These Rs.30 is deployed in the business, it is already funding something. But you cannot identify & pinpoint what exactly it is funding. Everything on the liability side is funding everything on the asset side on the whole.
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In short, assets are destination, while liabilities are sources of funds. The current positioning of funds is always on the destination side.
Hope it clears the confusion.
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Having no background in finance, this has confused me tooā¦ Just paraphrasing the earlier replies and a few articles that I readā¦
Neither profits (Rs. 100 in your example) nor reserves (Rs. 30 in your example) exist as cash. These are accounting entries. The dividend paid (Rs. 70 in your example) is a cash transaction. Since all cash transactions are captured is Cash Flow Statement, this would have an entry in the cash flow statement.
In practice, there is a lag between the revenues mentioned in the P&L and the actual cash being received. Also, the P&L has non cash entries like depreciation, which leads to more mismatch. Hence, it might not be possible to match reserves obtained from P&L (and carried over to the Balance sheet) to cashā¦
Hope this helpsā¦
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Why a company is paying dividend when it is having the debt on its books? many companies tend to do that.
Why cant they pay off the debt and then pay dividend in the coming years?
For example varun beverages.
@Mani_Starter Some promotersā main source of annual income is dividends. It is a legitimate way of bypassing the salary cap that the companies act imposes on management salaries.
So if I was running a 1000 CR top-line company, then the only way for me to bypass this cap and take money out of the company legitimately would be by the way of dividends.
Besides, managements are always under pressure from investors to return money to them through dividends, bonuses, buybacks, etc. Particularly from the older investors who depend on dividend income for their livelihood. No wonder stocks like ITC are in demand despite poor capital allocation by promoters. The lure of a 6% dividend is just too much to resist for some investors despite the fact that there are much better opportunities out there provided one looks for them with an open mind.
Hence, to a rational person dividends may not make sense. But if you think of it from the perspective of a 60 year old promoter or a 60 yo investor, dividends are an important part of the puzzle, regardless of business economics 
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In addition to what @barathmukhi mentioned aboveā¦
- There is also a possibility of tax benefits from maintaining debt (Tax benefits of debt - Wikipedia) rather than retiring it
- For large multinationals like Apple, the cash is often sitting overseas, from overseas operationsā¦ It might be cheaper to borrow in US and pay dividends rather than repatriate the cash.
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Why are research reports are freely available ie. in moneycontrol . Are retail investors target of these research reports? But research reports from CRISIL is not free and one has to pay for it. I guess here moneycontrol is paying for it.
Every time research reports are out, the stock prices move if it is buy call. I think this is dangerous buying it based on research report. Who are buying after all once reports are out? is it a retail investors or institutions or HNI/FII?
Why are they giving target price with certain duration(3, 6 months or 1 year)? Investing should be for 5 to 10 years. I dont get it why such a short duration with target price. If I follow this, tax and brokerage charges will eat my profits.
Is it a good idea to go through the research reports? looks to me reports are copying the text from annual report.
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We should go through the Research reports and use our own judgement on the assumptions/projections they have made. There is definitely value in going. through reports to understand the business/industry/economy better.
Just looking at the headline Recommendation & TargetPrice will not work in the long run.
Why are research reports are freely available ie. in moneycontrol .
I have never seen a complete research report on MC. There are snippets and TP/Recommendation given, but not the detailed analysis of the report. This is similar to the Freemium funda, where they are giving you basic stuffs for free (which may not exactly be reliable) and for the actual stuffs, you have to pay. Another reason may be that, MC is the biggest financial news space in the country. So, getting space on their page is good marketing.
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Refer below link for all the reports in MoneyControl which are updated date wise:
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How should we take it when management says that we will grow 20% per year? Should we blindly believe the statement made by management?
I have question about management intentions.
Recently I am started getting text messages from company āXā below is the recent text msg
"Dear Well wishers,
Xxxxxxx is pleased to inform the acquisition of an additional plant located Near Mumbai(approx 4 acres).
We shall forever be grateful for your contribution in the growth of our business and look forward to your continuous support. "
The question here is does anybody else is getting text update from company over sms also is it good practice And are management intentions good??
Hi, I want to know few instruments to park your money while waiting for opportunity in equity. e.g. is liquid fund good or short term debt or combination of both. e.g. if a person has 100rs(just for example) and a person want to use them in 3 chunks to buy equity, shall we invest 30% of it in liquid fund and rest in debt fund? Reason why i was looking for liquid and debt fund is because buying opportunity my come in 3/6/12 months. So it might not be good idea to put all money in liquid fund which gives only 3-4% rate of interest.
You can also consider gold at this moment. During the last crisis (2008), gold prices tripled over a 3 year period due to relentless money printing. So it may happen this time too. I am purchasing Goldbees on this thesis. It is liquid and a comparably low volatility to stocks.
Hey guys,
Iām choosing to do a comprehensive fundamental analysis of Colgate Palmolive(India). Iām a novice in this field currently. Iām trying to understand the business and industry of my company. For that I realised Iām facing a lack of resources. I want to understand things like future growth expectations of the industry of my company, future markets, competitors etc.
All Iām doing to try to understand all this is google :). Iām just reading the articles that come up. But this approach is failing miserably to get me enough info.
Any other resources seasoned investors use to understand the business and industry before investing in one?
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@Vaibhav_Mittal Pick up the analysis done by Dr. Vijay Malik for any company and try to replicate that for the company you are trying to analyze.
Another thing to remember is that investing is a pari mutuel system. Itās not about buying the best company. Itās about buying the best available opportunity at the best available price. In my opinion, Colgate would fall in the former category whereas what really benefits DIY investors is the latter category, i.e. relatively lesser known names with huge future potential, available at reasonable prices. Given this equation, every investor needs to choose which category would be his hunting ground, in order to optimize his risk/reward.
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You are right about referring to Dr. Vijay Malikās blog to beginners.
On the second point, Colgate is a good company to use from a perspective of ālearning to analyseā. It is a good choice where Dr. Vijay Malikās process can be put to play - single product company, stable business, long history, clean balance sheet etc.
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Thank you so much for the great advice!
And I picked colgate for that exact reason. Its a good one to start learning how to do analysis.
Although the problem Iām facing is slightly different. As I said, I want to understand the industry of personal care and Iām facing a lack of resources. I want to understand things like what is the market size currently, how much could it grow in the next 5-7 years, what is the competition and what strategies a company like Colgate should adopt.
The annual report of the company doesnāt contain that many āindustry specificā details. And being a student, Iāve almost no understanding of the industry apart from being a normal consumer myself.
Thanks!
@Vaibhav_Mittal Have you checked research reports from brokers such as HDFC Securities, Motilal Oswal, etc. ?
Those might help too.
Hereās a snippet from MOSL.
Hope it helps
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Thankyou so much @barathmukhi. This will be really helpful.
Are these reports available to any and all investors or do we have to be related to these brokerages in some way(like open a demat with them/ subscription) etc?
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@Vaibhav_Mittal Just Google Colgate-Palmolive (India) analysis filetype:pdf and youāll find quite a few 