Knowledge in Finance and Accounting
MAC Slides
MAC Slides
Yugank Singhal
Finanacial Ratio Analysis
Finanacial Ratio Analysis
Finanacial Ratio Analysis and Company Analysis
Finanacial Ratio Analysis and Company Analysis
Balance Sheet
This article talks about a small question on the balance sheet and how the entries on the balance sheet look like and to find out the profit for that year.
The Finance Club, IIM Kashipur
Financial Analysis of Tata Consultancy Services
This excel depicts the balance sheet and income statements for the last 4 years of Tata Consultancy Services. The sheets have been analysed and different financial ratios have been calculated to see what is the trend the company is following the past 4 years.
Generally Accepted Accounted Principles
Generally Accepted Accounting Principles for beginners.
Book Recommendation- Beating The Street by Peter L
This book is a perfect guide for first-time investors and many of you finance-enthusiasts in the 2018-20 batch should definitely give it a read! Peter Lynch, manager of Fidelity Investment's incredibly successful Magellan Fund from 1977 to 1990, writes this book to provide investors with insight into his investment methodologies and tactics. He begins with a tale about a group of 7th graders who make mock investments as part of their class. The children are instructed to invest in companies they own and to research their choices to explain to their classmates why they made them. The 7th graders do extremely well, beating the S & P 500 index significantly. Their story demonstrates that even a child can invest successfully if they choose companies they are familiar with and do their research. Knowing one's investments is the main theme of the book. Next, for those who might be timid about investing in stocks, Lynch explains why stocks are a better investment than bonds or certificates of deposit. While a conservative investor may prefer a bond that provides a guaranteed return on investment, at the conclusion of the bond period, the investor is returned the exact amount initially deposited. When inflation is accounted for, the investor has less money than when he started. On the other hand, a stock with a dividend will pay a return while it is owned, and will almost certainly increase substantially in value over a lengthy period, like ten years. The next few chapters chronicle Lynch's years managing Magellan. He explains why he chose certain stocks and how they performed. When he begins, Magellan is a small, closed fund of about $100 million that is not doing particularly well. Through investments during the early 80s in companies like Chrysler, Ford, GM, Philip Morris, Volvo, General Electric and Fannie Mae, Magellan grows into a huge fund. By 1987, Magellan is managing up to $10 billion. The second half of the book details how Lynch researched and chose the 21 stocks he recommended for the 1992 Barron's Magazine Roundtable stock guide. The first and most natural place, to look for stocks is the retail sector. The average person likely eat out often and shops regularly. These mundane activities can actually lead to good stock picks if the shopper pays attention to new and potentially successful stores and chains. If the investor can get in on a business as it is in its prime growth phase, which ordinarily lasts several years, the retailer can be very profitable. Next, Lynch demonstrates that investing in depressed industries or situations can be very profitable. An area where other investors are scared away because of gloomy news is often the best place to find undervalued stocks. The depressed real estate market of the early 1990s was a perfect example. By digging deeper into the seeming problem, he found that there was no problem at all. There are always some good companies to be found in lousy markets. Lynch advises looking for thrifty, no-frills companies that pay close attention to the bottom line and that treat their employees well. A well-run company in a lousy industry may have the added advantage of being able to buy up some of its failing competitors. Lynch concludes the book by re-examining the performance of his recommendations at the six-month mark. Always re-evaluating investments is necessary for successful investment. By researching a company's future prospects and plans, one can make an informed decision on whether to maintain the investment, invest more, or sell. Oftentimes, additional research into one's investments can produce new companies in which to invest.
Should you buy or rent a house?
As IIM students, it is very likely that most of you will get into very good corporations that pay you well and at some point in your career, you might want to settle down and purchase an apartment/home of your own. Question is, Should you purchase it outright by going for a loan or opt instead to stay on rent? In this article, we will try to answer this question and give logical explanations to back our answer. You might have heard of your relatives’ 25,000 INR investment in land assets turning into 25L in about 30 years. That’s a 100-fold increase. Sounds amazing, right? We don’t think so. Most people don’t understand compounding, even if mathematics is their strong suit. Compounding isn’t intuitive and humans dislike non-intuitive reasoning unless explicitly explained. A 100-fold increase over 30 years corresponds to roughly 16.6% annualized return. Over the past 30 years, the Sensex has delivered an annualized return of about 17%. If you consider income from dividends, this figure goes up to 19% YoY. The reason we have framed the answer in this way is to push you to start thinking in terms of annualized percentages. Let’s assume that you want to buy an apartment worth 50L INR. You have an amount of 10L INR that you pay upfront and borrow the remaining 40L INR from the bank at 11% interest for a period of 20 years. You end up paying an EMI of roughly 41,300 INR every month. Over the course of this period, you end up paying 99L INR for an asset that cost you 50L INR in the first place. Do you expect a prospective buyer to pay you this amount for an apartment that is 20 years old? We assume you don’t. Instead, if you go and opt for a rented accommodation for even 30,000 INR a month and invest the rest of your assumed EMI of 11,300 INR a month in a systematic investment plan along with the lump sum 10L INR at a very reasonable rate of 12% per annum, you end up with a corpus of 2.1 cr INR in 20 years. Just to reiterate, this is not rocket science. Just the power of compounding. Things not considered: 1. Taxation- There is tax relief on interest payment and on rent paid. An interesting thing to note is that the tax relief if you buy a house is only for the interesting part while on HRA, the relief is on full rent paid. So adding a tax component will only worsen the case for buying a house. 2. The risk involved with Equity market: The higher returns on stocks is due to inherent riskiness involved in the market. A thorough research before investment should consider that into account as well. 3. Liquidity: With stocks, you can liquidate as and when you wish. However selling a house can be a real challenge. So an apartment is a highly illiquid asset while stocks are highly liquid. 4. Inflation- We haven’t considered the effects of inflation. Though, this shouldn’t matter as much because we also haven’t considered any increase in salary earned/rent paid. 5. Spouse’s income- It’s very likely that both you and your partner will go to work for a living. This will reduce the burden of your EMIs. Credit is given where it is due. Of course, this doesn’t mean you never go in for a purchase of a property. If you can afford a significant down payment, the burden of EMIs will have the lesser impact, otherwise, you’ll spend your entire life repaying a loan you took in your mid-20s and ask yourself if it was even worth it in the first place.
Judging a company by its cash flow statement
Cash flow statements consist of 3 parts: 1. Cash from Operations 2. Cash from Investing 3. Cash from Finances So by analysing the cash flow statement, we can pinpoint where the most amount of the transaction in cash is happening and judge the state of the company from it.
A Dangerous Corporate Debt Bubble
While the ever-climbing U.S. stock market (and the bubble forming in it) has been stealing most of the investing public's attention, a dangerous bubble has been forming under-the-radar in the corporate bond market. Interestingly, this corporate bond bubble is one of the main reasons why the stock market has been consistently pushing to new highs, and it will also eventually prove to be its undoing. In this report, I will show a variety of different charts to help explain the U.S. corporate bond bubble and the risk it poses to the stock market and economy. To put it simply, the root cause of the U.S. corporate bond and stock market bubble is ultra-low interest rates. Though interest rates of practically all types have been falling since the early-1980s, the trend has been amplified by the actions of central banks like the Federal Reserve since the Great Recession of 2008 and 2009. In an effort to jump-start their economies after the recession, central banks cut interest rates to record low levels and pumped trillions of dollars worth of liquidity into the global financial system and markets via their quantitative easing (QE) programs. When conducting its quantitative easing programs, the Fed created brand new money out of thin-air (in digital form) and used it to buy Treasury bonds and mortgage-backed securities (MBS). These programs helped to boost the overall bond market, not just Treasuries or MBS. The chart below shows the growth of the Fed's balance sheet since the Great Recession as it created over $3.5 trillion worth of new money. Each phase of QE caused stocks and bonds to surge. Ultra-low corporate bond yields have encouraged U.S. public corporations to borrow heavily in the bond market after the Great Recession. Total outstanding non-financial corporate debt has increased by over $2.5 trillion or 40% since its 2008 high, which was already a dangerously high level in its own right. To put it simply, the U.S. corporate debt bubble will likely burst due to tightening monetary conditions, including rising interest rates. Loose monetary conditions are what created the corporate debt bubble in the first place, so the ending of those conditions will end the corporate debt bubble. Falling corporate bond prices and higher corporate bond yields will cause stock buybacks to come to a screeching halt, which will also pop the stock market bubble, creating a downward spiral. There are extreme consequences from central bank market-meddling and we are about to learn this lesson once again.
Analysis of consumer durables industry
This excel depicts the analysis of consumer durables industry for the last 5 years . The sheets have been analysed and different financial ratios have been calculated to see what is the trend the industry is following the past 5 years.
MBA FIN 1 slides
MBA FIN 1 slides
ANAYA KAMBLE