Investing Basics - Feel free to ask the most basic questions


(Chandragupta) #398

Notes to the Accounts usually gives the break up of Raw Material Imported and Raw Material Indigenous. Director’s Report also mentions at the end Foreign Exchange Used and Foreign Exchange Earned which can give an indication.


(Gothamcapital) #399

Actually my doubt had been different.I got a good link written by professor gleenblatt which answered my doubt.

My original doubt was why indian companies were not only paying for repairs of machinery and at the same time deducting depreciation(which prof greenwald says estimates maintenance capex).

My mistake was that i was thinking maintenance capex of the assets was the same as repairs to the company’s assets.

Thanks everyone for the help.


(Gothamcapital) #401

Yes,thank you for the article.I have read your post and things are clearer now.


(Rohit) #402

Hi , I downloaded the stock specific excel file from screener.in. I can see Best Case and Worst case columns in the last. They seems like the future projections. Can any one please tell how did they arrived at this Best Case / Worst Case scenarios. Did they used any model to calculate growth/PE etc. ?


(vikrantmehta888) #403

I have a very basic and perhaps a foolish question.
Standalone vs Consilidated
I was till today under impression that “standalone P&L” do not make much sense and “Consolidated P&L” as well as balance sheets are more important when we consider the “ownership” that the stock has. Today when i analysed market cap (as well as debts) of Tata motors and compared the same with other car manufacturers like Ashok leyland, maruti, mahindra etc, i found out that tata motors stock prices are more relevant when we take standalone numbers only in picture as “consolidated” figures of Tata motors are astonishing as compared to market cap of Tata Motors.

My question is this, today at the price of 290 if i buy all shares of tata motors with hypothetical 90k Crore rupees (which is market capital of the stock), will i own all the subsidiaries or will i just own the standalone company?

If what i was believing so far is right i.e if i will own all subsidiaries as well, then i feel the company is highly undervalued and i am surely buying it. But, noone in the market seems to think that way, so my concept is wrong somewhere.

Please guide.


(Rohit) #404

you will own all the businesses including subsidiaries.


(Mahendra243) #405

what is triple taxation on dividends? do we have to pay tax on dividends too?pls clarify…thanks


(Rohit) #406

I don’t know about triple taxation but recently their was some change in budget. Dividends are supposed to be taxed if they exceed 1 crore. i.e. if you have dividend income more than 1 crore , you have to pay 10% tax on it.
That’s the reason many companies are going for share buyback now a days instead of dividend payment.


(shreys) #407

Your understanding is correct.
Prima facie, Tata Motors does seem like a bargain. The stock has been struggling at these levels for quite some time now. However, I performed a comparison between Tata Motors and its American counterparts - Ford and Chevrolet.
Despite doing alright, both the behemoth automobile companies are priced very similar to Tata Motors. There’s surprising pessimism for legacy vehicle manufacturers.
It could turn out to be a value trap. Maybe there’s more than meets the eye. Only time will tell.


(inonix) #408

Could anyone explain the significance of these charts or how to interpret it?
https://www.bseindia.com/bsecmieindices/consumer.aspx


(Chandragupta) #409

A corporate pays tax at the corporate tax rate on the profits it makes. When this same money is distributed as dividend, there is Dividend Distribution Tax of 15%. And if your dividend income exceeds Rs.10 lacs (which is the case with many large shareholders / promoters), you pay additional income tax of 10% on this income. Thus the “same” income is taxed thrice. This is what is meant by triple taxation of dividend.


(Mahendra243) #410

So until the divedend amount is less than 10L…we dont need to pay any taxes right for the current fiscal?


(Chandragupta) #411

Right. No tax on dividend in your hands till the total dividend from all the companies put together is less than Rs.10 lacs


(Gothamcapital) #412

I believe,i had read somewhere that ,the issued share capital is something that is not used in the business,it is the share premium that is utilized
So,Is it true that during liquidation of the company,the issued share capital is supposed to be distributed to the common stockholders,ahead of the debtors?

Let us say a company issues 10 lakh shares at 1 Rupee face value and 99 rupees premium.The issued share capital = 10 lakh*1 rupee= 10 lak rupees is not used in the day to day activities of the company?Is this amount distributed to the shareholders,regardless of the claims against the company by debtors,preference holders,tax authorities and Provident fund organisations?


(Chandragupta) #413

There is no such thing. Equity shareholders are always last in the pecking order. Assuming liquidation is on account of bankruptcy, equity shareholders should theoretically get nothing.


(hussain_tamboli) #414

I am a newbee and have been learning a lot about value investing from this forum. I am almost finished reading - One Up On Wall Street by Peter Lynch (It was recommended in the thread about top basic investing books). Next, I plan to read The Five Rules for Successful Stock Investing by Pat Dorsey.

I don’t have a financial background (I am from IT background). I am trying to align concepts from One Up On Wall Street with information from Screener.in.

My question is How do find

  1. How much cash the company has? (I found “Cash from operations last year” ratio from Screener and I am not sure if it means the same)
  2. How much long term debt the company has? (What parameter of balance sheet/yearly report specifies this?)
  3. How much long term growth rate the company has? (Screener has some ratios like “Compounded Sales Growth”, “Compounded Profit Growth” and “Return on Equity”. Which one of these means long term growth rate)

Thank you for the amazing forum.


(MHS) #415

Refer below to start with:

https://www.safalniveshak.com/how-to-read-balance-sheet-1/

https://www.safalniveshak.com/analyze-balance-sheet-1/

https://www.safalniveshak.com/reading-balance-sheet-video/

Regards


(Rohit) #416

Would suggest you to read The Intelligent investor. Its a v good book. Also if you are a beginner , you can read Buffetology (its basically on how warren buffet invests , v good for learning)


(Gothamcapital) #417

Go to youtube and read about balance sheets,income statements and cash flow statements.

One classic is by benjamin graham “interpretation of financial statements”.

On your specific queries:

1)Cash is found on the balance sheet of the company.This cash is the cash that the company has on that date,whereas cash from operations last year is the cash the company physically collects only through its core business which is a bit different from net profit.

2)Long term debt is again on the balance sheet

3)Compounded sales growth is the growth in revenues of the company,compounded profit growth is the growth in net profit ,ROE is the return on equity,which basically means (assuming no debt) the net profit divided by the assets of the company.If the company has debt then roe is a bit more complex


(hussain_tamboli) #418

Thank you @MHS, @Rohitsharma and @Gothamcapital. I will go through the resources.