Investing Basics - Feel free to ask the most basic questions

I try to understand the company and try to use my analysis and then use morningstar or yahoo finance to match my analysis and see what everyone is estimating. Given that, I checked morningstar, and it showed the fair value of Bajaj Finserv around 6100. I want to know how they came to this conclusion.

How do you find what everyone else is estimating ? I don’t know any forum or website for that other than morningstar and you mentioned yahoo.

Hi - could anyone please guide me to any fundamental analysis courses they’d have done, or know are good for a beginner. Any books on how to read and analyse a balance sheet, or just any other source that would be helpful if you could point to would be greatly appreciated.
Thanks in advance and Regards,
Mohit

Read Zerodha Varsity It is good for layman

1 Like

Thanks so much for a prompt response

Hi @grovmo

Refer https://www.safalniveshak.com they have lot of stuff, videos.
Also check Dr.vijaya malik company analysis page https://www.drvijaymalik.com/pages/company-analysis#.Xp6ia8gzZPY

Also learn about Valuation: Measuring & Managing the Value of Companies

ROCE, WACC and Economic value added - this should cover most about companies and offcourse debt and cash flows.

If u patiently search valuepickr, u will get great stuff to learn here.

Hope this helps.

2 Likes

Fantastic @MHS, thanks so much. Am glad am here on this forum because of folks like you who’re always available with a goldmine of information. Much appreciated your quick and detailed response, and all your help and time. Have a good day ahead, and keep care. Thanks again

What is a good thumb rule for D/E ratio? I read in another VP thread that D/E < 0.5 is decent while in screener a lot of conservative screens have a D/E < 0.15 or 0.10. Most books does not delve deep into the numbers and vaguely state that lower number is better.

Why do banks lend to heavily indebted companies that have been loss making for many years.I am talking about airlines like Jet Airways,which in the past 10 years has made a loss close to 7000 crores.

1 Like

What is difference between COGS and Change in Inventory in P&L account. How are both calculated?

I think someone somewhere has an incentive to do so.

1 Like

Where can one see comparison of multiple indices/stocks in a single price chart? For example, if I want to compare nifty50, nifty smallcap, nifty midcap in the same chart from 2000 to now, how can we do this?

I will explain the difference between COGS and change in inventory using a small example.

Assume a company begins its operations by purchasing raw material worth 1000. It incurs 300 to add value to the raw material and convert it to finished goods. Thus the total finished inventory cost is 1300. Now half the finished inventory is sold at 800. Thus the profit of the company is 800 - 650 = 150.

Now there are 2 ways this profit of 150 can be reported
Option 1 - Sales (800) minus Cost of Goods Sold (650) = Profit (150)
Option 2 - Sales (800) minus Purchases (1000) minus Manufacturing Costs Incurred (300) minus change in inventory (-650) = Profit (150)

Option 1 approach is called cost of sales approach to view the P&L where the sales is matched with the cost that sale. This is the approach suggested under IFRS reporting.

Option 2 (followed in India) requires the purchase cost and total manufacturing costs to be shown in the face of the P&L. However if the purchased material and manfacturing costs is still unsold, they should not affect the P&L number. So the change in stock line adjusts for this unsold purchase+product costs so that the P&L is stated correctly.

Thanks and Regards
Shivram.

9 Likes

Thank you for your prompt reply.
I want to understand the Change in inventories of finished goods and work-in-progress being reported in P&L statement, from the example that you have considered the P&L statement should be as below:

Now I want to understand what shall be the Change in inventories of finished goods and work-in-progress in this case.

When you do cost of sales accounting (Option 1 in my example), there will not be any change in inventory. Change in inventory is required only when you disclose total purchases in your P&L (as against the actual cost of what was sold - Option 2 in my example). In the example provided by you below the 650 costs is fully attributed to the 800 sales (Option 1). Hence no further adjustment is required for “change in inventory”.

1 Like

But in India both Cost of Material consumed and Change in inventories of finished goods and work-in-progress both are reported. I understood the COGS part, but can you explain the Change in inventories of finished goods and work-in-progress with example that shall be very helpful. thanx

1 Like

Please refer to Option 2 of presentation of the P&L on my message above. That explains why cost of material consumed and change in inventory is reported in India. That is because we dont use cost of sales reporting.

Hello everyone,
I have a basic question on mutual fund.

I have my savings in Franklin overnight fund. Is it safe to hold that fund in the current situation?
I am worried because of the recent developments in mutual fund industry. Franklin suspending 6 debt funds…

Regards,
Selva

1 Like

Anyone has an idea as to how to buy gold without moving out of the house?Paytm gold or google pay gold any good?