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Tag Archive: Cash flow


Liar Liar

It’s always good to read some smart investors who did really well in the past. Here are some other lies that investors blogtell themselves on a consistent basis, including many I’ve told myself over the years:

Who are you ? Are you a Trader or Investor, Most of the post on this blog is written under the background as investors not as a Trader.

If only I would have taken my own advice…

I’m not wrong, the market is. You’ll see.

Investing is easy.

I can predict when the next correction is coming. Continue reading

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Good Bad & Ugly about EBITDA

EBITDA is one of those terms that has received increased usage but usually for the wrong reason. This article will define it blogand discuss how it can be useful but also misleading. EBITDA is fancy tax lingo for earnings before interest, taxes, depreciation, and amortization. It is calculated by taking operating income and adding back to it interest, depreciation and amortization expenses. EBITDA is used to analyze a company’s operating profitability before non-operating expenses (such as interest and “other” non-core expenses) and non-cash charges (depreciation and amortization).

The Good EBITDA can be used to analyze the profitability between companies and industries.Because it eliminates the effects of financing and accounting decisions, EBITDA can provide a relatively good “apples-to-apples” comparison. For example, EBITDA as a percent of sales (the higher the ratio, the higher the profitability) can be used to find companies that are the most efficient operators in an industry. The ratio can also be used to evaluate different industry trends over time. Because it removes the impact of financing large capital investments and depreciation from the analysis, Continue reading

It’s time to dust off one of the oldest, most conservative methods of valuing stocks–the dividend discount model (DDM).images

It’s one of the basic applications of a financial theory that students in any introductory finance class must learn. Unfortunately, the theory is the easy part. The model requires loads of assumptions about companies’ dividend payments and growth patterns, as well as future interest rates. Difficulties spring up in the search for sensible numbers to fold into the equation.

The Dividend Discount Model
Here is the basic idea: any stock is ultimately worth no more than what it will provide investors in current and future dividends. Financial theory says that the value of a stock is worth all of the future cash flows expected to be generated by the firm, discounted by an appropriate risk-adjusted rate. According to the DDM, dividends are the cash flows that are returned to the shareholder. (We’re going to assume you understand the concepts of time value of money and discounting. You can learn more about these subjects here.)  Continue reading

CDS & SWAPS

After a long time I am putting few basic quiz questions,  Lets check out who hit the bull’s eye. You can provide your answers by putting imagesup the comments , there are only two questions but they will help to understand the basics OTC derivative market:

  • What is correct about a credit default swap (CDS)?
  1.  A CDS is the exchange of two cash flows: a fee payment and a conditional payment, which occurs only if certain circumstances are met.
  2. The CDS will have value for the protection seller only if defined credit conditions are met
  3. The protection seller will always receive the premiums.
  4. CDS is a type of insurance in which default of an asset triggers payment Continue reading

imagesToday, we have chosen a very basic but, yet very interesting topic to discuss. “Financial Economics” Though seems 2 different branches but, when merged together it produces an extremely different class in finance. Today, we will start our discussion with what economics & finance mean independently, how both the classes are different from each other and finally what “Financial Economics” means to us.

Although Finance & Economics often taught and presented as very separate disciplines, economics and finance are interrelated and inform and influence each other. Investors care about these studies because they also influence the markets to a great degree. Continue reading

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