From where do I get the information about how much of the company is owned by owners, institutions, retail, etc?
Check shareholding on BSE website , you can also check the annual reports (but that will tell only till last financial year)
1 Like
How does declaring bonus share benefit shareholders?What is the accounting treatment of bonus shares?What elements of the balance sheet are changed?
-
Bonus Shares are exactly like dividends, but paid in kind instead of cash. For the company, it increases the number of shares without increasing the capital base, thereby bringing down the market price of the share. This is to encourage retail participation / increasing liquidity in for the shares. For example, if MRF issues a 1:1 bonus, it would bring down their sky-high market price of almost Rs. 75000 to Rs. 37500, more manageable levels for a retail investor.
-
Since bonus shares are paid out of Retained Earnings, the accounting treatment would be to move the amount paid out from Retained Earnings to Share Capital (Both of which form part of a companyâs âEquityâ - so the overall capital does not change).
I hope this was helpful.
3 Likes
You are talking about a rare example.How does it help if the companyâs stock price trades from 10 to 500?As such the number of shares doesnât increase,hence nothing really changed.Since money doesnât flow out of the company,a company can perform as many bonus issues as it can legally do(subject to the price not going too low).
Regarding accounting treatment,yes the general reserve or any other surplus may be capitalized to pay for the shares issued.But it only pays for the issued share capital,i mean the share premium(whatever it may be) is not set aside from the reserve.My question is again this is an internal process,which doesnât change anything.
Atleast according to me it is quite an inferior way of ârewardingâ shareholders than dividends and share buybacks.
Regardless of the market price, itâs done to increase liquidity in the market for the shares. Yes, bonus issues are inferior to say, dividends or better yet, buyback.
Personally,my aim of asking this question was why there are so many cheerleaders for stock splits and bonus issues.
Donât try to reason with the market. Itâs bad for health.
Hi everyone ⌠from last 3-4 month ,i am reading all the post in this forum. From last six month i am trying to learn about stock market . i am 24 and i just read rich dad and poor dad . now i have started reading one up in wall street . then i will read The Intelligent investor . i am trying to create a good portfolio as i believe whole 2018 will be much volatile and i will get a chance to buy quality stock . i am following SIP way to buy the same stock each month as i can allocate 4k monthly .i dont want excellent return in the year 2018 . i want to create a good portfolio which can give me good return within 3-4 year. i want to allocate 40% for large cap ,45% for midcap and rest 15 % for small cap . I am currently holding
- meghmani organics -31%
- ashokLey = 15.72%
3.sptl = 14.13%
4.Tata global = 18.92%
5.Spicejet = 12%
6.voltas = 7.66 %
Except voltas which i brought it for short term ,i have done little bit research on all the other stock . due to less cash my portfolio is looking like this . but later sip ways i will buy more large cap stock like hdfc and bajaj finance limited .
I am trying to create a check list before buying any stock . Please guide me what all the ratio or point i need to check before buying a large cap stock ,or what is the check list is required before buying small cap or mid cap . ideally its better to start with the mutual fund but i want to learn and i want to manage my own portfolio. i am not much worried about the loss because ultimately i want to learn as much as i can .
Frankly speaking from last six month i never felt bored by reading about investment , i am madly in love with the stock market .i Think in this forum i am the least educated guy regarding this business. But i am putting lots of effort to learn .
Thank you for letting me join this forum . Please help me regarding creating a check list for large cap ,mid cap and small cap stock . I am ready to learn and do homework ,so please guide me .
Thank you
Dear @Bikram11206178,
Iâd like to begin my post by stating in no uncertain terms that my intention isnât to discourage you from investing your funds. And, Iâd like to tender an apology in advance if my post hits a raw nerve.
Iâd like to extend my hearty congratulations for being aware of the importance of saving and compounding oneâs capital. As elders have rightly said - Well begun is half done.
The books you intend to read are stupendous sources of information.
But, itâs pertinent to note that these treasure houses of knowledge are necessary but not sufficient for investing success. The bull run has drawn a lot of participants to capital markets. Also, tremendous wealth generated can be attributed to the virtuous bull market. Making money is a pleasure like none other. The euphoria experienced is unrivalled.
Losing money is devastating, gut wrenching.
Staring at the loss on oneâs terminal pierces oneâs heart.
But, all the suffering is acceptable if you enjoy the process of stock selection. Scanning through annual reports, assessing financial statements, etc. And, the byproduct of a good, enjoyable process is wealth generation.
At the end of the day, stock market is just one of the many means to attain capital appreciation.
Capital appreciation can also be derived by investing in yourself. Acquire skills in aspects of life you enjoy. By exploiting the skills acquired you can facilitate increase in income. And, often, the return on investment could be way better than the stock market can offer.
To summarise- If you genuinely believe that investing is the path youâd like to adopt for capital appreciation, embark on the wonderful journey.
But, if youâre lured solely by the fantastic returns offered in the last few years it may be worth considering other options.
Itâs a question that you alone can answer.
I too am trying to find my answer.
The goal is capital growth. The paths are numerous. Choose the one that augurs well for you.
Yet again, my apologies if Iâve overstepped.
3 Likes
Thank you Shreya for ur honest reply . I started investing just before 3 month when the market corrected alot . As u have rightly mentioned one should not go after fantastic return . Genuinely I want to learn this business. As I was going through the other thread . I came to know about #hitesh sir #donald sir ,they are learning this business from last 20 year . I have started investing before 3 month .I want to follow this beautiful path. I want to learn as much as I can .
Please donât apologize for Ur honest reply. I am here to stay long in this field . So I will try to understand everyone point of view and take decision by myself . Thank you
1 Like
@Bikram11206178
Happy to help. Thereâs an abundance of incredibly high quality information on this forum. Wish you the best for your journey of investing.
I fully agree with your point about the financial institutions manipulating the emotions of the middle class and the poor.Given that most mutual funds under perform the market and the mutual fund industry knows this,it is point less to have a rational expectation that mutual fund investing will create additional wealth than investing in the index.
Thank you for your answer.It helped me refine my knowledge.
How can I calculate Free Cash Flows (FCF) from the cash flow statement of a listed Indian Company and what rate should be used to discount the same ?
The textbook definition is Operating Cash Flow (-) Investing Cash Flows. But in reality, there are several moving parts.
If youâd like to understand Valuation as a big picture, consider visiting my thread:
2 Likes
I also want an answer to this question (how to calculate FCF) - I read somewhere that to calculate FCF, we need to susbtract capex from CFO. Is this true sir? Also do we get the capex figures in annual report.
Thanks Sir.
CapEx is essentially Investing Cash Flows without Short Term Investments. So yes, in a way, Operating Cash Flow - CapEx is a better formula, in case the company had made a lot of investments in short term assets like bonds or money market instruments.
CapEx is nothing but the change in Fixed Assets (Fixed Assets y1 - Fixed Assets yo).
But to arrive at FCFF, you need to subtract OpEx or Working Capital, which is nothing but change in non-cash Net Current Assets (Non-cash Current Assets - Non-debt Current Liabilities).
Finally, you also need to add back Depreciation, which is a non-cash charge on Fixed Assets.
So put together,
FCFF = Post Tax Operating Cash Flows - (Fixed Assets - Fixed Assets Previous Year) - ((Non-cash Current Assets - Non-debt Current Liabilities) - (Non-cash Current Assets Previous Year - Non-debt Current Liabilities Previous Year)) + Depreciation
2 Likes
One basic question from my side.
==> What is the point of seeing ROE? Basically ROE says that it is PAT over the Equity (ie Asset-liabilities)?
Instead one should see inverse of PE. which is PAT over the current marketcap. Because that is the return that will matter to anyone entering the stock at current price.
Please let me know where I am going wrong or missing?
Look at it this way,you are a young entrepreneur who wants to start his own company.Let us say u start the company with some cash of 10 crore.You will buy plant and equipment (which are fixed assets) and inventories and also put some cash in the bank for liquidity as well as have to accommodate people who buy on credit.So your 10 crore is the amount you invest in the company.Obviously you want to make back the 10 crore as fast as possible,so you want to make a good percentage of your invested amount back every year.If you make 10 crore profit in the first year ,you have basically made your money back and you have earned a 100 percent return on equity.On the other hand if you have made 5 crore ,then you have earned 50 percent ROE and you will make back your money in two years,If you earn 2 crore ,your ROE is 20 percent and you will earn back investment in 5 years.And if you make 50 lakh a year then the ROE is 5 percent.ROE is also important because often ROE may also tell you the extra profit you might earn if you invested more in the company.i.e,let us say your company has a 20 percent ROE and you invested 5 crore more,then the extra profit because of these new assets will be 20 percent of 5 = 1 crore(Here i have assumed no debt and also ignored time value of money)
So basically ROE is a measure of how quickly you are making the money invested in the assets back.If your ROE is not greater than say 8 percent then the 10 crores should have been put in a bank as clearly a bank would give you a higher return,
On the other hand,market cap is the cost of buying the company,i.e the amount you will have to pay to become the owner of the companyâs assets and liabilities.Obviously the market cap has to be as small as possible as you dont want to pay a lot and also make back the monies as fast as possible here too.
1 Like
Price Yield is also used by some people. But the general notion is that the Market Cap is incorrect. In fact, an investor would make wonderful returns only if the current Market Cap is incorrect. However, the Book Value hardly changes and so, makes for a better input in a Ratio.
So yes, the ROE is not the best Ratio to look at, but it gets by. I personally look at Cash related Ratios like the CROCI.