8 August 2018 | by Benel P. Lagua| Manila Bulletin
In finance, the terms price and value are not really interchangeable. An asset’s fundamental value can only be its price if well informed investors pay for it in a free and competitive market. The essence of asset valuation is to estimate how much an asset is worth using information about one or more comparable assets whose current market price we know. By the law of one price, which is enforced through arbitrage, if two assets are equivalent they will tend to have the same market price.
Value therefore comes from fundamentals which represent the capacity of the asset to generate and grow cash flows. Analysts determine this by an intrinsic valuation process which looks at projected cash flows from the asset and discounting the same using a risk adjusted weighted average cost of capital. Fundamental analysts attempt to estimate value by a thorough analysis of financial statements and accounting data like price-to-earnings (P/E) ratios, sales or profits growth rates, dividend yields , the prevailing rates of interest and other parameters.
The essence of value is that it comes from a company’s earning power evidenced by what is happening within the corporation. Such information is what causes cash flows to move and risks to be examined closely. This information is what will influence the value of the asset. Fundamental analysis looks at the intrinsic value of a company and its long-term viability. Read more
19 June 2018 | by Jonathan Yudelowitz| BusinessDay
How could the Steinhoff accounting scandal have happened after governance codes were tightened and additional emphasis placed on auditing after the Enron collapse and the 2007-08 financial crisis?
Former Steinhoff chairman Christo Wiese says he would like to learn how these controls can keep a check on a committed fraudster. "You cannot run a business if the directors have to check the books. No matter how many codes and gate keepers there are — if there is a committed, talented fraudster you have a huge difficulty. I would like to learn how to overcome this."
Wiese says Steinhoff complied with all auditing, stock exchange and governance regulation. He acknowledged in an interview with the Financial Mail in May that, "I don’t know what I would do differently. Read more
Updated 6 June 2018 | by TheStreet Staff | TheStreet
While a company's income statement presents the current results of a company's operation, there are other financial statements that can present how a company is performing using other factors. The balance sheet, for example, depicts the financial strength (or weakness) of a company.
So what's in a balance sheet?
A company's balance sheet has three main sections:
27 April 2018 | by Maurie Backman | The Motley Fool
When it comes to investing money, we have several choices at our disposal. But those looking for the best returns would be wise to consider the stock market. It's estimated that 54% of Americans have stocks in their portfolios, and if you're not part of that statistic, you're missing out on a key opportunity to accumulate wealth, whether it be for retirement or another long-term goal you might have.
Of course, investing in publicly traded companies carries some risk, and buying stocks can be a daunting prospect for beginners. That's why we've developed a comprehensive guide to investing in stocks for the first time. Here, we'll review the basics of how stocks work, how you can profit from them, and the pitfalls you'll want to avoid. Read more
13 May 2018 | by Matthew Cochrane | The Motley Fool
Investors who want to sport market-beating returns must first learn a few valuable skills and be willing to put in a little weekend homework. Arguably, the single most important skill investors can learn is how to value a stock. Without this proficiency, investors are left dancing in the market's winds without a firm foundation, not knowing if a company's future growth projections are already baked into the stock price or if a company's shares are severely undervalued. The very thought makes me shudder!
Almost everything in the financial news media can be classified as unnecessary background noise, but investors must have a way of determining a stock's true intrinsic value. For that reason, let's take a closer look at a few tools investors have historically used to value stocks and how you can use them to discover undervalued stocks today. But first... Read more
15 December 2017 | by John Mansfield | BusinessDay
Shareholder-centric governance model takes authority away from boards and managers
Let’s not blame directors for not fulfilling their fiduciary duties and causing corporate failure. It’s not really their fault; they’re simply playing by the rules.
Our directors and managers live by a shareholder-centric governance model that forces them to behave in a certain way. They believe that maximising shareholder value is the number one priority of boards and managers. Shareholders are "owners" and boards and managers are "agents".
They accept as true that shareholders own the corporation and, by virtue of their status as owners, have ultimate authority over its activities and may legitimately demand that the board and management, as agents, conduct corporate activities in accordance with their wishes. This notion is otherwise known as agency theory or the agency model of corporate governance and is now seen as the root cause of most corporate failures — and for the global financial crisis of 2008. Read more
17 January 2018 | by Jena McGregor | The Sydney Morning Herald
More than 1,000 CEOs around the globe received a letter on Tuesday from one of the world's most influential money managers with a pointed message: Simply posting good financial returns is no longer enough. You must have a positive impact on society, too.
In his annual letter to CEOs, Laurence Fink, the chairman and CEO of BlackRock, which manages nearly $US6.3 trillion ($7.9 trillion) in investments, put CEOs on high alert that they would be expected to answer questions about their long-term strategy, what role they play in their communities and whether they are creating a diverse workforce that is being retrained for opportunities in a more automated future. Read more
7 March 2018 | by Aaron Smith | CNN Tech
Cryptocurrencies have been on a wild ride and the Securities and Exchange Commission is trying to rein them in once and for all.
The SEC warned on Wednesday of "potentially unlawful online platforms for trading digital assets." The federal agency said that cryptocurrency traders should only buy and sell them on exchanges registered with the SEC.
"If a platform offers trading of digital assets that are securities and operates as an 'exchange,' as defined by the federal securities laws, then the platform must register with the SEC as a national securities exchange or be exempt from registration," said the SEC. Read more
6 February 2018 | Produced by BBC's UGC and Social News team| BBC News
As European stock markets follow the turbulence in Asia and US trading, the BBC has asked for your questions about what is happening.
Many of the questions the BBC received focused on the possible ramifications for ordinary people.
Others wanted to know if it was likely the instability could bring about a crash.
BBC Business journalist Brian Milligan answers a selection of your questions below. Read more