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Personal Finance

Personal Finance. Investing – Intro to financial statements. When investing in stocks…. …information is key!. What information are we looking for?. Business 101 Foundation of a great business is SUSTAINABLE PROFIT! Successful companies EARN and SAVE

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Personal Finance

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  1. Personal Finance Investing – Intro to financial statements

  2. When investing in stocks…. • …information is key!

  3. What information are we looking for? • Business 101 • Foundation of a great business is SUSTAINABLE PROFIT! • Successful companies EARN and SAVE • We are looking to see if a company has the ability to consistently make money and invest it wisely on behalf of shareholders • Where do we look for this information?

  4. Business Financial Statements • Publicly traded companies are required to release updates on their financial performance every quarter (90 days) & a full audited financial report every year. • These financial statements consist of: • Balance Sheet • Income Statement • Cash Flow Statement

  5. Balance Sheet • Measures what a company Owns (assets) and Owes (liabilities) on a given date. • What to look for on a Balance Sheet • Strong Cash (cash & cash equivalent) position • No excessive amounts of long-term debt • Easy to read and understand

  6. Balance Sheet: Intel • http://finance.yahoo.com/q/bs?s=INTC&annual • Note the large, steady amount of cash (and short term investments) and the consistently low long-term debt

  7. Income Statement • Tells us how much profit a company generates year in and year out • What a company spends and what they take in • What to look for on an income statement • Sales (also called revenue) that increase quarterly • Profits (also called net income) that increase quarterly • Because of sales, not because of lawsuit settlements and other various non-sale related items • Where are they spending their money? • Beware of cost increases.

  8. Income Statement: Intel • http://finance.yahoo.com/q/is?s=INTC&annual • Declining Sales & Profit from 2007 – 2009 • Why is this? • Continuing to fund research and development

  9. Cash Flow Statement • Exactly how much cash (dollar dollar bill, y’all) went into and out of the business • What we look for • Positive change in bottom line of cash flow statement (Change in Cash and Cash Equivalents) • Means more cash coming in than going out • If cash flow is negative • LOOK FOR A GOOD REASON WHY!

  10. Cash Flow Statement: Intel • http://finance.yahoo.com/q/cf?s=INTC&annual • Positive cash flow in 2007 • Strong Operating Cash Flow • Negative in 2005 & 2006…why? • Stock Buybacks • Capital Expenditures • Neither of these are necessarily bad

  11. Where do I get this great information? • It’s free and easy to find! • Financial Websites • Finance.yahoo.com (quick, easy to use) • Finance.google.com (quick, easy to use) • Cnbc.com • Government Websites • www.sec.gov (look for 10-Q and 10-K reports) • Company Website • Website of specific company • Get reports and listen to conference calls

  12. How much information should I get • For starters, as much as it takes to help you understand the business in and out • Then, spend at least 1 hour a week per company you own! • Look at the news relating to stock/industry/market • Research competitors • Read corporate press releases • Listen to company’s conference calls • Read company’s quarterly reports

  13. Is Intel a Good Company to Invest In? THE BAD THE GOOD

  14. Activity: Evaluating Financial Information • Click on the worksheet in Moodle and complete it using information from one of the financial websites discussed in class. • Submit the file to me when you are finished.

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