps investors spot trends that a raw financial statement may not uncover.
  23. How To Trade The News

    Regardless of your investing horizon, learning to trade the news is an essential skill for astute portfolio management and long-term performance.
  24. The Market Value Versus Book Value

    Understanding the difference between book value and market value is a simple yet fundamentally critical component of any attempt to analyze a company for investment. After all, when you invest in a share of stock or an entire business, you want to know you are paying a sensible price.
  25. Evaluate Stock Price With Reverse-Engineering DCF

    This is a more accurate method to use when trying to find a target price for a stock.
  26. Analyzing Blue-Chip Stocks

    To find a good value on a blue-chip stocks, look for companies with strong fundamentals, appropriate levels of debt and competitive advantages.
  27. The Gross Margin

    A business's "gross margin" is a rough gauge of how profitable its operations are. It measures how much sales revenue the company retains after all of the direct costs associated with making a product or providing a service are accounted for. Direct costs refer to materials, labor and expenses related ...
  28. Cash Flow Statement: Reviewing The Cash Flow From Operations

    A company's ability to consistently generate positive cash flows from its daily business operations is highly valued by investors. Operating cash flow can uncover a company's true profitability and provide insight to its financial health.
  29. Balance Sheet: Analyzing Owners' Equity

    Analyzing owners’ equity is an important analytics tool, but it should be done in the context of other tools such as analyzing the assets and liabilities on the balance sheet.
  30. Technical Vs. Fundamental Investing - Friends Or Foes?

    Making money in the stock market has been likened to gambling by some, but experienced investors who do their homework usually profit by doing market analysis. However, even experienced investors debate which type of analysis - fundamental or technical - provides higher returns.
  31. Analyzing Investments With Solvency Ratios

    Solvency ratios are extremely useful in helping analyze a firm’s ability to meet its long-term obligations; but like most financial ratios, they must be used in the context of an overall company analysis.
  32. Reviewing Assets On The Balance Sheet

    A firm uses its assets to generate sales and bottom-line profits for shareholders. A healthy company will continually grow its assets, which stems from leftover profits that are reinvested back into the business.
  33. Introduction to Stock Trader Types

    Being a stock trader can be both profitable and gratifying. To maximize the financial benefits and your own enjoyment, you need to decide what kind of stock trader you want to become. The right fit depends on personality, time availability, and capital investment.
  34. Introduction To Fundamentally Weighted Index Investing

    If you believe the market smiles on those who focus on value, growth or income, this vehicle may be for you.
  35. How To Analyze The Transportation Industry

    By gaining an awareness of the transportation firms and trends that affect these players, investors can gain an edge by analyzing the sector and looking to profit from understanding it.
  36. Financial Analysis: Solvency Vs. Liquidity Ratios

    Solvency and liquidity are equally important for a company's financial health. A number of financial ratios are used to measure a company’s liquidity and solvency, and an investor should use both sets to get the complete picture of a company’s financial position.
  37. An Introduction To Coverage Ratios

    Interest coverage ratios help determine a company's ability to pay down its debt.
  38. Investing In Healthcare Facilities

    Read on to learn about how to value heathcare sector stocks.
  39. Oil And Gas Industry Primer

    Before jumping into this hot sector, learn how these companies make their money.
  40. Analyzing An Acquisition Announcement

    These deals can make or break investors' returns. Find out how to tell the difference.
  41. Yield Investing: Dividend, Earnings And FCF

    There are numerous ways to value investments, and many investors prefer a specific valuation method. Yield investing is one way to value a stock by comparing the current price to various factors. Yield by definition means to give way to or produce. There are many ways to measure yield - three common ...
  42. How To Value An Insurance Company

    In the insurance space, accurate predictions of metrics such as ROE are important, and paying a low P/B can help put the odds in investors' favor.
  43. Introduction To STRIPS

    STRIPS provide an alternative form of bond for fixed-income investors who need definite cash flows at specific times. Read the article to find out how.
  44. Equity Valuation: The Comparables Approach

    The main purpose of equity valuation is to estimate a value for a firm or security. There are three primary equity valuation models: the discounted cash flow (DCF), cost and comparable approaches. The comparable model is a relative valuation approach and is explained in more detail below.
  45. Understanding Leverage Ratios

    Large amounts of debt can cause businesses to become less competitive and, in some cases, lead to default. To lower their risk, investors use a variety of leverage ratios - including the debt, debt-to-equity and interest coverage ratios - to identify firms with unhealthy debt levels.
  46. Understanding Profit Metrics: Gross, Operating and Net Profits

    Rather than relying solely on net profit figures to evaluate a company's performance, seasoned investors will often look at gross profit and operating profit as well.
  47. Weighted Average Cost Of Capital (WACC)

    Weighted average cost of capital may be hard to calculate, but it's a solid way to measure investment quality
  48. Guide to Pairs Trading

    Pairs traders wait for weakness in the correlation, and then go long on the under-performer while simultaneously going short on the over-performer, closing the positions as the relationship returns to its statistical norm.
  49. What Type Of Trader Are You?

    There are different ways stock traders attempt to profit from market movements. Which of the strategies do you use?
  50. Mergers And Acquisitions: Understanding Takeovers

    In the dramatic world of M&As, battleground terms meld with bizarre metaphors to form the language of the game.
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