Відео

My pleasure, Catalin! Related concepts like IRR and WACC are discussed in this playlist: ua-cam.com/video/aS8XHZ6NM3U/v-deo.html&pp=gAQBiAQB Feel free to connect on Linked In!

Happy to hear that! More cash flow related videos in this playlist: ua-cam.com/video/mZBjsIYrLvM/v-deo.html&pp=gAQBiAQB

I assume you are referring to the 3M balance sheet example near the end of the video? Accumulated other comprehensive income or loss in the equity section of the balance sheet relates to the cumulative OCI that went through the income statement through the years.

You're welcome 😊 Here's how to apply these concepts in a Net Present Value calculation: ua-cam.com/video/N-lN5xORIwc/v-deo.html&pp=gAQBiAQB

If you want to learn more about DuPont Analysis (return on assets, return on equity), then the videos in this playlist will help: ua-cam.com/video/bhbDDSohJ84/v-deo.html&pp=gAQBiAQB If you are interested in the risk of taking on too much debt and "blowing up" when overleveraged, then understanding liquidity and solvency are key: ua-cam.com/video/XtjS7CfUSsA/v-deo.html&pp=gAQBiAQB

Hello Neal! I had not heard of the term "permanent working capital" before you mentioned it, and have not seen it used in real world financial reporting in companies.

Welcome aboard! Happy to help wherever I can. I categorized my accounting related videos in a logical sequence in the Accounting 101 playlist. Have a browse through it, and see which videos could be helpful: ua-cam.com/video/b93KBmcXanI/v-deo.html&pp=gAQBiAQB

Glad you liked it! Thanks for watching and commenting!

Hi! Yes, for stock splits the historical share prices are also adjusted to be able to calculate returns on an apples-to-apples basis. Regarding the second part of your question (bonuses), I am not sure what type of bonuses you are referring to? Bonuses paid to the management of the company? Bonuses paid to shareholders as in one-time "superdividends" in a very successful year?

@@TheFinanceStoryteller In National Stock Exchange(NSE India), bonus shares would be given. Bonus shares are similar to stock split which can be given as 1:1 or any ratio and we would get additional shares for no extra cost. But in bonus, the face value of the stock remains the same after the bonus is issued. BTW, in NYSE there is no bonus shares?

Thank you for clarifying! In Europe, we tend to call this "stock dividends", where shareholders get additional shares in a company rather than cash in hand. I have seen in the reporting of my stock portfolio that this is sometimes handled by lowering the average value per share retrospectively. Example: you originally bought 10 shares of a company at $100 per share, so invested $1000 in total. When you get 1 bonus share, you have 11 shares, and the original investment remains at $1000. The historical cost is then adjusted to $90.91. Assuming the share price in the market stayed at $100 per share, then your current holding is worth $1100, and you made a 10% return (($1100/$1000) - 1, or ($100/$90.91) - 1). Regarding the second part of your question: my experience is that US bases companies tend to pay cash dividends only.

@@TheFinanceStoryteller Thanks for the reply. It helped me clear my doubt on how to calculate the returns from a stock.

Happy to help! I have a few more useful videos about the stock market in a playlist, covering topics such as dividend yield, book value versus market value, IPOs, short selling, penny stocks, ETFs, etcetera: ua-cam.com/video/K4mWd2zBYVk/v-deo.html&pp=gAQBiAQB

Great to hear that! Here's my playlist with financial statement case studies, nothing like going through the numbers of a real world company to learn new terminology and review unusual situations: ua-cam.com/video/Hq-44PHgAiU/v-deo.html&pp=gAQBiAQB It's got the Microsoft income statement, Tesla balance sheet and cash flow statement, etc.

I have the feeling this is a homework question that you are trying to get answered, so I am not directly answering it, but rather pointing you to the section of the video (~15 seconds long) where you will easily find the answer: ua-cam.com/video/1O-DbtVueMw/v-deo.htmlsi=obv5zlwf_8wfM9Wg&t=477

Thanks for the kind words, Evan! Please share the link to the channel with new generations of MBA students. DCF analysis is nice as a thought experiment, and for entertainment purposes. There can be quite a bit of confirmation bias in the assumptions, and obviously you cannot forecast or predict the "unknown unknowns". Yet, those unknown unknowns are the ones that can have a huge impact on future share prices. The problem I see with behavioral economics is that it is not easy to generalize their findings to a bigger environment, and that it focuses on trivial matters not the "life or death" category of problems. In general, I have turned away over time from prediction, and am far more interested in Nassim Taleb's work operationalizing concepts like convex vs concave, and building robustness (instead of fragility) or even better antifragility (benefiting from disruption).

@@TheFinanceStoryteller I’m also a fan of Taleb’s work. Do you have any content about implementing his principles in an individual portfolio? Lately I’ve been looking into barbell portfolios and tail hedges, but it seems like many of Taleb’s strategies would require the resources of a large fund to take advantage of.

To me, his approach is about lifestyle in general.... I have fully paid down the mortgage on my house, no other debt, know the ins and outs of my country's tax laws to avoid any unpleasant surprises, live below my means, etc. In my investment portfolio, a few of the stocks (Adobe, Synopsys, Airbus) explain most of my returns. I expected these to have convex properties when I bought them, and turned out to be right and/or lucky. I also picked a few stocks that turned out to be losers (hindsight bias), but only lost a bit of money on them (never blow up!). Other than that, I go for 50/50 ETFs and individual stocks. See also: ua-cam.com/video/GBLNKbOgQ4w/v-deo.html I have a few videos about Taleb's work, but not specifically on how to apply his principles to portfolios: ua-cam.com/video/tQEH9caNMi8/v-deo.html&pp=gAQBiAQB

@@TheFinanceStoryteller Thanks! Agreed - my big takeaway from his work was to look for ways to mitigate risk everywhere.

Happy to help! My experience with Excel is that certain functions might work slightly differently than you originally expect, that's why I build my own calculation first and then check how to input data into the Excel function to get the same result. One such example is the NPV function in Excel, which really is a PV function rather than NPV, as you still have to deduct the initial investment.

@@TheFinanceStoryteller I still have a sheet tucked away for depreciation, each method contrasted manual vs function.

You could do separate calculations for the present value of the investment cash outflows, and separately calculate the present value of the future benefits (cash inflows). That way, you still get one number to put into the denominator of the calculation.

Happy to help! More DCF related content in this playlist: ua-cam.com/video/Wez6_1-9WiU/v-deo.html&pp=gAQBiAQB

Glad it was helpful! Some more examples and discussion in this playlist: ua-cam.com/video/W5CrcMSBARU/v-deo.html&pp=gAQBiAQB

I have one video on the channel that is very close to that: "Book Value vs Market Value of Shares" ua-cam.com/video/uCs9AyGIb3c/v-deo.html

Hello Niraj. Bank statements are written from the bank's perspective. If you have money in your bank account, then that is an asset for you, and on the bank's side a liability from the bank to you. Hence the bank statement will say you have a credit balance.

@@TheFinanceStoryteller Okay thank you! I understood But i want to know that if i want to tell someone that i have money in my account that should i say? "I have credit balance in my bank account or I have debit balance in my bank account" ??

Keep it simple: you either have money in your account, or you owe money to the bank. Per your bank statement, you have a credit balance.

@@TheFinanceStoryteller Okay but can't i say that i have credit balance to light up my saying that i have money in my bank account?

Thanks for the kind words! Please recommend it to friends and colleagues.

No worries! Been delivering a lot of "Finance Essentials" and "Advanced Finance" programs to clients in the corporate world. Now back to making videos starting this week! Stay tuned!

Hello! There are two ways I can read your question: 1) If I do a DCF analysis on a certain company now (in June 2024), can the WACC be different from the one that I used in a previous DCF analysis for the same company a year ago or two years ago? Yes, especially as interest rates have changed significantly over time. 2) Can I apply a different WACC to cash flows occurring in different years in the same DCF model? No, that makes it unnecessarily complicated. When calculating the present values, you already apply the time value of money ("lighter" on earlier years, "heavier" on later years) by doing WACC^1 for year 1, WACC^2 for year 2, etcetera. See also my video on DCF: ua-cam.com/video/Wez6_1-9WiU/v-deo.html&pp=gAQBiAQB

Hi! Add up the discounted benefits $333 + $278 + $231 + $193 and then deduct the upfront investment of $1000, that gets you to NPV of $35. My apologies if that was not clear in the video.

Thank you! More explanations and examples in this EBITDA playlist: ua-cam.com/video/eH4ex5q_j1w/v-deo.html&pp=gAQBiAQB

I would suggest to go very deep in one of the two, and build strong expertise, while being aware of the differences with the other standard. Many accounting firms have published guides on the main differences, with various level of "technical" discussion.

Inflation is (implicitly) included. The higher the inflation, and the higher the risk level, the bigger the rate of return will need to be.

@@TheFinanceStoryteller I know it will be difficult to determine the true value because it depends on who we trade with. So it can be said that in TVOM we assume the interest rate already includes the inflation rate. Am I right?

Agree! Sadly enough, in today's economic circumstances in Europe, banks offer an interest rate that is lower than the inflation rate, which has prompted me to put my money elsewhere (higher yielding and obviously also higher risk bonds of small to medium enterprises).

Thank you for the compliments. Please share with friends and colleagues.

Then the outcome of the calculation is NMF: Not MeaningFul. It tells you absolutely nothing. Other than the company potentially being in significant financial trouble.

Yep, it has pretty much been moving "sideways" for the past couple of months. I am still holding on to my shares, as I am optimistic of Verizon's future.

Kleiner taalgebied (dus minder kijkers), en het klinkt ook een stuk saaier....

Happy to help, Mitchell!

I would argue conservatism / prudence. What do you think?

@@TheFinanceStoryteller I'm confused between conservatism/prudence and materiality. Is it possible for both to occur simultaneously?

Overstating revenue is taken very seriously by authorities and auditors. In fact, it is a very common factor in a lot of accounting fraud cases. I have seen many CFOs getting fired for not having revenue recognition under control (and booking too much revenue is obviously a far bigger problem than understating revenue). Have a look at my revenue recognition video for more information: ua-cam.com/video/816Q6pOaGv4/v-deo.html Overstatement of revenue of any amount is seen as an issue, regardless of the size, so I don't think materiality is the main concern here.

Thank you! 😃

Like yourself, I am a big fan of incremental improvements as well. Both technical as well as perceived quality should go up, not down!

Hi! Add up the discounted benefits $333 + $278 + $231 + $193 and then deduct the upfront investment of $1000, that gets you to NPV of $35. My apologies if that was not clear in the video.

@@TheFinanceStoryteller thank you so much iam a CFA level 1 asperent and the day i found ur channel it had given me confidence

Hi Dylan! You are largely correct, but I would phrase it slightly differently. At 22% discount rate, you are indifferent between doing or not doing the project, as the NPV is zero. At higher discount rates (over 22%), you would get a negative NPV, meaning that the project destroys value if it is pursued. At lower discount rates (below 22%), you get a positive NPV, meaning the project creates value when pursued. I have a separate video explaining the difference between IRR and discount rate (aka WACC), this might be useful to watch: ua-cam.com/video/ZuH_q5crAWg/v-deo.html

​@@TheFinanceStoryteller Oh ok ofcourse, now I understand it better thank you. Basically, we need to find the discount rate that makes the NPV zero, which in this case is 22%. This rate is the IRR, which tells us if the project is profitable or not and the NPV indicates this together with the discount rate/IRR. If a higher discount rate (WACC/RRR+components) results in a negative NPV, it means the project or investment is not profitable, and vice versa with a positive NPV. The other thing I need to be careful about is between gross IRR and net IRR. Net cash flow or FCF will most of the time be a net IRR if used in an IRR calculation if I'm not wrong?

Happy to help!

Hi! The terms assets, liabilities and equity come from the financial statement called the balance sheet, which is a picture at a point in time of what a company (of a person) owns on one side, and owes on the other side. In your example of the house that's worth 500K, which is fully financed by a loan of 500K, then the equity (what a home is worth minus how much you owe to the bank) is zero. If the house is worth 500k, and the debt on it is 300K, then the owner of the house has 200K equity in the house.

... yet effective. :-)

@@TheFinanceStoryteller Really awesome how you kept it simple for us all to understand. Subscribed!!!

Please share the video and/or link to the channel with friends and colleagues! 😊

The best time to plant a tree was twenty years ago, the second best time is today! ;-)

Good catch! I should have phrased that as: "The higher the NOMINAL interest rate, and the more frequent the compounding periods, the bigger the difference between nominal and effective rate".

Play around with it a bit in Excel, and you will see how nominal rate and EAR relate: ua-cam.com/video/8PkMM1_DseU/v-deo.html

Break even analysis is a simplified view on the much more complex real world. You classify costs as either variable or fixed, even though they might not be 100% fitting that definition. For labor cost, I would indeed make the assumption that you include them in variable cost. Take the monthly salary and divide by the number of hours worked.

Awesome, thank you!

Hello! No, that's not something that I have expertise on.

@@TheFinanceStoryteller Oh its alright Sir!! Then uhm can you please make a video on teaching how to make suspense accounts??

Yes, my suspense account video can be found here: ua-cam.com/video/7_CBmXcJE2Y/v-deo.html

@@TheFinanceStoryteller Thankyou sir 😊

Thank you so much! 😊