CFA Equity and Portfolio Management practical tutorials | Heramb Vadalkar | Skillshare

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CFA Equity and Portfolio Management practical tutorials

teacher avatar Heramb Vadalkar

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Taught by industry leaders & working professionals
Topics include illustration, design, photography, and more

Watch this class and thousands more

Get unlimited access to every class
Taught by industry leaders & working professionals
Topics include illustration, design, photography, and more

Lessons in This Class

15 Lessons (3h 58m)
    • 1. Asset Allocation Class 1

    • 2. Asset Allocation Investment option

    • 3. Portfolio Manangement Basics

    • 4. Portfolio Management Process

    • 5. Equity Introduction

    • 6. Equity Basics

    • 7. Equity primary market operations

    • 8. Equity secondary markets

    • 9. Analysis of stocks fundamental and Technical

    • 10. Stock analysis

    • 11. Economic analysis

    • 12. Financial statements basics

    • 13. Ratio Analysis Interpretation of financial ratios

    • 14. Sectoral analysis of Cannabis sector

    • 15. Untitled Project

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About This Class

This course will help you understand practically the syllabus of portfolio management and equity analysis .

This course is best suited if you are pursing Chartered financial analyst designation (CFA) or taking finance as specialization in your grad and undergrad

The focus of this course is applied learning . This course give you basics of stock trading platform and research platforms

We would be discussing topics like :

1. Asset allocation

2. Portfolio management - risk and return

3. Types of portfolio management- Active and passive

4. Portfolio management process

5. Basics of equity

6. Types of equity

7. Equity markets - primary market operations

8. Equity markets - secondary markets operations (stock trading )

9.  Equity analysis - fundamental and technical analysis

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1. Asset Allocation Class 1: Hi, everyone. In this short, according we're going to discuss about asset allocation. So you're a qualified financial advisor who is working with a big Canadian back. Gitlin walks into your office. She has over a $1,000,000 which she Borden inheritance. She wants to know how she can handle that money. Money that you have can be investor for can be kept in cash. If you plan to invest, then you can have options like you can invest with the band. But you can open a checking account savings account, a G. I see our tongue deposit. Then you can invest in commodities like gold and silver. You can invest in equity. You can invest in that. If you do not want to handle your own money, you can go for manage products. Manage products are like mutual funds, exchange traded funds, managed accounts, structured products and at once, what do you think? How should Caitlin locate our own capital? 2. Asset Allocation Investment option: Hi, everyone, In this reporting we're going to discuss about asset allocation on, we are going to have a gleeful review off different investment options you have. Let's start. So if you have some money, first thing you can do us keep all that money in cash they should be keeping money in cash is it is not inflation resistance. What does it mean? So if you keep all your money in cash because of inflation, the value of that cash keeps on decreasing. For example, if inflation is 3% and if you are keeping $100 in cash, what happens? Today's $100 next year, after one year off, 3% inflation will be worth only $97 in the second. So as the time progresses, the value of money keeps on falling, and that is because of inflation. So cash is not inflation resistance, so it actually has a negative returns. Also, gases stories, address. So if you keep a lot of cash in your wallet and your wallet gets stolen, you cannot recover that cats or if you keep a lot of cash in your house and your house is broken in tow again recovering that cash becomes difficult. So when you invest, when you keep your money in cash, you do not gain any returns. You actually lose money, plus that it's stories wrists, so it is not suggested to have your money in means all your money in gas. Of course, some part off your capital needs to be liquid, and it needs to be in gas what your day to day expenses are for emergencies. But apart from that, it is not expected, or it is not suggested to put all your money into cash. Next, you can go to a bank and invest into different banking practice. So banking products are many, and they can be extremely clone complex, and they combine different asset classes. But for the simplicity purpose, I'm just discussing four of them. So first is you can keep your money you condone. Keep your money in the bank in a checking account. Checking account is equivalent to cash, so mostly it hasn't together negative returns because the interest rates are almost zero on . Sometimes it is minuscule, but it hardly makes any difference. The advantage of keeping your money in checking account is its easily accessible through A T M's on tele machines on you can withdraw it anytime. Also, you can use it for purchases for shopping, etcetera. Next, you can keep your money in savings account. The difference between checking account and savings account a savings account has certain restrictions. Only X number of transactions are free. After that, they start charging you, or sometimes no transactions are free and the charge for withdrawing money from savings account. But the one teachers that it has little better impressed, then taking a so in terms off interest rates. Savings account has a better industry than taking a. Then there is stoned. The father term deposit means you lock your money so you lose out on the liquidity. But because you lost your money, you get higher interest rates than savings. For example, if you are looking at a six month tone deposit, so you whatever money you invest that gets locked for six months, and after six months your money will be returned to you so that six months will generate some impressed Tom Deposit. Have a higher into the street, then savings, then their r G. I see guaranteed investment certificates. G. I sees a similar to term deposit. The differences they're insured, so they're mostly insured by seat. Siri Icy. So seedy, I see is an organization that insures Canadian banks. So G I sees are mostly insured, and you cannot lose your capital when you invest in a G. I see. But the working is extremely similar. You and you give your money to the bank. There is a lock in period, six months, one year, two years, five years on. After the lock in period gets over, your money is returned. Now, sometimes the eye sees a redeemable, so if you want, you can. Before the time period expires. Before the lock in period expires, you can redeem your money, but if you do that, then they will generally generally attract a pennant. Then you can invest in gold and silver, so mostly commodities and money. You can invest in island. You can invest in a in crude oil. You can invest in agro based products, or you can invest in billions like gold and silver. Mostly when we think about commodity investments with think about gold and silver. So I'm restricting my discussion to those good part about investing in gold and silver as they are a good inflation hedge. So we're a Pdf. You see, these assets have beaten inflation, so that's something to take a note off next. They have negative correlations with many other assets. So negative correlations part we're going to discuss and further details in future videos. But right now, just remember that gold and silver doesn't move in the same direction at other as of their assets. So many duties performing gold is majorly stable man. When equity goes down for the gold, prices are gold returns jump up. So if you're an investor who has locations in stocks, and if you're afraid off stock market's going down. It is a good idea to invest some part of the capital in in commodities like gold and silver , because when including goes down, generally, good reacts favourably. But the thing that you have to notice these assets are extremely volatile, so gold and silver fuller Tyler's compared to other see facets, then you can invest in a real estate. Real estate can be commercial or residential, so when you invest in real estate, the responsibility of rains so returns that you make from real estates are on true friends . One is the rental income that you get. Second is you buy at a certain price and you sell it at a certain price. If the selling prices more than the buying price, then you make capital gains. If selling prices less than the buying price, you make capital loss, then the thing that you have two notable really status. Liquidity is extremely low, so your money gets locked out, so it is very difficult to sell properties. It's not easy it takes time on You Mean requires significant amount off like a significant amount of time, like four or six months to sell your property. If emergency comes, you cannot use real estate as a fallback plan. So you have to remember, in real estate investments the liquidity is low, then comes equally so if you see equally investment. So what is equally investments when you invest in a stop? When you buy a certain stars, you become owners of that company, not the entire owners, not the decision makers, maybe but a part owner. So whatever profits the company made, whatever assets the company creates, all these belongs to us apart. So when you invest in equity returns, you get into forms either in dividends on capital gains dividends, our share of profits that the company decides to give shareholders. Capital gains are when you buy a certain share at X place and sell it data. Why price and then buy that is, the selling price is more than the buying price does when you meet capital again. Capital loss happens when you sell it at a lower price than what you have border. For example, if you bought a 1,000,000,002,007 the price was around $10. Right now, the apple prices around $200. So what has happened if you bought one share by investing $10 you can sell it now at $200 so difference would mean selling and buying. Price is the capital. So do you. Remember when you invest iniquity, you can get returned side from dividends that the share of profits are from Capitol. You can be classified a small cap, mid cap and large cap so small cap a smaller size Companies midcaps are midrange companies on large caps are large companies. Now. Risk also varies investment and solve small cap. It's generally considered to be a high risk, high return game. Makeup investments have generally more stable than small caps on large cap. You may not get much returns, but they're extremely stable. Also, one thing to note before we move ahead. Equity stock investments are may seem extremely liquid because you can sell it out in the market. But liquidity doesn't mean the ease off. Selling liquidity also means that there should not be any loss off capital. So there could be a loss of capital when you invest in equity. So though equally can be considered liquid because it is very easy to sell. But it is not considered liquid because there is a possibility of loss. Now you can invest in that. Also, that can be. That means you give your money to someone. Read it can be Gombe incorporate or your friends. Um, the person was boring money from you. The border work gives you periodic interest. These are also called Les coupons. Transaction is extremely simple. You give your money on against that money. The borrower agrees to pay you interest and returned back your money when the period gets over. When the boring video gets over so that can be government debt or corporate decks of governments. Also issued that on corporations or companies. Also assured that government debt is considered toe have lower risk than corporate because you'd go Munday. They're backed by taxpayers. So Roman Deck, especially countries like Canada or the United States they're considered extremely safe. So if you see their investment ratings, there's a little belief. Plus, if you look at core projects, they it depends on how. See if the company is there are some utility companies like Let's see, um Hydro Hydro Ontario right there extremely stable because they're backed by future generation off because they're working a monopoly and they're backed by future payments. That dog they're going to get from selling hydro. But there can be extremely unstable companies like some penny starts or some cannabis company that doesn't have a business model is trying to figure out the business more than so corporate. That depends. Now there is a subcategory in debt. Caldas Money market leg money market is a short term debt. The advantage of money market is they're extremely liquid. You can get your money right away. Most of the money market funds that you can invest in generally provide you with with a bank card so you can use it in a teller machine and withdraw cash from her. So money markets are considered to be extremely liquid. So whatever liquid portion off your portfolio that you want to locate, you can also invest in money markets to make most out offer, because money markets generally have a better here, as compared to banking products like savings and current. So instead of investing your money in lean savings and cutter, you're gonna look at some part off your liquid investment in money markets. But money market are dead, their short term debt so they can be one month's rate. 15 days, five days whatever. But generally the dead period is less than a yes now. There can also be long term that long term debts are classified further into borns and debentures. They're mostly seemed, so you give money to a company or government. Then you get periodic interest payments for less coupons. On when the period expires, your principal amount is returned to you. The same thing happens when you buy a born or adventure Difference could be that bonds are generally backed by company's assets. Debentures are not back by particular assets, but they're backed by the general claim on assets. So that's a different. So Barnes could be assets a specified. And in the benches assets are not specified. You generally have a overall claim, so borns are considered to be safer than debentures. But again, this is Justin nomenclature. If you look at government warns, there is no specific assets that is a located toe born. The show so generally their government debentures, but commonly they're known as government born. So it is something that you just have to remember. Borns are generally backed by particular asset specific assets. When they assured debentures are not backed by particular assets. They generally have a overall clean. Now, if you don't want to handle your own money, you don't want to make investment decisions. You have different options. Caldas managed so manage protectors. You give your money to someone else that someone else handles that money for you according to your investment objective to eat product, each managed product has an investment objectives, and based on that investment objective, that person who's handling money, we're tryingto manager money. So man, it's products can be classified as mutual friends. So her what is a mutual find? So a group of investors Parliament's group of investors contribute some amount of money to have fun that find this cold. As a mutual fund, it is handled by a mutual fund manager, so investors contribute money to a find. It is also quite as an emcee asset management corporation on that AMC find us the money off investors. Whatever return it makes, it transfers it after being itself to investors. Excellence treated fronts. They're very similar to mutual funds. That difference is there more liquid because they're traded as stocks. Mutual funds are not traded like stocks, so sometimes they can be illiquid because of locking periods and reduced liquidity because the find houses not able to service your request. But I've seen stated friends are much more liquid than mutual funds. They work in exactly the same big a group of investors contribute money to a fine on these finds are handled by a professional. But the differences those finds that then listed on stock markets and can be traded so liquidity is sometimes better. Also, the cost off vaccine student funds are comparatively lower to Mitchell friends. So we're going to discuss these products in further details, but I'm just giving you an overview. Now structured products are combination off equity debt and something for lesser derivative , so we're going to discuss derivative in a brief details. But you have to remember that there combination off equity bet on very Victor's the feature off structure paradoxes. Most of them have got indeed principles. So whatever you invest into a structure product that among the amount that you invest is guaranteed examples would be a market linked G I see of principal protected North's. Or it can be a mortgage backed security. So mostly whatever you invest into that product, those those investments are secure. The returns are not secured the returns and are guaranteed, but the principal amount is guaranteed. Return depends on performance off some underlying it can be a stock market can be stock index. It can be a specific stalk or it can be some dead product. Then you can also go for portfolio management services by opening a managed account so your individual account is handled by a portfolio manager who is assigned to you. Generally, it is a more costly option than buying exchange traded funds and your Children's so generally used by people who are high network. And finally, you have patrons. They're similar to mutual funds, the differences that are extremely low regulations in hedge fund world that have high regulations in mutual fund work. So metal friends are not allowed to do certain things but has friends. There are lesser regulations, or there is more free hand. But hatch friends. Generally there is profit sharing. So whatever profit the hedge fund makes, it takes a cut out of that. Also, their differences. It is more it can be more rescued can be less risky than mutual funds. But the cost is high, so the amount that the charge for handling your money is quite high, as compared toa mutual fund. So that concludes the session in the next session will build on these concepts, and we'll look at what is a portfolio on what are the basic soft portfolio management. So aloha, Have a nice time 3. Portfolio Manangement Basics: hi, everyone. So in this recording, we're going to discuss about portfolio management and the basics part. So we're going to discuss what this risk, what is returned. How What does portfolio investments? Where does portfolio return means? How do you calculate that on How do you combine different assets to create an efficient portfolio? Select Stein. So what is a portfolio? Support for you is created by combining two or more assets. So one answer doesn't mean a poll for liberty. If you combine something else toward, it creates, it becomes a portfolio. For example, if I'm a stock investor, it's only investing in stocks. All right, well, investing in one asset doesn't create the street on matrix that is necessary for for naming it a portfolio. But I activated certain things, So if I do it or if I had gold toe, then it becomes a good for you. Portfolio has two characteristics risk on return, so we're going to discuss about what this portfolio risk means and what this portfolio return mints. So before going to portfolio, let us understand what returns means and what risk means so returns. You can look at it as dollar returns holding period returns averaged returns or compounded pounds. So I'm going to open an Excel sheet and explain it, Dad, rather than explaining explaining it in a ballpoint. So let's see you invested in a stock off. Happens on you bought one stock off Apple. One said at $10. And you bought it in 2000 seven. Okay? No, the current praise off happen. Let's say one star is right now. $200. And this is 2090. So have you generated any return? Yes. You have generated in a return on you invested when it was $10. Now it is $200. So you have generated returns. So what are the returns then? So there are different ways to look at it. One is dollar returns. Dollar returns simply means how much dollar did you make? So you were made. The current price is 200. You invested $10. So you made I just Can you load the door the same. So you're a mere $190. So you bought it A 10. You sold it at 200. The current price is 200 to you can potentially select at 200. So returns. May that 1 90 Okay, then you can look at it in person dates times. So holding period return is the person is return you have got So how do you calculate that ? The formula for that isse current value divided by investors Value minus one Current value divided by investors. Value minus one or future value divided by president value minus one. Whatever nomenclature you follow. So it will be 200 divided by $10. So 200 is the current value investor amount of stained all US minus one. So in person dates, domes you have made 19,000%. Okay, that this holding pediatric? No, there a certain drawbacks are looking at dollar returns and holding period. The drawback for dollar return. It doesn't give you person teach so it doesn't You don't understand how much you have me so it doesn't give you Plus, in stage on it doesn't have any time element. So let's say you took 12 years to generate $190 on if I didn't $890 in one year. Still, if you just look at dollar returns, they will be exactly same so to limitations of dollar return. It doesn't have percent dates, and it doesn't have any time. And for the holding period. Return does help us in teach, but still it doesn't have any time in more. So if I made 19,000% let's say within a year. So a person was making 19,000% 1009 hours or it's 1900. So I keep on saying 19,000 it's 1900. So if a person makes 1900% in 12 years on, I make 1900% in one year, I'll still be same with still less still be regarded as same. So dollar it on once again. Doesn't help was in danger time and more boarding Peter returned. Does a person teach, but it doesn't have any diamond board, so these are limitations. Then we come to average return. So how does how is an average calculated First calculate holding period return on, then divided by a number of years. So on a percentage, so 1 58% is the average yearly return. Do you have a seat? No. What limitations? Average returns. Are it is in percentage. It has time in world because you just divided by the number of years. The limitation that it has is it does not consider component, so it considers simple interest. It doesn't consider compounded interest, but we have seen that compounded interest. It's what we look at because in stocks, it's all about components. Simple interest means that the additional value off stock that is increasing descendant reading it written so that doesn't work in stocks. So stocks are generally considered to be compounded. So to award a limitation, we'll look at CED, a compounded annual growth rate or compounded returns. The formula for diapers Current value divided but initial investment do the pod one by N on the whole thing minus one with this thing minus one. So current value divided by initial value to depart one by end minus one. So if you put this thing, if you put numbers in this example into the formula, it will be 200 divided by 10 20. I'm doing it in steps than 20 is to depart one bite 12. Well is the number of years, and finally it is this minus one. So 28% is the compounded return that you have got if you invested in Apple and this is what is important when you look in stocks to eats time, any stock gives you any returns. So most of the returns that is re present aiding in any media form like on television, on newspapers on Bloomberg generally ch er so keep a note offered. 28% is every year your good growing your money by 28%. If you invested in happy okay, I'm going to open an additional Excel sheet. Well, one more example. So let's say you invested in Tesla. You invested when the slut stock was $100. The current price of tasteless 1 $42 you invested in 2014. Who's Ito? Sorry, 2014 The current year is 2019 so you have to find out dollar returns. Then for Cindy, Returns are holding period repents. Then I read written. It's on ch. So I would request you toe pause the video here. Broward tried out once and then look at the solution, so I'm going to solve it. Dollar returns it simply the current value, minus the initial investment 42 holding period returns The current value divided by initial investments minus one to 42%. I have read irritants. We first need n so Ennis 2012 minus 2014. So five years you have investor. So it is simply I've resident honest, simply holding Peter returned, divided by a number of years 35. So it is eat warned 4% on a compounded annual growth rate is 1 42 divided by 100 toe current value divided by invested A moment to the park one by Fife on finally minus one. Okay, so please make a north compounded annual growth rate. Compounded returns are generally always lower than have residents so simple average will be higher than compounded growth. Three. So 7.2 is less than I've resident Enough 8.4 So once again to just recap it returns. We can look at it in a different mints different ways. You can look at returns in dollar terms. So how much dollars have you made holding period terms for ST Days Return? You have got over the period, have residents. You can look at it. How much? Average yearly return in simple compound returns to do get. Or you can look at CTR compounded annual growth rate. It means for that period of time. Every year your money way was growing by the CIA. The most followed oneness ch er This is something you have toe take a normal. So let's continue now. Now, if you look at it, look at risk. Risk is mathematically. Risk is defined as deviation from mean or expected returns. So if my expectation from Apple stock was 28% okay, but on that expectation is based on the historic performance. But Apple gave me 30%. So do you have any risk in Apple? So answer is yes, even though the returns are above expectations that different from the expected return. So that's arrest mathematically. Risk is deviation on the lower side or on the higher side, from the mean or expected no, but this can be seen as range variants of standard devious. So I'll again open an Excel sheet, and we'll discuss it. This woman. So what is the range green GIs? Difference between higher value and lower value difference between higher value on lower value is right, so I'll give you an example on then we can look at What does it mean? So that is a stock ABC that gives on the an average 12% return. There is a stock ex wiser that also gets 12% time, but the range off ABC is 20% and reach off X Y Z this 5% now. What does this range means? Range means the stop baby. It's 20% but so it can go to any percent from the mean lower. Or it can go to any person from the mean higher. But it so range means difference between the lower value and higher value of stocks. Of the range of ABC is 20% and range of exercise. It is only 5% they so Wittstock is more stable. If I ask you this Wittstock is more stable, so your answer should be X wiser because the range is lower, So range definition of range, lower value, higher value difference. How do you look at ranging terms of rest lower the value off, lower the value framed. Less risky is the stop. Next you can look at standard deviation on. You can look at variant first. We're going through this disobedience and then we'll look at standard Davis. So let's see you have five year returns from a stop so stock in year one give 5% year to give 6%. Yet he was a bad year for stock. Negative 1% year 583 bounced back. And yet you're forward bonds factor 12% and hear if I will give 15%. So these are the year later turns off stock E b. C. So first I'll show you how to calculate variants. Second will discuss What does that mean? Okay, so how to calculate? Very in step one. Calculate the mean so calculated the average So meanness 7%. The water's variance various in the variances. Deviation from me. Deviation means difference from the mean. Okay, so what we're going to do is we're going to calculate difference. How do you calculate difference? It will be five minus the mean value next six minus the mean value and so on and so forth. So I'm just making this constant on driving it. Okay, so step one waas calculating the average or mean step two waas. Calculating the difference between the observation and the mean Step three. We square that difference because negative deviation is also deviation that we have to account for. So that's the reason we square it. Okay? And finally we some the squares on this is you're variance also called as Ryan's or variance. Whatever the nomenclature, you follow pronunciation you follow. So ved INTs once again the steps to door step one number of years and their returns will be given. Calculate the mean steptoe. Calculate the difference of those observations from mean Step three. Square them up on finally step for add them up. No variance is not used much in the industry. The reason why does not used what are we doing? We're adding square terms So the no medical So the suffix to this variance or their denomination off variance is percent eight square What are you doing? This was difference in percentages. You squared it up and you added it on so no manipulated sort is 1.57% 8 square So there is You cannot understand anything by percent eight square What this person did square means nothing. So that is the reason variants or variants is not used much in the industry. Okay, so what does the industry yours. So industry uses a standard deviation. So the process of calculating standard deviation is exactly same. Step one. Calculate the mean steptoe. Calculate the difference. Step three, Square it up. Step for our the square values on an additional step Life where you take square root. So this is standard deviation. The denomination off standard deviation is presented Its not squared because we took a square root. So then standard aviation has meaning So before we before I give you an example and we see what it means Just to recap, we saw three virgins of rest for three ways to look at rest range difference between the highest value in the lowest value, not years. Much in the industry. Lower the range. Nowhere is there is Brian's. What alliances? Deviations from the mean we calculated deviations in square terms Person did square is a denomination that doesn't have much meaning. That's what variance is not used. But once again, higher the variants higher is the risk lower the variance Know what is the risk? Standard deviation is used by industry. Step one calculate the mean step to calculate the difference from the mean Step three. Calculate, Step three. Square it up. Step four Big O Take the addition off that and Step five. Do a square root. No, I give you an example and we'll see. What does this mean? So that is a stock. ABC, which has mean off or average return off 8% on standard deviation off 4%. So what does this mean? So generally, stocks follow normal cause. So instead of sticks, you would have seen normal cover. Just open it on good a normal distribution. It's all took or less normal distribution. So this is normal distribution. Normal distribution means maximum percent off. Observations will be close to me. So if you're projecting, return off stocky BC Most of the returns that were happen in future, they would be closer to me. So most of the returns I'm not saying all return. There is a possibility that they may like away from the mean to, but most of the returns are clustered around me. So how do you look at it? So let's say this stop follows Normal cough on you want to project returns next year? Project that India. Afrikaans. So what does normal curve mean normal car means 68% of observations. 68% of observation will be within one standard deviation means this stop 68% of the time. I would give returns that in the range off 8% minus 4% on 8% less 4%. Okay, so you deduct one standard deviation from average return toe, get the lowest value on you. Add one standard deviation to average written to get highest value. So 68% of the times return off. This stock were being the range of 4% 12%. If it follows normal, then 95% of the time it will be within two standard deviations. So true standard deviation means mean minus two times off. Four that Tzeitel Andi mean plus two times off. Four. So 95% of the time stock ABC will have returns in the range of 0 to 16%. And finally, it means 99% of the time you will have three standard deviations like this. It was sent minus three times off. Four Andi 8% minus. Plus it's 8% less three time stuff. Four. So if you're projecting returns on stock, ABC, You got a client? So plan gives you last 15 years, returns off stock ABC and he says, Can I lose money? So you can do this Practice that you can forecast returns and you can see that What is the possibility of losing money? So, yes, on this stock, you can lose money, but 95% of the time you want. So returns with brains in the range of 0 to 16% if it follows normal. So first you have to take whether it follows normal. Okay, so we have seen returns and rest. So goto slight. Just recap. We saw dollar returns pulling period returns, average returns and compound Red Britain's. We also saw arrange variants on Standard Davis. So give you a problem on Excel tried to solve it, and you can send your solutions to me either on email or you can send your solutions on the discussion board. So you invested in a stock ABC in 2000 15 Got India is 2019. You bought the store at $80. The current price of the stock is 1 $35. You have to calculate dollar returns average returns. Sorry, darling. Britain's holding. Pdf Britons have residents and finally see India. This is one example. Second, you're projecting risk all stock ABC So last five year returns are given the last five years. Returns for stocks PVCs 7%. 3% 2% 15% on negative 4%. So you have to find out. Based on this, you have to find out standard deviation on particular. Dunn's based on one standard deviation who standard deviation on three standard deviation. So 65% probability, 95% probability on 99%. Okay, so pause this video not everything down Try to solve where post years solutions, either through me or through discretion Boat. So let's continue. So we saw what is risk. We saw what is returns. So let's go to portfolio returns. So what our portfolio returns for fully returns is the returns of the portfolio went to war more assets and come back. So what does it depend on? It depends on wheat of the assets, and it depends on individual returns. So let's say I created a portfolio of equity. Um, there equals is giving me 12% return that is giving me 8%. If I look it more towards equity, will my poor Fullerton behind? Yes. If I look a more towards their, my returns will be less so. Depends on weight as well. S individual returns generally calculated as weighted average formula for Tartous where he indoor Sanofi Wait off be in return off b read of seen daughter. Turn off me. See going on So let's take an example on Excel and let's understand it better. So let's say you created on portfolio based on two assets equally in that equally you have 60% and that you contributed 40% off your money equally gave you 11% return. So your forecasters 11% on that year Forecasters Piper Center So my question to you for this portfolio report so we're fully return is we did have resident on certain simply wait off Asset E that is equity. My reply by weight off my blood will return opacity 11% Bless we'd of acid b my reply by my deployed but they don't know facet 8.6 if you have three asset portfolio like a BNC on the weeds are 20% 60% and 20% we're done. Sod eat, do on 11. How would you do it? How do you calculate portfolio returns? In this case, it will be simply wait off a city more deployed by Radovan said be bless. So the weight of a city multiplied better thana Fascetti plus weight of us It be multiplied by their down off acid B plus Read off sexy, more deployed by return on SNC Okay, that's why it's not working because this 11 should be in question. Each Fullerton, in this case is 5%. So this is how you calculate portfolio returns. Next is what fully risk support full Uris depends on weight off those assets the risk off individual assets that distended aviation of individual assets On Also on one thing that I missed out writing here this correlation tortoise It all depends on correlation. The vessel starting deviation is nothing but risk depends on three things Read off assets, standard deviation off assets or risk of individual assets and correlation between. Now what is correlation? Correlation is movement off assets with respect to each of that. So if you have a perfect correlation, perfect correlation is plus one. If you have a perfect correlation off plus one. It means if I said it goes up 10% I said, Be also goes up. 10% have asset A goes down 10% as it be also goes down 10% now. Statistically, that IHS no reduction off risk if you combine to assets having perfect correlation. So there is no rescue reduction because off hiding to asserts, having perfect correlations now in perfect correlations can be, let's say, 0.20 point. Oh, correlation between A and B. That's an in perfect correlation. What does this mean? If it goes up 10%? B also goes up because the correlation is positive, but it goes up only 2%. If it goes down 10% we goes down 2%. I guess we'll be reacts less than there is negative correlation, also mathematically. But in markets, it is very difficult to find assets that have negative correlations. A relation could be gold iniquity, and sometimes they do show negative correlations. So negative means if it goes up, he goes down and it goes down be goes up. Maximum risk reduction happens on a portfolio when two assets having negative correlations are combined. Okay, so let's see how to calculate the risk off for you. So before we go and do excel, I just tell you the formula to calculate Put for there is the formulas square root off weight of asset A square standing division s square weight of acid, B squared, standard division B squared plus two in tow. Weight of us. It a bit of us if we start. Motivation is trying to Division B Correlation Navy. How do you remember this formula? Things. That risk depends on weight, standard deviations and correlations. Only three variables. That would be There are bits standard deviations on Gordon. Listen. Okay, Lasser, it is Read squib standing division square, read square. Stranger divisions were doing wits, standard deviations and poor relations. And finally, we take a square three asset portfolio. It's a little bit longer. So weight of a square standard deviation is square. Will be square stranded aviation. Be square. Read off C square. Stranded efficiencies for doing toe. Wait A with peacetime division. Istana Division B. Correlation maybe plus two in tow. Weight off similar things with mean BNC on finally ends. So this formulas you have to remember on Let's go and solve some examples and see how it works. So let's start within two asset portfolio. So asserts that A and B now they're idiots are given on this time. Your division is given, so it is 20% on 80% in the portfolio. Standard deviation is, let's say, 4% on this one Has it wasn't standard deviation on a correlation is between both of them. A 0.3. Okay, now how do you calculate portfolio arrest for fully standard deviation is given us, So I'm doing it in steps Forster's read Diversity The World Square My deployed by Steiner Division off the World Scrap. Okay, whatever. The value is very low that so it's happening. Second wait off are set be the world square My deployed by standard deviation off be the world's great. The third and final thing it's do in tow. We'd of us today into weight of us. It be into standard deviation. Standard aviation, be in the core. Listen in. So what do you do? I'm solving the three terms separately. First is weight of a square. Standard deviation is where second is weight of these first time motivation be square third , a store in tow. Rate of a city weight of us would be standard deviation in Eastern motivation. Be on Correlation. Thank you. Add them up on Finally to find stand standard deviation. We take a square off back down, so standard deviation in this case is 6.68%. So how do you solve big again? Portfolio means portfolio Standard Aviation for two Asset portfolio read. Duffy Square Started Division E Square. We dont be square standard Division B squared into two into weight off a weight of being standard aviation in standard aviation being on correlation and be on Finally take a square . The things get interesting. They're investing when you have a the asset portfolio, so e b on See so again beats are given standard deviations have given on correlations. I give. So it's a lipstick. 20 Training on 60. Okay, Skynyrd's Aviation Saw. Let's see. Four eat on Do Go relations between E. N, B, B and C and BNC. 0.2 0.3 and 0.4. These are things that have given to you so first thing I'm going to write down the formula , and then we'll solar. So this square root off. So I'm ignoring the square weight of acid a square, my replied by standard deviation is for less, Vedova said. Be square, my replied by standard Aviation. Be square plus read of us. It's C Square, my deployed by standard aviation See split plus two into re diversity. Read of us it be standard deviation e Steiner deviation Be in tow correlation and be less do in tow We diversity weight of assets See in the standard deviation e standard deviations See in tow Correlation DNC and the last time that remains ISS plus two in tow. Read of asset Be into weight of us etc. Into a standard deviation. Be standard deviation see and the correlations Answer BNC. This is the formula and we have to take a square root offer. So let's solve it one by one. So this is square off via toffee into square off Standard aviation off it. Next amiss. Square off, Wait up. Be in tow Square offs. Steiner Division of P. So this is Northern person days. That's why it's showing this issues the torta. Miss, Read off. See? I swear. Standard deviation. See square. Now the correlation terms. So it is too in the re diversity, my replied by weight of us, it be well, the blood by standard deviation multiplied by standard aviation be multiplied by correlation and be the next um very tough and see we're going to consider. So he study. I forgot to do in tow. Duffy multiplied by weight off. See, My replied by Stein David a chinny replied by standard deviation, See my deployed by cool relations and see And finally it ISS to indo v Duffy. It will be my replied by Stanley division of be my deployed by we don't see more deployed by standard deviation off See on correlation be insulin. Yeah. Next tous add them up. Andi, take a square. This is how you calculates fullest tired aviation for three assets generally know Dustin Any exams that you take care of that you took had you dig the newly waters asked Is that to asset portfolio? So remember this formula that the square root off we had coffee will square my black by standard aviation A whole square less wayto be old square multiplied by stand The division be holed square plus two into Duffy. They don't be starting debut Shinnie started Aviation be cool relations. And this is the formula that you have to remember is if your luck is bad and you get this, then try toe. Remember how we did that? Okay, in this one. So once again, portfolio risk depends on weight. Off asset, discover individual assets and cool relations. No, I wouldn't trade you to do this example. So which portfolio camp in combination has the lowest stress. So they have given Britain off a city return of us. It be started. Aviation standard Division B relation there given and they have given different rates. So what you have to do us. I have prepared an excel sheet. So you have to This is given return a favorite or not be starting division. Eastern innovation being correlation and be on different weight combinations are given. You have tow calculate portfolio returns and portfolio risk. What? I love them. Okay, on what you will notice is something like this so logically, what would you do? So return on standard division of bees lower than its or this three. So if you have a portfolio that is 100% B, you may think that your risk is low because the portfolio has maximum weight is towards the lower risk asset. But that's not the case. Once you saw this example, you will find something like this. So as the portfolio allocation changes so all your all your money in portfolio B doesn't leave toe the western. So this is risk and return. So the West risk is not this point where 100% days in 100% isn't be As you start including into your portfolio, because off non perfect correlations, the risk keeps on go falling. So this is called as the cop capital market line. So what happens? So let's do this. I'll show you what I mean. So let's calculate for for your s simply it is square root off We it square multiplied by standard deviation square And I'm making things constant so that I can drag it Bless Wait be sweat my deployed by standard deviation Be square plus do in tow Wait off e multiplied by beta b my deployed by standard deviation e my deployed by standard deviation Be on finally my application off Correlation in toe Let me keep it in person days so that it throws violin percentages. So if you put all your money in a said be with no asset E, it's the returns are 4%. Risk is 2% if you drag it. This also needs to be constant. That's why I could not drive it too busy. But this keeps on changing right As you start including portfolio being toe the mix forcefully into the mix re rests keeps on increasing where as well as the return increases . This is when positive correlation is there. So let's say you haven't answered that has very close to zero correlation. So same thing returns are increasing. The risk is also increasing. No slight negative correlation. So this is what happens if you have negatively correlated assets you get a CMA so risk was 2% here. As you start adding a, the risk actually falls for a while. So you added e risk went down and then again, the restarted to increase. So you get this s curve or elk. Er right. This is capital market line. So when you include a portfolio that has non perfect correlations that disclosed tonegative , then you get a Nellcor. What does this mean? that vote for you If you just including risk less portfolio risk free asset portfolio that is here your risk is not actually the lowest. But if you start including little risky portfolios that this actually falls because off negative correlations. So the lowest risk portfolio is this. It also means all the portfolios that are still here the blue line. You will ignore those portfolios that are non efficient portfolios. All the portfolios that are above this red line you will included and it is called US efficient, friendly airport for years. So this is something that this interesting. Okay, so I would encourage you to read on this topic. So off risk return and see Eman on will catch up in next. According in the next, according will discuss the portfolio management process. 4. Portfolio Management Process: Hi, everyone. In this recording, we're going to discuss the portfolio management process in your Saliba cities. Also called less investment planning process. It's one in the same thing. So how do you start the entire investment management process or investment planning process ? Forced? You meet a video client and have an initial interview. So what is an initial interview? You make your car client comfortable. You tell what services to your provide on gettinto. A primary blind agreement, kind of assortments kind of thing. So client agreement is where you lay out what duties you will have to as an adviser on what duties the plant will have as a client. Right? So you lay out your duties as an adviser and duties off the client. So that's the initial interview. You meet a bitter client, then you have a discussion with him or her on. Based on that, you clear your objectives. Are your duties on clients duties? Then you generally do aqui y c and risk assessment. So it helps you to understand the client individually, first, get information about US information about their eat, about the marital status, about other personal details. Then we get details about income, expenses and savings. Then we look at what stability off employment does the client enjoy. Then we look at various dependence on. Then we right one lace through a risk. Questioner the lines. Attitudes towards risk. No white, please. This step is important because the investment planning is heavily dependent on each they. So if a person is extremely young, the risk appetite that he or she has is certainly higher. If a person is closer to retirement, the risk appetite a tous lower based on income expense and savings. If if the person has enough savings and manages his expenses well, so he has a little bit off ahead room where then investment planning is different. Worse is someone who is totally into dead have barely. His income provides for his necessities. Then you have extreme limitations. Stability of employment also plays a role. If the employment is extremely stable than you can plan certain things. But if the person works on our jobs and employment doesn't have pensions or any other support like extended health benefits, you have to plan for all of that dependents. Also, if a person has a lot of dependent on him Let's say he belongs to a signed with generation in which he has kids to take care off as well as the person also has parents to take care off. Then the number of dependents reduces the risk. Appetite on the planning would be different. Wasa someone who's single doesn't have any dependent on him. The planning would be different finally attitude towards rhesus person's own perspective towards rest. Certain people are risk averse. Certain certain individuals are s taking so dependent on that. Whether a person is risk couples are mistaking individual you're planning will be different now before going to the next stage. We Generally this is a life cycle model, so lifecycle mortal is something that is a good guideline. It is not. It does not apply to each and every individual, but it's a good guidelines or it's like a book hard, a kind of a chart that you can refer toa before actually making the investment plan for a person. So what does it see this life cycle Mortal say's that as the client, as the EADS changes right, the gold, the responsibilities on financial planning changes. So if a person is currently in pre career states with 0 to 22 majorly, the goals off the client would be establishing good money on getting in tow. Good money management. Harbert. Creating a good credit rating Milestones were big graduations of financial planning or investment. Planning for this stage would be different, seem wave early. Earning years are there, so pay yourself first principles so safe first and then spend. It's something that the client needs to focus on managing that does not Do not get your debt out of find that could be focused. Balance your savings goal. Have adequate amount of property, health and life insurance. Consider mutual friend or arrests piece to start with so that you can space your investments out out and plan for a diamond and get a head start in life. Mike Stones will be first job. New job reasons. Meddling period is went 31 to 44 So consider aria speeds because by the time you're 31 to 44 years, you may have kids now, so you need to plan for their education toe. Consider aria speeds have an adequate amount of property, health and life insurance because this is the phase when maximum amount of dependents are there for you. Have a villain power for Tony. Investigate and understand your pension plan. It work goals could be married, then forced out. Then start with the family. Prime earning years are 45 to 59. This is the stage when maximum wealth generation happens because kids are old enough that they move out of your house so dependents are less. Your income is extremely high, expenses are less so wealth creation happens maximum and prime earning it. So how much do you need to see if that's your focus? You need to pay off all your debts. Children's education finds If anything is remaining, what to do about marriage of your kids, Job security, elderly care that these are the questions that you need to look at on empty nest parent care. 10 years to retirement. Main thing is that your timing is getting close by so you need toe. Start moving your investment into Laura's vehicles because you cannot take this kindred diamond in the diamond. What you can expect from government programs than plan yourself in our ESPYs on review book . Workplace Pension benefits account for all your ass ERT retirement income distribution part in so retirement ages, where you have a corpus and you need to manage it properly. So it last your lifetime and post retirement. You look for wealth management and estate planning, passing your wealth to the next generation. So this is a broad model. You can sort so you can read this article there does men turned out here, but this is just a guideline. Every person will have different goals, different objectives. But you can refer this before starting with this financial planning. The reason is, sometimes people just don't know what they want. So maybe if you know the age, you can suggest that these could be the probable golds and start the conversation from that . So before we start managing clients money, we have to create an investment policy statement. So investment policy statements has to part objectives and constraints. Objectives are what kind off rest the client can take, how much less you can take on the portfolio, what investments are allowed, what investments are not allowed based on the risk, then what other returned requirements? So does the client want to beat inflation? Does the client want to beat certain index What is your objective off creating this investment plan. So you need to four straight down before store down or forced the life risk and return objectives. And then goto constrain constraint. There's lt d you so legal restrictions that the client may have. Sometimes the blind is working in some company, and he cannot buy additional shares of that company, so that becomes a legal restriction. Or maybe the client's wife is working as a board of director in certain companies, so you cannot invest there. So you need to consider those legal restrictions liquidity. Sometimes that line has particular liquidity needs for a vacation, Let's say, for a vacation or for Children's education, so you need to account for that. Then you need a can. You need to account for time. So how much time do you have for you? An investment plan. If the time is short, you need toe. Invest in certain liquid instruments of the time is long. You can block your money of the then tax constraints. So after tax returns is the focus. So sometimes, if your client is on in a higher tax bracket, maybe a dividend would be better than investing in a born or debt because dividends in Canada enjoy dividend tax credits, then what are the unique circumstances that that line needs to look at? Two unique circumstances may be religious behave believes like alcohol and tobacco. Stocks are not loud in certain religions or banking stocks and order Lord in certain religion or maybe personal beliefs like not investing in oil and gas because believing in the green deal so something like that. So you knew George down everything. Rescue, return on constraints, constraints are LTTE you legal liquidity time tax and unique. So once again we interviewed the client. We did the cave, I see endless assessment. Then we looked at the broad model before starting the discussion with the client to create an I. P s. Now the I PS has been creator So you start with investing So you get you take the money from the client or if it is a self director broker, you advising where to invest. But that doesn't end the process. You need to re balance the portfolio and reevaluate support for you. When do you reevaluate? The evolution happens when external factors are changing external factors A market related factors. Maybe the stock market tank on may be the stock market gift. Fantastic returns, for example. Right now, in minutes in today's news, men's NASDAQ is up and my seize up. The reason is there is a probability off interest rate cut in the U. S. Environment in the U. S. So that's why markets are up. So certain things like this happens and you re evaluate your portfolio or external factors can be recession happening. Interested in this inflation in just wars, famines, all these things are external factors. So based on those external factors of the performance a portfolio exchanging you need to change your locations and portfolios, then internal factors can also teens. So internal factors our client specific factors may be the client was a single person than he got married or she got married. So that changes the investment plan. Maybe your client was a single family, but then they were a young family, not single family. Your client was a young family, Andi. They gotta cared. So the plan changes again. So, based on external or Dexter, internal factors changing, you need to re balance a portfolio. And finally, what type of portfolio management or investment management's are there. So there can be two broad types, passive investments where you don't take investment decisions. You follow something, so when you don't take investment decisions for, do you follow. So generally you follow and stock index so stock indexes and aggregate off certain stocks. So maybe you're falling NASDAQ or in vice, your safety fire under like this your objective. So passive investment is for the classified as indexing, where you follow the index to governments in black, in black and white. So whatever stocks out there, you invest in that to the court, right? No, no deviations from the index weightings. Your follow the index as artists, and then there is close it. Investing are so you get close to any next. You may not follow the index 100% but you get close to Dynex. Then there is active portfolio management. Active portfolio management has active indexing, so you follow an index, but you teen the predates based on your prospector. So let's say in index banking were days 20% but you think banks are going to do fantastic, so you may change that. Read in your portfolio. 25. Even though it was trained in their next. So this is active indexing. Then there is static and dynamic asset. A location static means you cite a certain person date 60 40 and you do not seems that selected 60% in equity, 40% is dead. And you do not strange that a location so that the static dynamic means based on the life stays off your client. You keep on to ending the location. So when the client is young, you're looking more towards equity. As the plan gets older, you are looking more words. That and finally, this tactical practical means you have a set of location, but you have some room to maneuver. So let's say a location is 60 40 60% iniquity, 40% in debt. But you think that there is a recession going coming in equity markets. There is a downfall coming in equity markets. So based on your assumptions, you can change it to 80 20 so move 40% off funds from iniquity toe dead. So this is tactical based on portfolio managers, Assumption. So that sit in this model. So once again, we started with a small story off Caitlin on. We then discuss various investment of investment avenues. Then we discuss the portfolio basics on we ended up with portfolio management or investment management process. In the next class will start with how equal detaining works. Thank you. 5. Equity Introduction: hi, everybody. Now that you're a very off fully management, let's dig deep into equity. In the series of recording that follows, we will be discussing what is equity. Why's it crucial to make it part of your investment plan? What are the markets? Very dis trader namely, will be discussing primary and secondary markets. What are the different orders you can put while training? What are the components suffered treating? Plan. So how do you create a treating plan, then? How do you analyze equity? How do you select with stocks you buy on which stocks to sell? Namely, will be discussing about fundamental and technical analyst. And finally, we will be looking at what other different regulations you need to be a Vero in financial markets. 6. Equity Basics: hi, everyone. So in this recording we're going to discuss about it could be six. So we're going to discuss what is equity? Why do companies raise equity? Why should investors invest iniquity? And what are the different types off shares that are traded? So let's start. So the first question is, what is equally so equally is nothing but ownership. So when you buy any stock that is available in the market, I did in primary market or in secondary market. What do you do is you give money, and against that money you receive a share. Now this stock or this share three presents ownership. So what are you getting? What ownership are you getting? So ownership is share in the profit that the company makes after being everyone else on sharing the asserts that the company's creating after being all its liability. So as a secret E owner, you get on a ship in two things. Oneness share off profits after paying everyone else on share off asserts after being all the liabilities. So you have to remember that equally means cooler ship in profits. After paying all the expenses on debt on full ownership in assets after being everyone else months after being all the liabilities, the net assets and profits belong to shareholders. Now there are some concepts you have to remember. So there s total shares outstanding versus floor. So what this total shares outstanding. So this is an example of Canada Goose holding. So it's a company that manufactures winter clothing in Canada. So if you have bean there in Canada for a while in vendor winters are harsh. I believe I don't go for North Face or Canada Goose. These are the two prominent winter gear went again place in Canada. So if you see here, there are two things Florida's mention and share outstanding is mentioned. So what does the share outstanding? So 59 million shares are outstanding. That is, the company has a sure 59 million shares. Now all these shares may not be. Have label for a normal investor to buy some off. That would be blocked that this Cordless some of this could be so stag nature stagnant churches. They could be holed by minority interest. They could be holed by insiders. So all shares that the company issues may not be available for training. So total shares outstanding once again means the amount of share that the company has a shoot to investors float means the amount of shares that have label for trading. Okay, so whenever you see floor, FLOTUS float means the amount of shares that are label for training. If you buy one share out off this floor, you get proportional holding. Our proportional owner set off 1% of profit, or 1% off assets. So few off this entire 58 million shares 59 million shares that are outstanding. If you buy one pleasant off that shares, you get 1% ownership in profits and 1% ownership in net assets. So there is also concept off market cap toe. Here we can see Market Cap of Canada Goose. So it is. It's in 1,000,000 so it's 5286 million's. It has grown from 4811 million's toe, 5 to 86 million. So what does market cap Market cap is nothing but a number of shares that are treated or number of shares that are outstanding. But generally Florida's consider so floating market cap it's consider it's a number of shares that are treated might replied by price per share martyred Kappas. Number of shares started trading multiplied by price per cent. So Canada Goose a striated $40 it has 58 million shares. Trader. So 58 million into 40 would be the market cap off Canada. No. When does the market cap in Greece? Market cabin grease is when more number of shares a reshoot or if the share price goes up. It's a market cap off. A company means size of the company and market cap increases. When the price the share praise, increases or more number of shares is sure on. The price of share doesn't okay to market cap has significantly increased. Also, whenever you look at market cap and you come across this concept, market cap is nothing about the size of the company. Higher the market cap larger is the size of the company? No, an important question. Why do companies sell equity? Why do companies sell ownership? So if you see company have different options to raise money, they can use their savings. So Canada Goose will have some savings that it has generated over the years. These savings air Korda's retained earnings, it can use retained earnings toe. It can use retained earnings, too. Expand your take on new contractors are doing something like that so they can use their savings. Are retained earnings. They can ensure that they can raise loans. They can issue borns or debentures and get money. Or they can sell almost three ways majorly for company stories. Money. They can use their own retained earnings. They can use issued debt or they can sell that herself. Know what happens when you use retained earnings, Supposed to fall your casts. Whatever you have is limited. Maybe you have an expansion project that was $1 billion. You may not have that $1 billion in retained earnings, so retained earnings could be restrictive. And it's also quite rescue to use retained earnings because the entire risk of the project you would be taking on your own okay, so retained earnings can be limited. Also, the entire risk is retained by the company if it uses retained earnings. If they used dead, then you're not used. You're not limited by the amount of cash. You have your limited by how much the bank or the born holders approve you for loans, but so restrictions on the amount is not there anymore. But the restriction is the risk is still with you because the born holders or the debt or the bank would not share in your breast. There is a SEC payment schedule if you stopping them, then they will take over your assets. You could be sued, and your assets are liable for foreclosure if you don't pay. Born holders are banks, so dead is not restrictive as retained earnings. You have access to a large amount of money in the debt market. The thing that comes with lettuce, the risk is not shared. There is still lies with you. Banks do share a bit off your risk, but major risk is still with you know what happens when you sell equally, so you give of a ownership so you give away some part off your profits and some part off your assets. But against that, you also give away some part of the risk. So let's say if you sell your 10% off your equity and raise $1 billion for expansion. If the expansion works out, then you will share that expansion shared the money that comes from that expansion with the new shareholders. But if the expansion does not work out, the new shareholders also share the risk of failure, so equally is the only medium in which company can share its risk off doing business. And that's an important thing that this white company raise equity. The second reason could be unlike debt. There is no set payment, so in that you have to pay minutes a few issue of born or debenture at periodic intervals. You have to service that debt, so you have to pay those coupons so the coupon payments are fixed in a pretty there is no set coupon payments. If you make profit, you may share it in form of a dividend. But dividends are not compulsory, so there is no set schedule when you sell ownership. That's also gives you more flexibility. If you see types of equity, there are two types of equity preferred stocks and common stocks. So what is a preferred stock? So preferred stock? ISS, some somewhat similar to preferred stock, is somewhat similar to a born. How is it similar, So preferred stops when you buy a report stock as an investor. You give money so preferred stock has a shoe print. So let's say the surprise is $25 so you give away $25 against that $25 you are going to get . Generally, a fixed person pays dividends. So 5% let's say, is the dividend rate. So reserve is that $25 that you give your going to get 5% off dividend eats? Let's eight year back from the company. Okay, so this somewhat similar toe bones, but the difference would be no born, and the preferred stock is born. Makes payment from before born makes payment before so just a second. So sales are there. So born Hold us, Get here not from the prophet but from the seals. Refer to stockholders. Get here from the profits. So once again they didn't. Payments are not compulsory, but preferred stocks generally have a fixed payment schedule. If you don't pay preferred stockholders, there could be penalties and there could be accumulated payments on time, so it is less stringent than a born. Also, their differences. Bondholders are paid from the seals in eight, which has a stricter payment schedule before stockholders are paid from the prophet, so there are no profits. That is no payment. So it is less stringent on you have on a ship in asset, but only limited to the amount that you paid. So you do not shared in any capital appreciation that happened. So if the company becomes big reports as a preferred stockholder, you'll still be paid the same dividend. Yield. Your dividend or your payments may not increase unless and until there is a special provisions. Dodo. So your dividend payments or the amount that you paid. It's not going toe. Ingres Common stocks. It's extremely simple. You get ownership. So there is the Unigate dividends out of profits. But the dividends are not fixed on. You get ownership in the company, so ownership in assets on ownership in profits. So this is an example of a preferred stock. So the name of the company is Toronto, the Minion Bank. So it's a TV, so it is better known by TD. So issue was in Canadian dollars. Dividend rate is 5.1 person frequencies quarterly. So if I 0.1 is annual rate, but they despaired quarterly. It's up my charities, perpetual so there is no maturity issue. Praise was $25. So what happens if you want to buy this preferred stock? You pay $25 to TV. Against that $25 they will issue one purports stop to you on. They will try to pay 5.1% dividend each year, which is peer quarterly, and it will. You will be paid in financially. So maturities lord there. So it's a perpetual offer, so dividends are more or less fixed. Now if you sell this preferred stock back toe the company, you're not going to share in the appreciation off the company. So the company TD becomes big Surtees. Let's say market cap is Let's a $10 billion on TV or European expanse internal, United States and Europe and had become so $200 billion back. Still, you will be paid only 5.1% dividend. You do not share in the appreciation off the company, so it is very similar to born. So that is what Since borns are also affected by interest rate changes reports, trucks are also impacted by interest. 13. Just that happens in the market. Now, this is an example of common stock, the company's Costco. So it has a retailer on hold, sailor off goods and different things. So the prizes Let's a to $57. Right now it has given a their 52 week. I've people be low. We have seen what does market cap market cap is 113 1,000,000. Something like that we have seen Float Float is the total amount of shares that I have level for treating. So for 39.8 million, that is outstanding on for 33 million are the shares that are traded in the market, then operational will discuss. Dividend is generally one person, but it's not compulsory toe pay diffidence. So this is an example of the commenters. If you buy one share off Costco, you share in profits that Costco makes as well as answered that Costco has the net assets. Why should investors, including equity in their portfolio? Because there is a tremendous potential to generate wealth so equally were the last 2025 years old? If you even take a 50 year period, most of the time if you take CED are compounded annual growth. Three. Stock markets are stocks have beaten everything else, so there could be periods when real estate performs better than stopped. But if you take a long enough period, equally has a better risk adjusted return than all of that. I said classes. It sort us tremendous potential to generate wealth. It's of else generating asset. Not every company is going to give you returns, but good Cos if you buy a decent prices on bond market, a fever you, then you can make Lord off. Well, better returns than most of the assets on better respirator tradeoff so equal is considered to be a high risk investment returns also compensate for that. Now, how do you make money from common stocks? So you make money from dividends and capital gains. Dividends are share a profit that the company peace to you on capital gains is you buy a stock at express and you sell it out of my price difference. We're doing X and y is your game. For example, if you bought cost $400 now that prices to $50 the difference between $100 that you bought it at on 2 50 The current price of UK, which you can sell. The difference is your capital city in the next, according we'll see, where can you buy stocks? That issue can buy stocks in primary markets, or you can buy it on secondary markets will justice more about that. 7. Equity primary market operations: Hi, everyone. Now you have understood about how basics of equal work we're going to discuss about primary market operations in this recording. So let's start. So what is Frame Marie? Market? Primary market is very. Interact directly with the issuing company. So important thing. You are an investor you are buying stop directly from the company or the companies issuing you some additional stocks, so they're too partisan. World investors on the company. The issuing. So whenever such situations are good, those transactions are featured in primary schools. Transactions are classified in primary markets. Important point to note. In primary market your deal directly with the issuing company, not with another investor. So what other different participants and primary market participants and primary market are companies that are issuing stock? The original originating companies? Investors were buying it or receiving it. Investment Bank, a merchant bank that helped facilitate the transaction, and dealers were ultimately responsible for settlement and training. So what happens in a primary market so that are different instruments that issued. So they're IPO's. I appear transactions. Initial public offerings, F piers alone, public offerings, right issues, bullish issues on some other things, like warrants and options that issued in primary Market. So let's go one by one. Where does an I P O I Peel? The name suggests initial public offering. The name is initial public offering. So what does it mean? It means the company WAAS never traded stocks publicly. A company who has never treated its stock publicly issues stocks for the first time in a public domain to investors. So an I P. O. Is a company that is new in public listing. It may have private stop. It may be an old company toe. It may not be a new company, but it has never resorted stocks publicly. That company is coming up with them. Public offering that is core lesson IPO's So whom are appears bought from my peers are bought from the issuing company. Who buys that those I appears investor by those by those I appears on. What is the characteristic off a come off the company that is doing an idea? The company has never been traded publicly. It is issuing its stock publicly for the first time. That's important in and what is an F B or than for low in public offering on a company that is currently trading in public so its stocks are already there in the public domain is issuing some additional stock. For example, Apple right now is a publicly traded company. You can buy stocks off Apple in on exchangers now Apple. If it wants to raise some additional funding through equity issues, it can do in F feel forlorn public offering. So what it does a listed public company like Apple comes out with a public offering. Whoever investor one stop life are wants to buy the stock stand by the stocks from the company? No, in an F feel. The company stocks are already there. So as an investor have options. I can either buy it from exchanges from another investor, Oregon. Buy it from a company that is doing in FBU now to entice me to entice me as an investor's companies that do N f. You're generally do it at a discounted price. So let's say up illustrated at $200 a pill may come at 100 and $80 so now I have an option . If I buy it from exchanges by from another, investors are that investors. I have to pay $200. But if I buy it through a nephew, I have to pay a little lesson. So this is an important feature in appeals. Generally stop. Sorry. Sure, I've discount to entice investors to buy directly from the company, and I appear in an I P O companies don't have in public. Listings of stocks are not of level in public moment, so there is no concept off discounted price. Then there are right issues. So there, again, like F BeOS forlorn public offerings except the right issues are a sure only to existing shareholders. So Apple, instead of issuing a public issue, it goes to take existing shareholders and tells them that I'm coming up with some additional shares. If you're interested, you can buy the shares from me. Bonuses Shoes are right issues that do not have any price, so shares are given away free of cost. So once again, I appeals a new company public issue F peel on existing publicly traded company, a public issue right issue on existing publicly traded company, but issued to only its shareholders So no new investor gets any right. The people who get rights can sell them externally, but that's the guest bonus issues is existing public company by a shoe shares, three off cost. There are other things like waters and options, etcetera, that can also make part off primary market transactions. So this is on sample on simply fired. You know, I'd be a process so before an I P wire IPO's done IPO's are generally done to give an exit option for existing shareholders. Imagine when Apple goes starting. So when Apple was beginning, some investors would have helped Apple out as private equity or as Angel investors. Now they're up now when I police shoot an I P o. Apple was significantly big company. Now these investors who have made their gains want an exit, so I abuse are done. One of the reasons why I pose I've done is to give an exit option to existing Chan orders Now. Then you had a different type. Your old man. You develop a strategy and a story around the company because sometimes the companies are new. No one knows about those companies, so you have to create a story, review the business plan, financing and growth options. Then you do evaluation Valuations are generally done by investment bankers. So company decides to do an I p o then contacts an investment bank, toe do evaluations infrastructure the so then they look into financial information and black records. Then you look at different key management positions, refined the business plan and the equity story your point advisers who are also an investment bank. Then you do tax structuring how their taxation will review the systems and control you give it. If there are any incentives that they tied up the typo that R e swap source, right equity, you deal with dark, then you do. Then I appears a generally once I piers done. The stocks are generally less trade on exchanges, so those exchanges may have some due diligence requirements. So you plan for those do religious requirements, you communicate the strategy, then you execute an idea how I was executor. So generally, the banks, the investment banks who are valuing your company may see may be interested in helping you with the night view. So they underwrite your company. What does underwrite they by all of the stocks that is there that you want to issue from you and then they sell it in the market. So how does this work? So let's say the price that they buy that is $100 portion. So they buy all your stock if they're interested, if they find that your company could be placed the but all your stock at $100 person, and then they gored in the market and sell that stock at $110 per se. So the $10 is the money that they make now. Why is this process coil is underwriting? It is called as underwriting because if they cannot sell all their stocks out, then they have toe. They still have to pay you the money that they go. So it's like an insurance that investment by does. Then the market prize the location on Finally Die Piers released on then it is 99% of the times listed on an exchange, so the stock starts trading post an idea. Now sometimes what happens? The amount of shares that the companies issuing are limited, but there is a lot of the members because the company has a good name, a good story. So a lot of investors are interested in buying the stocks. But the company has only limited stop that it can issue. So those investors. So what happens when the company gets listed on exchanges? There is extraordinary, and there is very less supplying. So they're listing games. So what a listing in I'm a Knipe you investor. The company had Lord of the mind, but I could buy that stock from a dealer that was under arriving here. Now the company got Lister. So my share good listed on an exchange. So because there is a lot of demand, the stock price went up. Let's say 30 40% so I can make 30 40% gain in a single day effort isn't oversubscribed type you and there is a lot off the mind for it. So these are called us listing gains. Same way there could be listing losses so no one is interested on. The underwriting also did not go 100% so the company is still left. The investment bank is still left with 10% or 15%. Stop that it is not able to sell in an I p. O. So it will try to dump it in the secondary market. That's why listing losses can happen. Listing gain happens when there is a lot of the mind listing losses happen when there is a lot of supply. But that is not enough. The mind are not enough white for the company. So once again, a company decides to do an I p o Contacts and Investment bank investment bank. Them values that company on the right side company for his interested, or it could be best efforts. Self best efforts, ailments. There is no guarantee the company will try its best on the writing means a full pleasure, and writing means that the company buys it from the the investment bank, buys it from the company and then sells it to an investor. The difference would mean by Price and praises their gain. Andi also charts consulting and other fees, then the company. Then it sells to an investor on. Finally, the stocks are listed on the market, so things you have to focus in a NY P or as an investor, you have to look at valuations. Are you paying the right price for the Because the company's new, it doesn't have much public history publicly traded history, so the risk is quite high. Most of the I pose, if you see don't on profit. So not all companies are profitable, and not all investment make you money, so you have to be extremely careful. Be careful about valuations. Are you paying the right price for the company story that's currently there? Then you need to also look at it. Overall demand for the I. P O. Is there any possibility of listing gain or there is a possibility of listing loss. You have to also look at inside a steak post, type you. So are the insiders that the founders selling off their entire state, or even after the night they have staked significant stake in the business. So if if insiders the selling of the entire state, then the company could be interest to invest in. But if they have a stake in the game, if they have a stake in the business, then that's not something you have to. What do you so in the next class will be looking at secondary market presence 8. Equity secondary markets: Hi, everyone. It's in the last recording. We discussed above how primary market worked and what are the different types of issues that can be assured. And primary markets, like I feel with you on rights issues as well as bonuses in this recording will discuss more about secondary market operations. So let's start. So what a secondary market secondly market is when you buy from another investor. So instead of buying from the issuing company you're buying from someone who has already bought the star okay, so you're treating from your trade is happening between two investors rather than between the Asian company on the investor. So when you buy from another investor rather than the company you're trading in secondary market trading on secondary market mostly means that your trade on exchanges like Toronto Stock Exchange, New York Stock Exchange, NASDAQ could see Niccum INTs, all global exchanges. Four. You can also prayer over the counter. Cool over the counter means you're not trading on the next scene. You're trading through a dealer, so you can either buy it. You on an ex seemed like the SX, or you can buy from over the counter. But whenever you're treating with another investor rather than the company. It is a second new market transaction, so type of pleadings that immediately happen on exchanges are gas trading in margin trading . So castrating majorly means cash by and cast cell. Modern trading is sharp sell that is minding, so we'll discuss these streets in detail. So I'm going to show you stop track. So stop practice a simulator so it simulates life trading. So whatever, wherever you trade, like if you trade in Scotia Trade or Scotia trade or question the platform is somewhat similar, the basics is somewhat similar. It could look different, but more or less, the basic idea is still the same. So whenever you trade on stocks, you can either buy that is gash by. Sell the discussed sell short sell that is margin cell, or you can cover your short sense. So what if you have already traded short? Then you can cover Go straight till go one by one. What does a cast by means? Cash. My means you exchange money for the stock, so if the starkest rated at $200 so let's go to some company and we'll discuss more. Let's look it happened. So e p. L is the stock court for Apple. So Apple is currently traded at 1 $94. So 1 94 or $200 for the simplicity said is the price of apple. So if you click on by Apple that this cash by and put one unit here, so you have to pay $200 plus brokering toe, get that stop on the stock. Will the settlements. I could take steep lists two days. So after today's stock will be in your account in your investment account. Okay, so whenever you do a cast sell, you exchange cash for the stock. It takes t plus two days to execute that transaction on after people is to this, that stock will be there in your account. Okay, The second, this castle, you can only sell stocks in cash if you own those stocks. So if you have already bought apple stock and you wish to select now you can sell it through a castle transaction. So once again, cash by is where you exchange money for stock on gas cells where you exchange stock for money again. It takes t plus two days for settling that transaction, then that is short sin, so short sell is big difference. So first will discuss cash by the entire thing on. Then we'll preserve, discuss Castle and then I'll discuss more about short seller margins. So first it's cash by. Once again your discuss immense, you exceeds cash for the stock. Now, stocks are always traded by the symbol. They're not traded by the name, but most off the platforms. If you're start typing the name and they will give you him, for example, Royal Bank off Canada, Royal Bank of Canada, equities that are listed on in my asi Surprise is $30. Okay, the last to get prizes. 30 1 51 You can I put a market order that you don't have to mention the price. It will try to get you the best time label place that is there. If you put a limit order, then you have to mention a price. So prizes the last traded prices 30.1 So you can mention price. Let's say 31 or even 30. Okay, so once again, But by here but symbol here, so symbol you start typing and it will give you health, then put wanted a How much you want to buy, then put what type of order you want to make. The first order is a market order where you don't mention a price. The second order is a limit order that you do mention a price. Then you put if you're putting a limit order. You mentioned the price at which you want to buy that stock. Then you put order details or items like Is this order violet in the system for a day? Is it violated? You cancel it? Or is it valid in the date you mentioned so sometimes the order may not get executed very heavy. So if you put good day, if it doesn't get executed in a day, this order will be cancer. But if you put good, take answer Unless and until you cancel that order, that order will be valued there. If you could go till date, that order will value unless men's until the date you mentioned. Okay, so gas, But But by here for the symbol here put quantity here at the market order. But you don't mention a price. Whatever best possible prices that it gets executed that or you put a limit order. You have to mention a price that you want to buy that. Then there order terms like good day. It has violated a validated turned off the trading day. Total cancer valid unless and until you cancel it or good till date. Valid until the date you mentioned. No. Can you see Big and us praise so big means the best possible by price. So if you're selling the stock, the baby is the price at which the buyer wants to buy the best possible by price. Ask us the best possible sell price. So this is the price at which the best possible seller wants to sell it. So if you're a buyer, generally look at ask phrase if you're a seller, you generally look at bread price. Okay, so, for example, if you put on order off 30 so you're buying a stock and you want to buy back 30 so this limit order gets executor. If the prices act 30 or below 30 this limit order gets executed, the prices at 30 or below 30. Now the best possible price at which the seller is willing to sell is 32. So ask a seller spreads, so Seller wants to send the best possible salaries have level at 32. So if you put 30 it will not get executed right away. Unless this ask praise goes to 30 or below your order will not be executor. That's where whenever you're buying a stock, it is important to look at the ask price. Okay, now there are other types of orders, like stop loss orders and these subtypes off stop loss. So I'll explain what the stop losses by going to an exception. So let it open. Have Bloomberg and Style in my terminal. So it takes a lot of time for accept you because there is a Bloomberg A P A that connects to because of this it takes time. No, The price that we saw the last period price or are we see was $30. But we also saw bid and ask Price. So a bit of us 30 and asked. Waas lets it 32. Now let's discuss each order indeed, A. So if you put a market order, what will happen so if you put a market order, you don't have to mention a price. Whatever prices have level, the stock will be bought. So the best possible price right now is 32. So when you're buying, you look at ask. When you're selling, you look at their best possible. Ask. Price is 32. So your trade with state of a get executed rate at 32 of the price if the US remains at 32 . So the prize is that you get is the market place next? If you put a limit, order off 30. What does a normal limit? Order means not stop loss order. Where does a normal limit order means when you put your distressing by So when you do it by trade, a normal limit order means that the stock will be bought if the price is at or below. The stock will be bought in the prices at or below the below mentioned price. 2 30 is the mention price. So the stock goes at or below. That is asked course at or below this price, it will get executed. Until then, it will be there in the system as on un executed order. Okay, If the violated is day, it will be there in the system for a day. The validity is until you, counselor, it will be there in the system for a while. Okay? No. Imagine this order gets executor time. Mulkey marking it as green. So you bought the stock at 30? No, the stock starts to go up. Okay, It goes to 35. So are you. And profit are your in los. So you bought the stock at 30. Now the stock is up 35. So you're in profit off $5. Sorry. Your body. No, you're not way by the stop starts to go down, you start suffering losses. So if the stock starts to go down, you start making a loss on that. If the stock goes to 29 you bought a 30. The stock is right now in 29 2 years of finger loss of $1. Now you do not want to lose too much money, so your cap you maximum money that you can lose is $5 on this street, you maximum want to lose $5. If you are losing more than $5 you want to close that trade. So the price at which you want to stop your train is 25 the price at which you want to stop your tree. It's 25 because that's the maximum loss you want to suffer to stop. Plus Street Stop Lost three is a V off stopping your loss at a certain price. Surprise mentioned this 25 because my appetite is only I can lose $5. So what will I do? First, I'll execute a normal trade off limit. 30. I'll get the stock if the stock goes up. I don't have any issue because I'm making profit. But if the stock goes, if the stock starts going down, I'll start making lost. Then I'm worried, but I want O limit my losses toe. Five bucks. So what I'll do? I'll put a stop loss order at the price of 25 so I'll put a market as green leg on what? This is right, So 25 is my stop loss order. So if the price goes at 25 below it, the trade would be stopped. How does that work? So if if you see normal order, a normal limit order gets execute er if the price is at or below a stop loss order. Get Mexico there. If the praise go stew the mention price. Okay. If it goes to benefit, the stop loss order gets executed. What is the mechanics offer at the price of 25 Market order would be given for selling the store. So it does not guarantee that you will get $25 when you sell it. What happens whenever the price regis 25 or it was a little below the toe? If it reaches $25 a straight of a market order is flushed into the system to sell your stock. So whatever best possible braiders, their stock will be sold like that. So once again, stop loss order in a bike trade exit generally executed below the stock price below the price at which your board it is executed to limit your losses to a certain value on whenever the stop loss trigger point is reached, a market order is given out to sell the stock. Whatever is the best possible break price. At that point, the order will be executed at that. Okay, so this is the mechanics off a stop loss order in a buying spree. So once again, if you see there subtypes off. Stop! Lost! Trailing. Stop loss. Where you mentioned how much money you want to lose and it will readjust to that. So what is a trailing stop loss? For example, the limit price was 30. The amount you want to lose this $5 right? So what it will do? It will calculate the stop loss trigger off 25. If the price goes to 32 the price is going up, the stock goes up so it will recalibrate the stop loss to 28. 27. So as the stock moves up, the stop loss trigger goes up. So from the given point, you cannot lose more than fight. Where are you? Are you do not want? Oh, you do not wish to lose more than $5. That's the mechanics. So trailing means it trails your stock. As the stock goes up, the star plus goes up. The stop loss trigger goes same thing in percentage. You can mention a percentage. So that will track how much percent you want to lose as the stock goes up the percent value . Also, these are subtypes off. Stop loss. Okay. No. Let's TV executive, the street importing a market career. The markets are closed right now, so it may not execute. But we put a review of this chair. One stock by commission is $10 so estimated cost. So commissioners brokerage confirmed the tree. All right, we go toe place a new order. Okay, So once you execute your traits, you can go toward that history. It does not execute, See? Does not executed at because the markets are not open yet. So that's why the order is not executed. When the market gets open, it will try to execute disorder. Okay, Now, if you have executed disorder and you want the seller, let's see, how do you sell? Let's start gas cell. You go. But all I did nine. You will enter the quantity one stopped. You want to do same way Market is where human. Do not mention a price. Whatever bread prices there it will execute that dark. The best possible price. When you're selling, you look at bed when you're buying, you look at ask So whatever is the best possible bread price it will execute. I died limiters where you mention a price, the sweltering or party so that So you want to sell it at 35? Limb itself gets executed when the prices at or above so limit cell will go here. So you were selling a stock. The last very price Waas 30 bid was 30 asked waas 32. You're putting If you put a market order What will happen if you put a market order? Well, if you put a market order what happens? You don't have to mention a vice. Whatever the best possible rate is there, your order will be executed at that. You don't look at us crazy. Look at Big's when you say Let's not if you put the limit order So let's say you want to send the stock at 35. So if you put a limit order 35 this order will executed When the price is I four. How about when the prices I ought above this order will get executive? Okay, so this is limit market stop loss. Same way so stop loss in sale order immediately works when you short sell the stock. Not when you cast seller, so we'll discuss stop loss when you when we discuss short selling tenement in the race then again would build a good build, cancel or good the next is short selling. So what is short selling? It is similar to Castle that a few differences, So I'll copy this here and we'll discuss about short selling. So we're not putting us normal cell order. Yes, short selling the stock. So what's what is short selling? Short selling means you do not on the Star, but you water weight from the broker with on comet made who returned this fall. So this is a sharks in where this short said you don't know doing the stock, but you border the stock from the broker with a commitment to return the stock. After some time. For example, RBC's last traded price was 30. So what do you do? You go to a broker, you border that stop. The broker will ask for certain comic made so commitment, generally 50% off the stop when you So if you're bordering one stock, it will, I will ask you. The broker will ask you 50% off one stock's value that this $15 as a deposit this is quite as initial margin. Okay, this $15 that ISS the deposit. Iscor less the initial margin. So you put on $15. You border the stock. That is, what 30 on. Then you execute a sell order. So what happens effectively when you click a short sell effectively, All these three things happen simultaneously. $15 is 14 as a deposit. $30 stock worth is war more or from the broker on. Then it is sold in the market at a price started. Let's a market order toe the price that is going on the market. Turkey. So your border. The stock sold in the market on received gas by selling er, what 30 Now there are different things that can happen. First, the stock starts going down, so the stock goes stood $20 in fuel. Next Fury's what is happening. You have sold on the stock at 30 which you had border with a commitment to return the stock . So when you sold it, you received $30. Now you have a commitment to return that stock back, but the price right now is 20. So what can you do? You can use this money that you have received. Buy a stock. What's Grandi Keep their difference then as your profit and return back this storm. So whenever you short sell on, the stock goes down, you make profit. So if you have short sold the stock at 30 on, if the stock goes down by $10 you make profit off. $10 in the stock was down by $1. You make profit, what, $1? Now, if the stock goes up, what will happen if this dog list of 48 you have sold the stock for 30? You have a commitment to buy back and return it. But you have to buy it now at 40 bucks. So you have to put in a decent 10 bucks from your pocket. So you make up los off, then it's the same maintenance stop goes down. You make money in many short sell stock goes up, you lose money. Okay? No, please remember, you have not put the entire $30 you have only in my state $15. That's the initial. So how much profit don't lost? Do you mean said the stock was down by $10 So actually, the stock is going down by 33% but you will make $10 over 15 that this 66% as profit. Because you have not invested $30 you have put in only 15. So the profits are large in short selling because you're only putting a percentage of money , nor the entire money, so that is leverage in war. So what is leverage? You're not putting the entire sum. You're boring money. That that's why your profits are little large. Same way your losses. Large seven goes down by 10%. It is actually going down by 33%. So you should have lost 33% of the moon. But you will lose effectively 67% off here deposit. Okay, so once again, when you sort sell a stock, if the stock goes down, you make money. If the stock goes up, you lose money. Also, there is concept of leverage because you're not putting entire more. Your only investing people sent as in each Martin. Okay. And the last thing is, that is a concept of mark to market. Democra market means whatever profit and loss you may. It is a distant from your Martin. So if you make money when the stock goes down, you're Martin goes up. If you lose money, when the stock goes up, your margin goes down. So profit and loss it suggested from the deposit you make. Okay, So this is the concept off short selling how lazy you did. So what sort here. Symbol here. So Royal Bank of Canada, You want to put a market stop? You want to sell 10 stocks on click preview? So you want toe sell their stocks. You have tow. Estimated cost is $310. Conformity. So yes. Short story. Stop what you have Starter 10 stocks off. I see. If the stock goes down, you make money. If the stock was up, you lose money. Generally, you don't have to invest 100% amount. You just have to put 50% tomorrow on there is the concept of leverage. If stop goes down, you make money. And if stock goes up, you lose money. Also, the concept of mark to market, whatever profit or loss you make, it is adjusted from you're deposit No menus, short seller store. You will start making loss if the price goes up on because of level is the losses can be big. So what are generally recommended yet that once you execute a stop loss order or when you execute er short sell, order tenderly protest off loss. Now this is important. We saw stop loss in and by order. Stop loss in a buy order always is put below the stock price below the executor price, because when you buy a star, you make lost when the stock goes down. So that's why you want to stop your losses below below the price executor. But when you put a stop loss order in a sort cell, you will make losses when the price goes up, not down. When the price goes down, you're making profit, so you will put the stop loss order above executed price. For example, if executed price was 30 so if you executed the order I 30 on you want protect yourself from los, and maximum loss you can pay is $5. So what will be your stop loss order? Stop loss order will be 35 so when you buy, stop losses subtracted. When you sell. Stop losses are how will it executor? So whenever the stock boost at 35 or a little above it a market order will be flushed out to cover Your short said. Okay, so you protect yourself for making huge losses. So that is the execution part. So we have discussed for this cash by exchanging money for stocks castle extending stocks for money margins L or short sell very border stock. Select with a commitment to return it back in the next class. We'll discuss about when the mental illnesses. Thank you. 9. Analysis of stocks fundamental and Technical: hi driven when you and lay stocks you have to re stood with Either you can use fundamental analysts, IHS or you can use technical analysis. Fundamental analysis looks at the story of the company looks at the past and the present toe project The future. No company works in isolation, so you also look at the economy and in the street. When you analyze a company, there are two approaches to fundamental and misses the top down approach where you analyze economy, then the industry and finally, the company for the bottom of approach, where you analyze the company, then look at the industry on. Then look at the technical analysts. IHS looks at the picture of demand and supply, so it looks at charts. It works with certain assumptions, with the major one being that price reflects everything. Technical analysis involves analysis off Chart, Parton's and certain technical indicators. You have an option I did to use fundamentals or technicals in isolation or to use them together 10. Stock analysis: hi. Everyone in the short recording we're going to discuss about stock analysts is and will focus our attention on fundamental analysis. So let's start so there are two ways to analyse the stock. Either you can use fundamentals or you can use technicals. So in fundamental landless is we try to look at the story of the company. So we try to understand the past performance. We try to understand the present performance of the stock, and based on that performance, we try to predict future. So you look at past and present to predict future in fundamentals. So what do you look at? So you look at financial statements and issues, economic, very reels and all these things. Technical answers is a bit different, so it assumes that price reflects everything. So in technicals and you look at price data, that is the mining supply off the stock on try toe, predict what will be future demand and supply. So in technical analysis, you look at charts and patents to minister, create your stock trading strategy. So before we go into fundamental landless is we need to understand what this market efficiency means. So what is market efficiency market efficiency denote if there is any possibility to generate positive Alfond the portfolio. It means, given the level of efficiency of the market, is it possible for a investor to beat index? Is it possible to consistently generate higher returns than what in next gifts? So there are different levels off efficiencies, so market efficiency Terry denotes these levels so there can be four levels. One is inefficient market. Second, those weak form, efficient market, semi strong form, efficient market and strong form efficient. So there are four levels in which markets can be classified. They can be inefficient, weak, form, efficient, semi strong form, efficient or strong former Fishman. So let us look at what doesn't inefficient market means in official market means two things . The first thing is price does not reflect any information. It does not reflect the past information about stock. It doesn't reflect the present information on neither. It reflects the future information. Second, it means you can use technical and this is fundamental. Analysts is as well as insider trading to beat the index so you can use any of these three so inefficient market means information is not reflector past, present and future. Second you can use because information is not reflected. There are gaps you can use technicals, fundamentals or insider treating Toby the market. The next form off efficiency is weak. Former vision in week form efficient markets it means historic information is reflected means the past is reflected in stock price. So since pastors reflected that you cannot use technicals, so technicals does not work in weak form, efficient market. But still you can beat the index by using fundamentals or insider information. The third thing, semi strong form market means first, it reflects the past that is historic as well as all publicly have label information. But it's all present information, so it reflects historic as well as present as well as public. But it doesnt reflect private information so you cannot use fundamentals or technicals to beat markets in semi strong market. But you can still use insider information to beat the index. Strong from efficiency means all information, historic, public and private. All three historic, present and future. All information is reflected in stock prices, so you you can either use technicals nor fundamentals nor insider information to beat the markets. So this is extremely important to understand markets can be inefficient where no information is reflected. You can use all three. Technical fundamental insider market can be weak form where historic information is reflector but public and future information that this private information is not reflector so you can youth. You cannot use technicals, but you can still be the markets using fundamentals and insider information. Then there are semi strong where public information as well as historic, is reflected. Only way to beat market is insider and strong form efficiency where there is no possibility of beating and index. The best approach in a strong form efficient market is to just invest in an index, just follow passive approach rather than active approach. Now, if you'll see global markets, inefficient markets could be markets. Such a Zimbabwe or markets such as Venezuela we're treating is extremely restrictor. The information is not very public on there can be a lot of gaps, so those could be inefficient. Markets. Weak form efficiency could be developing countries. African developing countries like let's say, Djibouti rate or it could be some country in Latin America that is still developing its markets. Semi strong form efficiency could be most of the European and American markets. American markets are tending towards strong from efficiency, but you can classify. It's still most of the European markets and American markets as semi strong, Strong form is extremely tear. Article. No market dispose shows perfect, strong from efficiency, but some markets are tending towards it. So what are equally prizes? Sensitive toe. So when you invest in equities, what are the what are the things you need to be of air off? So you need to be aware off little business cycles toe Which business cycle is currently going on? His expansion happening? Is recession happening? Is it peak? Is it trough? Right? So you need to be aware off that you need to be aware of fundamentals of the company. What is the past performance? What is the present performance? What is the future outlook off the industry on the economy? You need to be aware of demand and supply of the stock. So who is buying? How much is how, how much eyes, the total buying volume or selling volume as well as charts and patterns? You need to be aware of these things because stock prices do reflect in this in any of these, So let us start with a business cycle. So what is a business cycle? It denotes different phases off a business miss different phases of economic. So a complete business cycle generally goes through an expansion. It reaches a peak than it contracts. Then it reaches a bottom again, recovery and expansion happen. Then we get a peek and contraction happens. So on. Why, on X axis, you have time on y axis. You have economic activity, then the leads. Gross domestic product. So how the gross domestic product moves through different cycles that does din ordered by business cycle. Now why? It is important to understand how a business cycle works. It is important because different assets function or behave differently in different business cycles, so equal D will generally be beneficial when expansion is happening. A T bill is generally beneficial when peak is reached and the economic starts to fall in contraction phase when interest rates are going down. Ah, long term born strategy could work, so depends on where the economy is. You can device your asset allocation. So what does a typical scenario in the sessions or the mind falls in reentry begins to accumulate, companies slow down their production and companies cut nonessential expenditure, which creates lower gross domestic product. In expansion, they just grow input. Prices fall so low inflation consumers and companies purchase more companies. Increase capital spending because off lower interest rates on economy generally increases the jewelry, P generally increases. So if you understand the different status so based on economic activity, early expansion when recovery is happening. Economic Activity Team just from declined to expansion late expansion growth rate is accelerator peak. It be accelerates so economic be accelerate. Breaks airport on and in contraction. The economic activity false if you see him. Employment Layoffs A slow in early in recovery fees. But new hiring does not occur because so unemployment will actually remain high even in when recovery is happening. Late expansion Unemployment rate falls too low levels peak. Unemployment continues to fall. So just before an expansion happens, generally you will see that the economy was overheated and employment was at its lowest level. And finally in contraction, the unemployment rate rises. Consumer and business spending in expansion that is up tone as often print means it's generally soon by housing durable consumer writings and orders. So in recovery, the housing market starts booming, the consumer durable starts booming and light producer equipment start booming. Late expansion broad based. So even capital good start moving in peak face. Capital spending expands rapidly, but the growth rate and the spending starts to slow down in contraction. That air cutbacks in industrial production, housing, consumer durables and other things inflation inflation remains moderate on may continue to fall in early expansion. In late expansion, inflation actually picks up more greatly. Speak Inflation is very high in the peak face because the economy's over. Heater on in contraction phase inflation falls down, but generally with a lag. So why it is important to understand business cycles, because if you classify your passer, the location into three assets, equity T bills and long term debt, you can do asset a location based on the business cycle stage. So I'll go back to this slide and explain it to you so we'll start from peak. So let's see your economy that peak. So what should you do? So when economy is at a peak, generally quit ive markets are overvalued on. There could be a big fall coming so generally, investors in this days when the economy that peak decrease their equity allocation on movinto tables because tables are considered to be safe asserts, so they will decrease their equity a location on move into people's. So that happens when peak strikes. Then there is a recession happening in early stages of recession. You'll still be in people's but in later stages to boost taken, Army central banks will generally start cutting interest rates. So when central banks are expected to cut interest rates, you will move your location from Peebles Toe long term debt. So in peak, you're moving from equally to people's in late stage off contraction before the interest rate cuts start to happen, you will move from people's to long term debt because long term bonds react favorably to interest rate cuts so you can make some gains there when it is at bottom. When the economy is at bottom, you will start investing back from long term borns into equity because the recovery and expansion is goingto happen. But before the expansion phase begins, the recovery phase you will have a balanced the location between Sai click ALS and defenses , so cycles of stocks that react more to economic changes. Andi defenses are stocks that react less to economic changes. So in this face, when the recovery phase is starting, you will have a balanced allocation towards defensives as well as cycle stocks. When they expansion hits when the economic zooming up, speeding up you will I look it more towards psychical stock less towards defensives, and you'll cut down further on your T billon. Long term that allocation. So this is called Les Tactical Asset Allocation, so you locate assets based on the economic states we are in. So once again, at Peak, you move from move away from equity into tables in late stage of contraction. Late stays off recession. When the interest rate cuts l happening, you will move from. You'll move from people's to long term burns because they react favorably. Bottom. You'll start investing back into equity, but the balance portfolio into cycles and defenses in expansion, you will go more towards I click ALS on again chains as a delegation once again. Okay, it's implications of business cycle during expansion. Investments in an aggressive stocks are psych. Lickle stocks react more favorably, so aggressive sectors of psychical sectors can be infrastructure banking, cement production, etcetera. So these stocks react more toe economic than defensive sectors. When investment, when expansion happens in these stocks is actually good in the session. Investment is in defensive stocks is considered to be safe. Defensive stocks can be pharma. Are fast moving consumer goods? No. The second part is how do we predict business cycles? So there are multiple V is to predict business cycle, and we focus on predicting recession. So what is the possibility off the recession happening? So there are two ways that we're going to discuss. In theory, there are multiple ways, but out off those ways we're going to discuss two days. So forced is you. Look off and buffered integrator. So let's go to you locker. So what is Yelich of yield curve is the returns that you're making on different debt instruments According to their time to yield, curve is different returns that you're making the eulogy that you're making according to different time period. Right Normally a year covers upward sloping. So this is the Canadian you look off, so this is not upward sloping. This is currently inverted, but normally a year covers upward sloping. What does upward sloping means higher the time period, higher the time period? Better Other returns on that debt instrument, for example, a 30 year born should give you better returns than a one day born Wait. So that's what your normal Utica is, upward sloping. But whenever the yuk of inverts this could be a sign off, inflating off recession happening. So what is in Virgin off yuk of inversion means you can get a hump like this. So, for example, a three months instrument a three month that instrument is giving better returns than a 10 year instrument. So investing in a three month born right now is better than investing in our 10 year born. So this is an inverted ilk of a perfect inversion. May never rocker, but you can get humped like this. So right now, if you see, based on July's 2019 state, a yield curve in Canada and United States that in voter, if you look at the unico from China, it is a poor sloping because Chinese markets have corrected a lot and Chinese economy also struggled a bit. But it is a port sloping right now, so it's positive. Okay, so what do we based our decision when we look at your curves. So if the yield curves are positive, if you cubs are positive, either we're in recovery or expansion. But if the uric of in votes that me, I'm once again saying me, it's not certain that may indicate signs of recession. So inverted deal cough is a good sign off upcoming recession. And if you look at the past, whatever recession has happened, right 2008 19 nineties, 19 for the world wars or whatever. Recessions. If you see all recessions have preceded have been preceded by an inverted ilco, so it has a very positive correlation toe The decision happening. The next is market cap to GDP ratio, so market kept GDP ratio indicates valuation off stocks. If the valuation off stocks are too high, we do not invest in stocks. Evaluation off stock is low. We invest in stocks, so it's as simple as that. So what? I have done this have indignant I have blond. The buffered indicator, or market kept GDP ratio on have calculated a linear regression that is an average Okay, so this is the average this is the average line, and this is market cap to GDP ratio. So what do you do if the market capital GDP ratio is below the average? You invest in stocks? If it is above average, you remain little bit careful and you get out at the first sign off recession. Okay, so market Capital Judy P. Analyzing isn't it's easy, so it means market cap in numerator. Gross domestic product in denominator. If the issue is rising, it means the stocks are getting more valued. The price of stocks is rising, but the jury P is not reflecting that. So that's us a sign off overvaluation if their issues falling. It means the market cap is the price of stocks are falling, but GDP is starting to improve. So that indicates I know valuation are Amos tow, avoid overvaluation and get stocks when they're undervalue. So whenever this ratios above, this average line to average could be in 2020 somewhere around 115 or something like that. So if it is above 115 you will avoid investing in stocks. And if you are investing in stocks, going to defensive if it is below 115 you go for psychological stocks. This is the additional reading you can look at. So we will start looking at fundamentals of fundamentals once again looks at the story of the company. So we look at past performance and present performance. Office Talkto predicts its future. There are two approaches to fundamental analysis. It stopped down where we analyze the economic first, then the industry where the company's working on then the company. So we boiled down from the economy, industry and companies. 10 point in bottom up. Approach me unless the company first, then the industry and then taken arm. It's not company, its economic so and top down economic ee. I see economy industry company Bottom up C i E. So company industry and then economic in the next class will start with economic analysis. 11. Economic analysis: hi, everyone. In this recording, we're going to discuss about the first component off Fundamental, and this is E. I see approach. That is the economic analysis part. So what is economics? Economics is the process of understanding, the financial choices that people make and how the some off thes choices determine what happens in economic. For example, let's in Netflix versus Blockbuster. So people decided to go away from blockbusters towards Netflix because blockbusters workers was a store based job where you used to walk in and rent out DVDs. Netflix initially was a meal service where you could order those day videos online on later on, the move towards streaming. So people moved away from blockbusters and towards Netflix. So that choice impacted both these companies. So this is an example off microeconomics. What economics is some off all choices that happens in an economy so choices are made by government. They're made by companies and their mere by consumers. So all these three choices made by government consumers on the company's constitute an economic so why we should study economics. The performance off a security market is strongly tired toe overall performance of the economy growing and stable economy over time has positive impact on the equity market. The born market activity is also strongly tired toe inflation and interest rates. That's a part African Army. The economy has an impact on how many people work, how much they spend and how products on which products do the companies sell. How high is the inflation? So all these factors are important when you do to my in less render tons. So there are two types of economics, micro and macro. So what is micro economics? Microeconomics is the market behavior off individual consumers and forms how the price levels creator lead market equilibrium. What prices are, why prices are bred, go up by. They go down the impact of minimum wages laws and supply off labour and companies profit taxes on import and impact on industry profitability. So microeconomics is study off the small. It's a study of the small men study off the foam so we focus in this type of endless is on the phone. So if the minimum which is implemented, how will it impact the profitability of form If price off goats are increased? How would it impact the profitability if the prices decrease for the sales rise. How much All these decisions are focused towards form. So micro economics it's study off the phone. Macroeconomics is performance off the overall economy, the big picture, the performance off rural economy or the big picture. It is measuring output through Julie PN TNP. So it focuses on gross domestic product or gross national product. How changes in unemployment or inflation. It cannot impact economic performance. How a nation standard off living has seen over the last business cycle. It focuses on inflation and interest rates. So micro a small macro is big for the study of the big picture. So an important thing to understand for an economic analyst or a stock analyst is understanding gross domestic product and gross domestic product growth. Three. So what is Julie be so that a three essential players in an economy go meant companies and consumers. So interactions between these three country constitutes, like the garment company, as under consumers, leads to transactions, so whatever transactions happen in the geographical vicinity of the country within a year constitute our GDP. So what is GDP Gross domestic product to simply understand it is the total amount off transactions that happen within the geographical speeds off our country. Now those transactions are immediately made by government companies and consumers. So three people transact the government companies and consumers. Okay, And what do they transact in? So they can either transact in goods, services or financial assets. So if you go to Walmart on shop from Walmart, let's say milk. You buy milk from WalMart. So does that constitute GDP? Does that transaction Lee toe addition and do GPS because you are transacting in Walmart, right? WalMart is a company. You are a consumer, your transacting. You pay money to Walmart and you get milk so that transaction constitutes an economy. Same way. If you go and buy stocks on TSX, that also constitutes an economy. You buy real estate property that constitutes an economy. You go into education, you apply for certain course. You start getting you get into some university for some program that the service so that also constitutes and economic. So what is an economy? Economic? Istante is actions that happened between government consumers on the company's within one year in a geographical vicinity, and that is represented by cross domestic product, so you can calculate GDP, either by using the consumption approach or the production approach, the expense approach or the income approach. But we generally use the expense approach. So in this we calculate gross domestic product as see consumption or private consumption I gross investments that happen in the economy. G It is government spending, so expense minus income plus x minus. Um, where X is exports minus imports. So C plus I plus G X minus m is how you calculate GDP. See is generally consumption eyes investment G is net government spending. How much of the government expenses? Where does the government income through taxes and X minus? Um, now, if you're rule is as a as a politician, you are heading the country and you want to increase this GBP. How can you increase this jury P. You can increase this gross domestic product either by increasing consumption. You can increase it by either increasing investments in the country. You can increase it by teen lowering taxes or increasing government spending. You can increasing by exporting more than what you import, so gross domestic product is driven by consumption, investment taxes, government spending and exports, and important now, how do you influence consumption consumption. You can influence by decreasing the unemployment rate. More people working more they spend decreasing the taxes, less taxes, more consumption, then giving more money to people toes. Some social scheme that transfers that transfers well that may increase consumption. Interested if you decrease interest rate consumption would increase because people will buy more investments. Maker, country More productive. Enhance companies to invest. Cut out the regulations that are there. Cut out The wreck trip that is there and also in decrease in interest rates can also increase in investments because companies will start investing. More of the interested are low goldman spending minus taxes. Increase the government spending or decrease that access. So if you decrease the taxes, that will boost up the economy and finally make your exports more viable in the global economy, so your exports are more than your imports. So long term economic growth sustainable economic growth happens because off three reasons population growth, rising productivity that is linked to capital on technology innovations. So if your population is rising, more people will consume. So more is the gross domestic product. If you're productive, it is rising so that our capital investment, you get more machinery in, so that will also increase the gross domestic product. What if you're focused on technology innovations? If you're going for artificial intelligence and neural networks and your country's doing well on that space, then your economic me rise in future. Now you cannot look at economic in isolation to you need to understand what is nominal GDP and what Israel TDP so nominal GDP is based on current prices off the prices that prevail in the same year. So it reflects in the stained in size off GDP. So de repair can and GDP can increase because people have people are consuming more or people are consuming more expensive words. So some part of GDP teens can be attributed to inflation. So if the inflation is high, the people are not consuming more. But they're just consuming goods that are priced higher than previous year. So normal GDP doesn't separate our inflation, so it constitutes it. It includes the impact of inflation toe, but real GDP corrects the effect of inflation. It is a better matter off world performance. It is a purer measure off changing amount off products or amount off our port and isolate start put, which is attributed to inflation, so generally need to cancer, their economic growth rate and inflation together to consider what is the real growth rate . So this is an example of Canadian GDP and the constitutes so consumption, government spending, investment, exports and imports. So how they have moved. So if you see, in 2012 we were growing at 1.8% of GDP, then we went 2.32 point nine. Then, since 2015 our GDP growth rate has slowed down. Except for 2017 the only increased by 0.71 point 13 and 1.9 on our forecasters also 1.41 point eight and 1.7. So if you compare it to the global GDP, globe is increasing by around 3.5%. Canada, being a developed country, cannot expect toe consistently grow faster than the world. But our GDP growth rate is almost the expected GDP growth rate is almost half off the world . So since 2015 we haven't done impressively on GDP friend. Then there is household consumption. Household consumption has related least shown an increase of 1.92 point 62.7. Then it went down and it is expected to fall further government spending. This has increase. It was negative. So we were running a deficit there. It increased a bird, but since 2015 it does short up and 2018. Also, we expected to be around 3.8 and 2.9. Gross fixed investments have fallen a lot, and this is because oil and gas investments are not come happening much in Canada. So external investments that usedto help happen in the oil belts. That statue in Alberta, Prince Edward Island. So this is these investments have great up, so that's the reason it has shown a negative value. So investments have fallen. Exports have fallen significantly so 3.5 and took 2015 than one, and it is expected to improve a bit. Imports f Moto Gordon down so as an equally and unless you need to have your you need to keep watching these numbers, then if you see provincial gross domestic product. So Alberta had very bad years in recent times, so this was This is 12 13 14 15. So since 2015 it went down, but it is recovering again. Let it had a good year in 18 2004.6 b. C has remained consistent. All this while. Manitoba. If you look at the biggest state, don't Ari Ontario is doing quite well, but it is expected to slow down a bit immediately because of manufacturing cuts. So this is our pro big three provinces have performed indicators, so along with gross domestic product, you also look at various economic indicators, so indicators can be classified into three friends leading coincident and lagging so leading indicators. They generally happened before the GDP changes, so Pekan through peak and bottom before the overall economy, you can anticipate trends by using leading indicator. For example, housing starts number off houses that are being built is a leading indicator. If the house is air constructing, the construction of houses improves. That means a G in expansion, mediocre and future. So it's a leading indicator coincident indicator, teamed at the same time and in the same direction as they can. Army so inform the current position off the economic example. Gross domestic product or retail sales is a coincident indicator off economy lagging indicator the teens after the economic in this so they used to confirm a business cycle. Baton unemployment is something that confirms how the economy is doing. It's not a prediction. Examples off leading indicators can be housing starts the number of houses that are being constructor manufacturers. New order. New order that manufacturers receive commodity prices if commodity prices starts to shoot up. That indicates that the consumption is improving. Average hours worked per week if they show an increase that also it's a good sign. Stop prices is a leading indicator for an economy money supply to rate cuts on breed increases that are also a leading indicator. Coincident indicators can be personal income. Gross domestic product in the steel production, retail sales exit, etcetera. Lagging indicators can be unemployment, inflation, labour cost, private sector investments, business loans Except for so if you look at few indicators in Canada, so these are the few indicators. So if you see 2018 19 and 20 real GDP 1.9, it is slowing down. In 2019 it is expected to be 1.8, but below 2018 figures so economic is slowing down a bit. Inflation 2.3 in 18 2001.9 in 2019 and 2020. It's too now we have already seen Wait, you need toe Seen a northern isolation to inflation is falling a bit, though it is still higher than our group GDP. Increase unemployment data. If you see unemployment, our country has done quite well. So unemployment is around 5.75 point seven now, which was 5.8. So more people have jobs. Current account balance. It's the violence between exports and import. So if it is negative, it means we're importing more. If it is positive, it means we're exporting more. So current account balance has fallen so 2.72 point six. But it is improving. It is projected to improve slightly. Budget balance is how much the government spends. Was this the taxes? So if it is negative, it means the government is spending more than it gets from taxes, which is also negative. It indicates that we're spending more than what we own as a country. Three month interest rate interest rates are supposed interest rates as opposed to rise, So 1.171 point 21.31 point seven So expectation is that there would be interest rate hikes . Born deal If you see same way bond ills are going to rise to that altar indicates interest rate hikes in future exchange rate against US dollars. Our currency has been appreciating for a while. It may improve a birth in 2019 and 2020. So if you see everything together, so inflation in Canada has since 2015 has gone up. It was 1.1 in 2015. Predators steadily going up. The expectation is that it will stay around 2%. Unemployment has improved a lot, so employment figures are always encouraging wherever whenever they come up. So unemployment has gone down current account balance. So we are running deficits toe important more than exports right now, fiscal balance. So we're all since two c. 2015. It was a balanced budget, so our expenses and income for exactly seem. But since then, we're on a spending spree, so we're spending a bird interest rates. Interest rates are expected to go up. Andi means if you see exchange rates so we usedto trade very close to the U. S. Dollar. But US dollar has been improving in strength and Canadian dollar has been falling. Have you compared it the United States to industrial production in US after 2016 as short up So their industrial production has gone up. Their inflation is reasonable to it's around 2.12 point five, but they're growing at 3.5. So as compared toa its economic growth. Inflation is quite decent. Housing starts are expected toe improve from 2.61 to 2.74 and so on. Unemployment is all time low for us over 50 years low. I guess in 2018 it is expected to stay related Lee. Same current account balance. So that has improved because of the trade policies that the U. S has. Now, if you see a budget deficit budget deficit. So they paid back some loan here, but again, they're taking on few loans as a percentage of GDP. That's a worrying sign. So US has around 78% off dead right. US currency has gained strength in the vial. Interest rates are expected toe rise even in states. Now, this is Canadian debt. So can you. Didn't that is around 89% right now as compared to our GDP That significantly hires compared Toa passed. We had very low debt in 6 4007 and 2008. We started to accumulate debt. But we have paid back up but offered since 2016. Now this is interesting. If we're comparing us with kidney Canada to Canadian, death is unknown. So this is the US one, the white one. So it's around 82% Canadian. That is around 89%. On this is comparison off GDP growth was his inflation. So you can see somewhere around 2017 murder of 2017 are inflation is rising higher than our gross domestic product? Now that's a worrying sign. So we are growing less than the inflation. It's a really negative. Real growth rate in Canada can be considered to be worrisome because inflation is high. So that's about it. Well, me does each other in the next recording 12. Financial statements basics: hello and welcome guys. In this session, we're going to discuss structure off financial statements, so structure all financial statements so there are three kinds. Often answer statement on which you base your managerial decisions as well as you analyze them if you're an investor, so these financial statements are income statements or it is also called as profit and loss in some countries the balance sheet on the cash flow statement. Okay, so let's discuss them one by one. So first is income statement No, this income statement is simply Thank you. So the structure of income statement is simply it starts with sales. It starts with sales. Then you have direct cost. So direct Costis cost. That is the Ricky associate ID with constructing the product for making the product. Then you have gross profit. Okay, then you deduct indirect cost. So this is less sorts of production in their cost is also deduction. So it is less so. It is cost that you incurred but is not directly related to product example sales and marketing HR while this cost, you incur them. But they are not directly related to construction off Prada. Majorly, these are period costs rather than the product cost. Then you get something or less e b i d d. This is also known as operating profit on your design. I Cronin for earnings before interest, tax, depreciation and amortization sorters earnings before being dressed docks depreciation on amortization. Okay, now, from this EBITA, you first deduct appreciation on. Then you deduct amortization. The appreciation is the cost that you incur on your tangible assets or fixed assets. Ah, more decision is the cause that do incur on your intangible assets. Now, what is depreciation and amortization? Example like to say a college is spending 100 cruise on constructing or, let's say, one million toe Make it more simple. The college is spending $1 million from renovating a classroom. Okay, really renovating a building. Now this building is going to be used for next five years on what we do. One million is directly spent by college. So the reality is it is spending it in this year. So one million will be the cash outflow in the cast flow STIs system or the cash flow statement. But income statement has an accounting rule called us matching principle. So all the expenses, sure match benefits that are there from those expenses. So you're renovating the building, Maria, Renovating the classroom. This classroom will be used for next five years. So benefit of this classroom you're going to take in the next five years. So it is much more practical to speak. Divide the spending in five years. That is exactly what we do with depreciation. So we create a set of $1 million and then we divide this asset that is, we expense this asset out in five years. So the precision of normalization is nothing but expenses that you incur on your assets. After that, you have a bit earning before income. Interesting backs a bit. You deduct interest. Interest is the cost that you pay on your debt. So it is cost on your debt and just to make it a little bit more certain, this is less. This is less interest courses also introduction. So it is less so. You are left with earnings before tax or profit before tax. From that, you did up tax the tax that you have to be so the government that is provincial city as well as federal tax on Finally, you get earnings after tax, also known as profit. After that's this thing's goes into the balance sheet as retained earnings. So this is transferred from income statement to the balance sheet. Ours retained earnings. Okay, so there is a flow from income statement to balance it. No, a couple of things that you have to keep in mind. Income statement is not a point statement. Like balance sheet. It is appear statement. So what do you mean by Peter Statement? It has a starting date on. It has a indeed. So it can be a quarterly income statement, a monthly income statement or a yearly income statement. So it has a starting date on a end. It next is there are certain things that happened after the spot is determined. So after this part is deter mine, you can divide it. You can have some things that disappeared out of this part or this earnings called as dividends. Okay, as well as you can show this back as earnings per share GPS, So dividends is a payment that you make that you mean payment that you make to shareholders . So it's a cast payment that you make in shareholders retained earnings goes down by the amount of dividend you appear so part after adjusting for divergent flows into balance sheet and retained earnings, then there is earning per share. E. P s GPS is simply profit after tax divided by a number of shareholders. So MPs is profit of the company re present there as a per share quantity. So you're replacing your rep resonating total profits of the company for a particular shareholder. The next statement that we're going to discuss is the balance sheet. So balance sheet has three aspects towards we have asserts liabilities on. We have equity. Super Now I said, just things that are giving you current benefit or they will give you benefit in the future liabilities of payments that you're currently making or you're going to make in future And equity is the balancing figure. What do you mean by balancing figure so assets Surely equal dough liabilities bless equity . So asserts equal do elaborately plus acquitted. This statement should always balance so equally that we get is a balancing figure between assets and liability, so equities it will do our search finance liability. This is also known as a residual claim off shareholders this is Carlos rescued ill claims that shareholders have okay now assets of further divided into current assets, fixed assets or longer and deserts find something called less goodwill Lavely Days further divided into current liabilities. Non current liabilities on equity has residue learnings, that is, and share with this capital. Do you have this Cheryl s capital on? But I said your earnings toe be simply put better. There is more, more complex re presentation, but this is the most simplest form offered. So assets are divided into current assets. What a current assets. Current assets of benefit that you're going to get within a year. Non current assets, all the benefits that you're going to get beyond a year. Goodwill is amount here that you pay over the market price because you think there is some synergy. It is also equated toe brand value that you pay for acquiring different assets or companies . Liability has current liability, and longer and current liability means payments said you have to make within a year. Non current liability means things that you have payments that you have to make beyond a year within equity, you have shareholder's capital, the amount that was raised by shareholders for shareholder's interest in your companies as well as you have residue learnings. No good. The final statement, this gas flow statement. So let me goal a little below. So cash flow statement. Cash flow statement has three parts cash flow from operations cash flu from investing on cash, flu from financing. What this cash flu cash flow is whatever cash flows into your company as well as out off your company. So it consists of Kachin flu as well as cash out flu. Okay, Now, where this cash flow from operations, it is cashed in fluent outflow that results out off mean business off the company or main operations off the company. So cash flow from operations is cash inflow in our flow. That is resultant because off the company right cos main operations or mean business. So whatever cash flow happens because of mean business that comes in cash the wrong present , Then you have cash flow from investing. This is nothing. Bird amount off cash flow because the companies investing outside as well less it is. Some people are investing in the company. So if you pay a dividend to your shareholders or if you raise money, if you are investors, if you're investing in some other company, come back company shares, then it becomes a cash flow from investing. So whatever cash inflow and outflow that happens to investing activities off the company that comes under cash flow from investing, that is not the main part off business. No good example. If Microsoft bought by his Apple shares, then it is cash flow from investing and Apple she S P dividend to Microsoft. That is again cash flow from investing because that does not a part of Microsoft's mean business. Then you have cash flow from financing. It does nothing but money, at least from external players. I will less money Pierre to external players. Example. It includes amount Yuri's through dead. It includes a Mountie raised through equity. It includes interest payments that go towards stared. It includes payments that go towards dividends, so confusing factor is divergence. If you're giving money to shareholders, it will be cash flow from financing because you have taken money from shareholders. So you're giving your back sort is included in cash flow from financing. But if you're getting dividends from the investment that you made. It will come as cash flow from investing. So cash flow statement is divided into three aspects. Cash flow from operations, cash inflow in our flow domain operations off the off the company cash flow from investing cash inflow in our floater to investing activity. That company undertakes on gas flow from financing cast released from external place as well as cash paid to external players. Because you near money, you raise money that comes under cash flow from financing in the next class. We're going to see how to analyze each one off them, so we'll be starting with income statement than with balance sheets and then finally with cash flows. 13. Ratio Analysis Interpretation of financial ratios: Hello, guys. In the last classes, we have discussed how to analyze income statement, how to analyze balance sheets and how to look at cash flow statements. For example, we have taken analysis off Puma for understanding purposes. Only in this class we're going to discuss about what Dorie shows means where do financial ratios means on how to interpret these rations. So basics one. Owen mats one No. One right? What is racial ratio is one variable expressed ana as another. So is one variable expressed as another radio. Okay, that's basic mathematics for you. So it shows two parts numerator and denominator there. Two possibilities. Either the issue can increase or the region can decrease, or it can be mean seem so. If would increase this, it means that numerator is going up on or or denominator is going down. If it decreases, it means numerator is going down on our our denominator is going up so vile analyzing ratios you need to remember what does increase means. What does decrease mints or what does higher value means? What does higher value of ratios compared toa other racial means as well as workers? Lower value of Rachel needs Okay, so let's come toe this excel shoot. It's a very interesting excel sheet that I have prepared. So I'm just putting myself up so that I can zoom in So will go through this Excel sheet so it has eat off these ratios that are important. Then you have numerator for Does the numerator mean and denominator? Where does the denominator me then I have highlighted whether increases gore or decreases gore on the meaning off this ratio. OK, so first is working capital turnover in numerator you have revenues in denominator. You have working capital. If this ratio increases it, minister revenue is increasing on door or you're working capital is falling. It means the efficiency off using your working capital goes up if this ratio increases so increasing Working capital tonal What is good for you? Next is fixed asset don't know what fix us. It don't over means 11. You divided by average Netflix facets. It means how are you converting your fix assets to revenues? If this ratio goes up, it means you're converting. Fix assets tour better revenue to a higher revenue so increasing it means efficiency off. Using fixed assets increases good decreases by total acid. I don't know where it means the revenues divided by average total assets. Again, it means how you're converting your total assets into revenues. If this ratio goes up, it means efficiency of converting those total asset is getting better. So it's a good sign in rent return over its bread. Tricky. In numerator, you can have either cost off sales or you have sales on in denominator. You can have in reentry if cost off sales is there, then decrease in this ratio score because your cost is going about the rights that we don't want because it will lead to lower profits. If seals is there in the numerator, then increases or so, depending on the definition that is used unit to decide whether called increases good or decreases. Good. My quick picks will be if cost is there, then decreases word That is the 99% case. If sales is there, then increases work. That is the 1% yes receivable. Donna, was the revenue divided by average receivable. How are you converting your receivables into revenues? Actual sales. So are how does your average this it was compared to your revenues so again increases good decreases by but just be able Donald versus purchases diverted with every street people. In this case, it means how much time your supplier is giving you for your purchases so more time is better. So more time means lower higher trade receivables. So I trailed cables, so it means decreases gore in Greece's bar. It indicates time that supplies give you to pay so activity ratios, our numerator that is on income. Statement. Variable on denominator that is a balance sheet variable. So you have a numerator divided by denominator. You're comparing income. Statement. Variable with the variable from balance it on working capital Efficiency of using working capital fixes her Turnover. Efficiency of using fix asset total asset turnover. Efficiency of using total asset inventory turnover. Efficiency of converting in reentry. The receiver. Eternal world proportion off cash in castle. So in Greece's Gore, people don't over time to play supplies. Next is solvency ratio, so it indicates deck visa, his asserts or equity. So first is debt to asset ratio. It is total that divided by total assets and what do we want? We want more assets and lower that so decrease in this ratio is go, it means less debt. Don't dead to capital again. We won't lower that. So decreasing the stray shows good that to equity. We want lower that lower date means lower risk. It's leverage, but it's ah, it has a detailed analysis, whether it's good or bad. But for the time being lured, that means lower risk. It is good. Then you have total assets to totally quit area. So we want more assets. And we weren't less partner as a business person. Equally means partners. We weren't less partners and we weren't more assets. So increase in this ratio is good. Then you have interest coverage ratio that is a bit earning before interest in packs divided by interest payment. It means how much revenue you have to cover your interest payments. We want more revenue. Reserve is over interest payments, so increases good fixed charge. Certain includes Obertan lease payments divided by total payments that you make on your interest and lease things so again in Greece is good are going return on equity. It indicates how much returned the company generating for shareholders. Net income divided by average equity increases Gore are aware, indicates how much income. The company, generating on a tacit net income divided by average, asserts, increases Gore Argosy. It indicates how much income the company generating for it equity as well as that hold us again. Increases scored, but it does a bit arrest off them have net income. So Aro sees a bit our operating profit divided by total equity. No evaluations indicate how much money you have to pay to acquire earning assets or cash flows. So we want to pay less to acquire assets. We want to pay less to acquire earnings, and we want to pay less to acquire. Gas froze. So all the valuations lower. Better for investing purpose higher than you means you are being higher than what you working in the earlier days or visa of his other companies. So bi racial price burnings is market price diverted but unequal Share lower. Better prized black ass flu market price divided by cash flow per share. Nowhere better price by sales. Evey by cells, I'm capper sales. All these variables Reserve a sales lower. Better price book value. Market price divided by book value per share. Thirties Net assets divided by a number of shareholders that the book value? No, we're better even by Britta and the press value, divided by operating profits again lower. Better so all the valuation ratios As a value investor, we try to have it in the lower spectrum, so lower ratios are better for us. No margins. You have operating margins. EBITA margins as well. A spark margins on Earth income margins. Alberta, or operating profit divided by sales on part divided by sales. EBITA margin Indicate operating efficiency. How good or how efficient is a four minutes operations night and imagine indicates total efficiency off making operating decisions as well as financial decisions. Both of them. We weren't better. Higher toe increase in this is good or higher ratios are good liquidity. Racial current reso current ratio Is current assets divided where current liabilities, it means how much current assets you have to pay your current liabilities. We warned more current assets with is more liabilities, so increasing the serrations board quickly. Sure, just search for it in rent free because inventor is not very liquid, so you may take time to convert inventor in tow cash. So it I just current assets buying one tree, so to check how much liquidity you have again increase in this ratio is gore on. Both of these ratios indicate better short term liquidity for a form dividend build. It depends. So if you're looking for growth companies, lower dividends is ideally good because the company's reinvesting into its business. That is good for you. If you're looking for value based companies, we generally go for higher dividends in the next last, we're going to see how to use this ratios. And unless companies So we're going to look at two things. Horizontal analysts is or will also known as Time series, and Lis is as well as vertical, endless is or sectoral and Mrs. 14. Sectoral analysis of Cannabis sector: Hello, everyone. This is going to be my last video father day because I am feeling extremely sleepy. And I also want toward some Netflix for for asleep. So this video is about wrench analysis. We have already seen photo time series and places. So in this class, we're going to discuss Cross Sectional. Agnes is so in cross sectional like analysis. We have companies and we have their ratios on. What do we do in this cross? Explain this. This is made rank companies according to their ratios. So we don't consider all the issues that are there because then it becomes too complex. So we're going to just look at six Rachel's return margins and valuations in return ratios return on equity. It indicates how much returned the companies and hurting for 20 folders. So this ratio higher. Better so company that as a yes duration will rank them, rank it one than the least least tire and so on and so forth R o c. As well as if we consider our way sometimes. So both these ratios again higher, Better. Okay, So high return on capital employed as well as higher return on equity. So a company that does highest cards rank one operating margin or Roberta Martin, so this ratio indicate operating efficiency. This rituals for higher, better net profit margin indicates total efficiency or personal as well as financial. So again, higher. Better valuations indicates price that you pay to buy the stock in valuations. We warned. Lower valuations, lower place that we pay for the stock so lower, better so company that as least bigots rank one and price level quality. Also, it is how much assets you have to back your Preiser. How much price are you paying for your assets? So we want lower place. So again, lower. Better. So what are we going to do? We're going tohave differently. Shows are in different companies, and we're going to rank them. Are we literally quickly indicates how much return you get on your share. Capital Higher betters for a company that does her yesterday sugars rang. One. Our own e r OCR way returns on capital. Anderton's on asset again. Higher, better so company having highest get rank one operating margin number, Thomas in operating efficiency higher. Better so company that has highest efficiency in operations cares rank one net profit margin higher. Better because it indicates total efficiency financial and operational to begin Halbritter valuations. We want lower price to pay. So be and price. But book early. Lower record. Now what? I have done this. Sorry, I have already done the work for you. So this is a quick snap shirt off cannabis sector. So we're looking at cannabis because it is currently talk of the town. It is also known as hem sector, so also called as real sector. So we're looking at the new emerging sector. Carla's cannabis, him or we'll. So these air different companies that are there in these sectors have taken nine companies on. I have ranked their ratios. So example in all these companies, and just show you how wife, Right? Example. One. I'm sorry. So this was are we so ALF area has the highest return equally amongst all its peers, so it gets rank one then Aurora has second highest our way. So it gets tryingto and so on and so forth. So eat off these ratios I have ranked for their higher. Better is there are lower batteries. So 1234 All this for ratios higher is better for these two ratios, lower is better. Now let us right. Interpretation off how the form works. I'll tell you the interpretation. So there are nine companies, so averages 35 averages. Five. So if a company has ranked below five, it is good because it isn't above this performer. If it has rank above five, then it this bad because it is a below have respect for Okay, so let's see, So Al Faria about ovaries returns good margins. Good p so good Price, good valuations or the steeper in terms of equity doesn't have much assets to back its price. But that is still OK, so one positive, while others are negative interpretation, it gives good return on equity on asserts it is operationally very efficient as well as it takes financial decisions. Also good it has current. It is currently related a very T price cucumber to return earnings, but it doesn't have much assets to justify its price. So this will be the interpretation Aurora Good returns, so it gives good returns on assets and equity. A better imagine is not so great. But back margin as well as valuation is support some sort as good operating margin, then the straight at a low price with his earnings, has decent amount of assets to back its price. Now this company above average means doesn't give much of Dunn's has good efficiency because operating and part of agencies word but is costly sometimes over its earnings but has a search to back its praise so decent this company doesn't have good returns is costly . Okay, but has good margins on Doesn't have much assets. Also, Okay, Emphasis. Nothing greater border doesn't give return. Doesn't have a breeding. Efficiency doesn't have total efficiency. It is costly in terms of earnings. And it doesn't have assets either. This company, if you see only thing barred, is it's fire deficiency. No part margin. That is a total efficiency. Rest offered this girl so except maybe financial decisions. 13 picks. Everything else is decent. This is not great. So can emerge. Doesn't give you return on equity. Aitana Search doesn't have good. A bit Imagines. Neither. Packed imagines where it has good valuations, country and straight at the T Prize. This is not a great toe. Can dressed no good better. Dunn's has decent operating efficiency. Back is, has Lord off assets to back its Christ but is not cheap in the market as compared to its earnings last. All these things are barred, so can cannot be sector means canopy company doesn't have good operating efficiency. Part efficiency districted costly in the market by guest Good returns to shareholders. Us. So this is have you This is how you analyze more green Better for you. So you will choose companies that are more green. But before choosing it for investments, you have to analyze it further. So this was just for illustration purpose and education purpose. It doesn't give you any buyer cell calls. You can ask your financial advisors or and lays it on your own before taking the school. So this was this illustration just shows how to do cross sectional data. Annelise is off ratios. 15. Untitled Project: Hello, everyone. This is a very interesting class in this class. We're going to discuss about horizontal analysis on how to analyze that he shows for a company on. We're going to see three examples. One is of Tesler. One is off. Google on one is off. Alibaba. So one is a EUCOM ascent one is in tow, automated cars as well as electric cars. And third is in tow. Stories of surgeons. And Okay, so let's start. So in the first wait one lays ratios is horizontal analysis in horizontal Analyst sis, We simply find out. Friend, how do you compute transfer this current period? Data divided by previous year Period data minus one. So you check whether the ratio is increased order. The issue has decreased. That is what you look at. So to understand how to do it, let us jump into examples and and lays things one by one. So we'll start with Alibaba. So you gonna shine from China, Lister down and wire. See, I'm taking this data from Capitol like you. I have an access to capital like you on. This is just for information and knowledge. Purpose. You should not base your investment decisions based on us. Okay, so let's look at work. Alibaba has done in terms of regions. So Forster's is return on assets. So let us do a horizontal and listens quickly on that. This trend analyst is this is also known as time series. Endless is So it is ca locally known as time series rather than horizontal. So just right time series. So in time series analysis, you divide current Peter State are divided by previous periods ST Ar minus one. So a lot of the deer's we don't want so many bees for a single digit number. Okay, and just dragging it the bottom, then we're going to discuss it. Ratio one by one. I'll quickly clean up the date also. So this divide, by zero thing I lied. This is the word, but zero thing. I'll delete this elite. Okay, I'll hire these Collins so that we can just tend to print the trend. So whenever you're going horizontal or time series analysis on ratios, it's simply current PDS data. Current periods ratio divided by previous figures. Racial minus one. Andi. Then if we can read the interpretation for it, So simple thing we're going to follow this thing. If increase or decrease is good, we're going toe market green. Otherwise, we're going to market rate. So return on asserts are the This ratio for return on assets is up by 5%. So just for your information from the previous gas return on asset is net income divided by average assets. So you didn't get efficiency. So it indicates the returns that you're giving on assets. The home is it returns. Does the company given asset and it has gone up. For example, the return on assets was 7% on our this 7.4% so $100 off assert it is giving it was generating $7 of revenue. Now it is generating $7.4 off revenue. So it is the efficiency off. Using asset is up so, or rather, more income on assets. That's a good sign for us. Return on Capital Capital is both equity, and it sort majors Alberta or divided well return on total capital. That is equity as well as shareholders equity their debt as well as shareholders equity. So it indicates how much she returned the company generating for all the shareholder. It was 8.5% and said this quarter mask order now in December, it is 9.3. So it has gone up. It's a positive sign. So more income on that as well. Less equity. Then you have return on equity. Return on equity indicates how much the returns yours and rating for equity shareholders. Earlier it was 14.4%. Currently, this 17.6% So 22% increase in return on equity so more and come for equally shareholders. That's also a good sign. The next tape of ratios margins. EBITA margin indicates operating efficiency. Part margin indicates total efficiency. So don't think that is inclusive off operating as well as financial decisions. So operating efficiency has gone down. That's not a good sign, so less operationally efficient. So a libre buys less operationally efficient than in past. But it is more total efficient or total efficiency has gone up. So it is better than past reservist total efficiency. It means indirectly, it is making good financial decisions. Okay, total asset turnover has gone up. It indicates efficiency off using assets, so it's a efficiency off. Using asset has gone up. Fix us it done over his efficiency, refusing fix assets that has gone down. Thank you then the next edition is current ratio, so currently shows current assets to read my current liability. The increasing race was good. Decreases bar. This racial has increased 1% so good it is good for us. But quick ratio has decreased. Quick. Rachel's a registered by INR entry since current asserts that divided record and lively debate current Lassiter adjusted first. Wayne Brentley. So it is going down when that does. Not good. No, that to equity. We weren't lesser that that is equal into risk for us, so we weren't lesser deck. So that has gone up. That's not a great sign. Deck to capital that is going up total abilities to total assets. We want more, asserts Visa with liabilities so increasing level, it is not so good for us. Earning before interest, like the world by interested, shows you how much earnings you have to cover your interest expense. So earnings have gone up so better viability in near future. So that's good for us. Increasing valuations is bad. Decreasing valuations is Gordon, fear of value investor, so resource are almost same soil. I like neutral. So just to recap this company was Ali Baba. We're done on return on assert equality as well as capital have improved. That's good. Making good financial decisions using its total assets better has better short term liquidity. So inventor, if you consider it has but a short term liquidity, it has more revenues to cover its interest expense as well as valuations are almost similar . So company has Gordon by Tehran. Certain aspects by parts of cooperation or braiding efficiencies is not so good and better margins down. Fix our surgery. It is not using for access it as it was using in the earlier days. Quick ratio is going down to short term. Liquidity is going down. Debt has gone up, so that's a sign that you need to consider. So let's school. The next company makes us Destler. So this this is these are ratio's off Esler. We'll do the same thing. We'll find out with your time series. Analysis on these ratios on will highlight the will Write down their interpretation. Okay, so Time series is some simply current period. State are divided by previous speedier certain Ah, minus one or we can simply say we can simply and operated quickly rather than doing this. Santelises the return on asserts has fallen, so it was negative 2.5%. Now it is negative for parts saying return on capital has fallen by saying return on equity has fallen bad. Sign EBITA margins have fallen so bad. Sign Net income margin has fallen for the Hobart, saying total asset turnover almost seem so. New drill. Fix a SEC Turnover. Almost seem so new drill current ratio has fallen birds and you weren't current ratios to improve quickly. Show has fallen bad, saying debt has increased part. Sign that was his capital has increased. Bad sign. Total liabilities have increased. Reservist total assets. Part saying price where earnings price Web Quello has increased. Barton price every by Britta has increased part time. So what is happening with Tesla? So does it was disintegrating. Negative returns on asserts capital as well as equity. Its operating efficiency is going down. Its asset. No, no. Where is almost same so nothing to do with very about it. It's short of liquidity position and current rations quickly show is going down. It's that has increased on it is getting costlier day by day to buy into the stock because valuations are no, that's lies trying to change the world by its electric cars and automotive cars. If this is the situations, you can consider the consider turnaround story so currently financial ratios don't look good for Tesla. But going forward, if you believe that this financial ratios were seriously taken up taken turn around because this life changing the world on when you change the world, you cannot worry about financials so you can consider the future aspect of financials and maybe decide to invest or not. But currently on based on financials, thing to talk about next is alphabet or Google, so return on assets have improved. So good written on Capitol has improved. Good return on equity has fallen. Not so we're EBITA margin improved, so operating efficiency is better. So good sane move ill net income Maginnes improved. So good sign, I said no, no world as well as successor to turn over almost seem so nothing much to discuss. Their current ratio has fallen, so short term liquidity has colon quick ratio. As Colin, so short term liquidity has fallen. Then you have total that so that has fallen. Was this equity and was this capital good sign? Total lead to total assets better that has in libraries have increased as well. Comfort toe asserts. Oh, not so good. Sign EBITA, divided by interest, explains interest coverage ratio has gone up good signs or does more income to pay its interest on price were earnings have short up as well as price per book while you have short up. So companies costlier toe by these officers passed. So Google better returns for on assets and capital, then operation efficiency is not as well as net income and part efficiency. Profit after tax efficiency means operational efficiencies. Willis Financial efficiency has gone up. Derek has fallen. Was his equity That's a good time death has fallen? Was his capital. That's a good sign. More income to cover to interest expense bar things, less return on equity. Then sort of liquidity is going down. Total Abertis have increased versus asserts as well s The company's getting costlier day by day to buy in tow on. And we have completed these three statements. Oliver, about Tesla on alphabet that is Google. So just toe recap horizontal illnesses is finding Prince You compare previous period straight. I was just the spirits data aan den. You decide whether the ratios increased and decreased on whether it is good but back these three companies we have discussed these are only for illustration purpose off the concept. I am not recommending you to buy or sell anything. I'm not even commenting on a word this for the future of these companies would be Thank you .