There are various ways to assess portfolio performance, especially when just knowing the return may not tell us much about the true performance of a manager. The measures below are four commonly used methods to evaluate portfolio performance. Sharpe Ratio = (Rp – Rf)/σp The Sharpe Ratio is a measure of risk premium gained per unit … Read more
With the IFRS, the costs of inventories include purchase costs, conversion costs and transport costs. Purchase costs include duties, insurance, handling, shipping and any other costs of acquisition of the inventory. Volume discounts like rebates reduce the price paid of purchase. Costs of conversion are related to management of the inventories, like labor and overhead … Read more
Bond duration is one of the measure of interest rate risk on a bond. It measures the sensitivity of a bond’s price to changes in interest rates. One assumption of duration analysis is that all other variables are fixed. Essentially, bond duration tells us how much longer or shorter we need to hold a bond … Read more
The simplest present value model for estimating the worth of company is the dividend discount model. It assumes that the company issues regular dividends and there is a constant required rate of return. The idea is that the value of the company is the present value of the sum of its dividend cash flows. Dividend … Read more
Short Term Investment Yields Short-term investments are investment assets that are meant to be held for less than a year. We calculate the yields on money of these assets using a discount yield basis. The difference between face value and purchase price is the discount interest. Purchase price (discount purchase): Face Value – [(APR)(periods remaining/maturity)(FV)] … Read more
An alternative to purchasing assets is to lease them. Leases have advantages over outright purchases, but are treated for differently than purchases in terms of accounting. Usually, leased equipment can be financed very cheaply due to the nature of lessors, whom may enjoy benefits such as economies of scale on equipment, which incentivize them to … Read more
The DuPont system is widely taught because by interpreting the ROE of a company through various other ratios, we can quickly gain insight into the various operations of a company and understand which aspects could be improved to generate a higher ROE. The DuPont analysis breaks the ROE of a company apart in three different … Read more
The three major financial statements analysts look over to evaluate a company are the income statements, balance sheet and cash flow statements. The income statement shows how the company is using its assets and liabilities to generate revenue. The cash flow statement is an overview of the inflows and outflows of cash, and shows the … Read more
The balance of payments for a country is a bookkeeping system which represents the sum of a countries economic transactions with the rest of the world during a set period of time. The system uses a double-entry method, where every credit has a corresponding debit entry. Ideally, this would lead to the balance of payment … Read more
Technical analysis focuses on making investment decisions purely based on supply and demand forces which are interpreted in charts and graphs. Technical analysts believe that human driven markets are susceptible to predictable reactions and patterns of behavior which enable analysts to estimate price direction. Using technical data, mainly based on price and volume trends, seek … Read more