1. Investment Valuation
Evaluating an investment on the basis of this aspect answers questions like: How attractive is the investment? Has it shown growth in the past? Will it keep growing in the future? Investment valuation helps to decide the value of the company as a potential investment.
2. Profitability
Making profits is important for every company. However, a good company is one that makes profits by using its resources most effectively. A company that earns $ 40 million in profit by using just $ 35 million of resources is much better as an investment than one that earns $ 400 million profit by using 500 million worth resources. Profitability measures how well a company is performing by looking at how profit was earned in comparison to sales, total assets and net worth.
3. Liquidity
Liquidity measures the financial of a company. It tells us whether the company will be able to sustain itself in case of a financial crisis. It evaluates a company’s ability to meet its short term as well as long term financial obligations. During times of recession or economic disturbance, only companies having a strong financial backing can survive.
4. Operating Performance
Operating performance measures the potential of a company to generate its assets to revenue. Basically, it looks at how efficiently and effectively a company is using its resources to generate sales and increase shareholder value. In general, the better the operating performance, the better it is for shareholders. Operating performance also checks the management of the company.
5. Intrinsic value
This is perhaps the most important factor to be considered before investing. The intrinsic value of a stock reflects its true value – its actual worth, after removing any market bias that may exist. A company’s stock should be bought only if it is selling at a good discount to its intrinsic value.
The five factors mentioned above form the basis of choosing every investment. Our next post will concentrate on discussing in depth and detail each of these factors and their application while picking a stock.
Evaluating an investment on the basis of this aspect answers questions like: How attractive is the investment? Has it shown growth in the past? Will it keep growing in the future? Investment valuation helps to decide the value of the company as a potential investment.
2. Profitability
Making profits is important for every company. However, a good company is one that makes profits by using its resources most effectively. A company that earns $ 40 million in profit by using just $ 35 million of resources is much better as an investment than one that earns $ 400 million profit by using 500 million worth resources. Profitability measures how well a company is performing by looking at how profit was earned in comparison to sales, total assets and net worth.
3. Liquidity
Liquidity measures the financial of a company. It tells us whether the company will be able to sustain itself in case of a financial crisis. It evaluates a company’s ability to meet its short term as well as long term financial obligations. During times of recession or economic disturbance, only companies having a strong financial backing can survive.
4. Operating Performance
Operating performance measures the potential of a company to generate its assets to revenue. Basically, it looks at how efficiently and effectively a company is using its resources to generate sales and increase shareholder value. In general, the better the operating performance, the better it is for shareholders. Operating performance also checks the management of the company.
5. Intrinsic value
This is perhaps the most important factor to be considered before investing. The intrinsic value of a stock reflects its true value – its actual worth, after removing any market bias that may exist. A company’s stock should be bought only if it is selling at a good discount to its intrinsic value.
The five factors mentioned above form the basis of choosing every investment. Our next post will concentrate on discussing in depth and detail each of these factors and their application while picking a stock.
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ONEZYPHER © LTD-2021: All rights reserved.