Monthly Archives: July 2013

What is a Common Size Financial Statement?

For carrying out their financial analysis of a company, stakeholders need its financial statements to collect useful information concerning the company. A common size financial statement provides everything in the form of percentages. Items in the balances sheet are given as a percentage of assets whereas items pertaining to income statement are offered as sales percentages.

Comparative financial statements contain monetary data for a number of consecutive years alongside.  Facts and figures could be offered as percentages, in absolute values or both.

1. Vertical Common-Size Statements

This kind of financial statement is a kind of common size financial statement which states all values as a percentage of the base value of the same year. Vertical common statements are most helpful in case of income statements. Generally, the amount of entire sales is taken as a base value (100 %.) Assorted expenses like the amount of merchandize sold, expenses towards advertising, administrative expenses etc are shown as a percentage of entire sales.

Vertical analysis, when used in conjunction with balance sheet, tells us the relationship between different items (like liabilities, assets and equity) and the sum of total assets.

Since analysis is carried from top to down, such financial statements are known as vertical financial statements.

2. Horizontal Common-Size Statements

A common size financial statement that conveys values over a number of years as a percentage of the base value for a specific base year is called horizontal common size statement. . Horizontal statements prove helpful while comparing data of balance sheet and income statement to assess the changes that took place over the years. Since data analysis is carried along the rows of statements these are known as horizontal statements.

3. Comparative Financial Statements

Comparative financial statements, also known as year to year statements may use either absolute amounts or percentages to facilitate significant analysis. This kind of analysis provides an outlook of percentage changes and absolute changes. You can’t work out any changes in the absence of a base figure or calculate any important changes when you have one figure while the corresponding one is positive.

Considerations

You’ll find common-size financial statements of great help for comparing fiscal data of different companies, especially of companies engaged in different kinds of industries. That is because it becomes rather difficult to say if a figure is too high or low or normal because of the differences created in financial statements due use of different currencies by various companies and their sizes. Common size financial statements, being standardized, enable us to make effective comparisons.

How to Buy Stocks and Bonds?

Knowing how to buy stocks and bonds helps securing your funds for future. Traditionally, these financial instruments are known to have provided maximum returns on funds. Though investments are always associated with some element of risk, you can reduce that risk by spending time to research the companies you should invest in and formulating your investment plan. You objective could be to afford college education of your children or to take care of financial needs on retiring. Whatever be the objective, ensure your investment portfolio contains stocks and bonds.

Here are some essential features of learning how to buy stocks and bonds:

• Having stocks offers a means of owning a part of the company. The worth of stocks keeps fluctuating, depending on many factors. Stocks allow you to gain the most, provided you buy these at low prices and sell the same when prices are high. Usually, you can also expect some payment by way of dividends that many companies provide on making profits.

• Bonds are secured debts. In their case, you loan your money to a company, government or municipality and earn a specified predefined amount of interest for a definite period, at the end of which your money is paid back by the borrower.

2. Conduct your research independently. You can find any number of people advising which bonds and stocks you should buy. Some may offer that piece of advice free, while others would charge fees for that. Perhaps, you best option will be to conduct research of your own and be a self-learnt advisor of investments. Fortunately, you’ll find the Internet of great help in this regard. Here are the things you should be looking for when learning how to buy stocks and bonds:

• study quarterly and annual reports
• examine industry and press releases
• take note of conference calls
• find out competitors of the company
• what are the assets of the company
• who forms the management of the company and are they experienced

3. For buying and selling bonds and stocks open an account with a broker. You choice of broker depend on the kind of work you would like them to do for you and the amount you are willing to pay for such services.

• Brokers providing full services will offer research on investments but charge more fee as commission.

• Discount brokers will buy or sell bonds and stocks for defined prices. They don’t provide any advice but may make available some research on investment.

4. At the initial stages of making your portfolio of investments, make investments in mutual funds. Rather than purchasing stocks or bonds, mutual funds collect funds from a number of investors for making investments in bonds and stocks or additional securities. You can find a very large number of mutual funds that focus on different kinds of investments like large caps, index or small caps or different kinds of industries like IT and healthcare. You also have funds specializing in bonds or a combination of bonds and stocks to keep the fund balanced. You may buy mutual funds straightway from the company or through a broker.

Those were the essentials of learning how to buy stocks and bonds.

How to Invest in Stocks and Bonds

Buying bonds and stocks make a worthwhile investment in the long run.  However, it’s imperative that one understands how to invest in stocks and bonds and derive benefit from that investment, rather than losing money. Here we’ll tell you how to invest in stocks and bonds.

1. It is important to understand the working of bonds and stocks. The two are different kinds of investments. Possessing stocks of a company implies that you own a part of the company. Bonds don’t give you any ownership rights of the company. Bonds are debt instruments that the company is obliged to honor.

2. You should also be aware of how bonds and stocks help you making money. In case of stocks, only when the performance of the company is good, you also make money and the worth of your stocks tends to go up. But mind you, stock prices are considerably volatile. On possessing bonds of a company you get paid interest on your investment and definite predefined periods of time and you get your investment back on maturity of that bond. However, volatility in this case is not much.

3. Before making investment in any company, you must research the same. You can find a number of online sources for the purpose. You may also ask for financial statements and annual reports straightway from the company you intend investing in.

4. You’ll also need to open a brokerage account prior to investing. You may select one of the online brokers charging a low rate of commission. Should you require any additional help before investing it will be worth consulting a professional broker in person. Of course, they provide additional information and guidance but charge for that.

5. Define aims of your investment and prepare your portfolio. Defining your goals, including time frame gives you a fair idea how to distribute your funds among bonds and stocks. Bonds  give a regular income whereas stocks get appreciated over a long time.

Those were the basic points telling you how to invest in stocks and bonds.

How Is Market Share Calculated?

What is market share?

The sum total of the sales of any product comprises of the sales contributed by a number of businesses selling the same product, meaning each business has had its share of the total market for that product. This share or contribution of each business to sales of the same product in a given area over a definite period of time is called market share. It is easy to calculate market share of a particular company or dealer. Let’s say that the total number of cars sold by all the manufacturers in a country during one year is 10 million and if one company sells 1.3 million cars, its market share will be 13 percent. In case of small businesses it becomes rather difficult to assess their market share. Nevertheless, it is important. That’s because unless you know your share of the market, you can’t know how good or bad your business is doing as compared to your competitors. An increased sale usually means you are doing good business but if there is a drop in sales it indicates that either the market for that particular product has shrunk or your competitors are grabbing a lion’s share of that business.  Here, we’ll see how is market share calculated:

Defining the Market

For assessing a realistic market share, it is vital to first classify the market which needs to be considered. For instance, it doesn’t really help small businesses to know their share of the national market. Only that market needs to be considered that is open to that small business. One decisive factor is the geographic location of the business. Usually, operations of small businesses are confined to local cities or districts. If the business is catering to any specific clientele, it forms an important factor. For instance, a local store specializing in selling clothing for teenagers should be concerned about that market rather than the sales of the entire clothing market in that area.

How is market share calculated?

Two methods are used for calculating market share. Market share can be measured in terms of sales or number of units. For instance, a retailer selling high-end shoes may be keen to compare his sales against stores selling discount shoes. In this case it will be worth comparing on the basis of number of shoes to asses market share. Having selected the method and clearly defined the market you want to evaluate, it is essential to collect related information and data concerning business. Getting data from the market is quite difficult. So, how is market share calculated in such cases?  Fortunately, there are sources available for the purpose.  A lot of information for small businesses can be gathered from newsletters and industry publications or from statistical reports published by government agencies at federal, state or local level. Local chambers of commerce and trade organizations are also helpful for getting such information. They often suggest additional sources for gathering required information to small business owners. Once you have the required information calculating market share is very simple. Simply divide the total sales of the product (in term of units or revenue) by the sales made by your business over the same period.  Let us assume the total number of shoes sold in a particular year in a specified state or country was 600,000 while a local store sold 30,000 shoes. In this case, the market share of local store will be 30,000/600,000 X 100= 5%.

Revenue and Sales Difference!

Businesses keep a track of their performance for a defined time by having nominal accounts through a financial statement known as income statement. It contains the values accumulated in those nominal accounts that are used for keeping track of indicators which are needed for assessing the performance of business over a defined period of time. Income statement explains expenses, revenues and profit or loss for that period of time. The statement gives net revenue=net sales + every other net revenue that the business may have from other sources.

To make revenue and sales difference more clear, let’s explain the each term:-

Gross Sales

Gross sale is the sale that doesn’t exclude discounts, goods received back and allowances. For example, if a business sells 20 units in a given period at the rate of $100 each, of which it receives back 5 units, it is said to have achieved a gross sale of $2000. Net sales, on the other hand, are sales minus discounts and goods returned.

Returns, Discounts and Allowances on Sales

Since net sales do not include discounts, allowances and goods received back, they give us a realistic figure of sales made during a particular period of time. That is why it is considered as the real worth that a business has achieved through sales of goods in that time. Going back to the above example, an amount of $100 X5= $500 needs to be deducted from $2000 towards the goods received back, giving a net sales figure of $1500.

Gross Revenue

Gross revenue means the total revenue earned by a business in a given time. It includes discount, returns and allowances. Though for most businesses revenue comes from sales of goods and or services, all of them don’t follow that practice and even those following it may earn secondary revenue, which doesn’t form a part of their key operations. An example will be of a business that is earning revenue by way of interest on certain interest paying monetary instruments in its possession.

Net Revenue

Net revenue is the total of all revenues that a company earns from various sources in a specified time. It is not frequently used as total revenue or just revenue describes the same in a simple way. Net revenue doesn’t mean revenue minus expenses as that will equal to income.

That should give you fairly good idea of revenue and Sales difference.

Reputable Sources for Buying Gold Coins

Many people like having gold as an investment. Others buy gold as it provides them a hedge against inflation. It’s not unusual for investors to invest in gold coins. Whatever be their reasons, the issue for them is from where to buy gold coins.

Fortunately, buyers have quite a few options when it comes to where to buy gold coins from. Here’s a list of some of the online vendors of gold coins.

Goldline

Headquartered in California’s Santa Monica and established in 1960, Goldline has been recommended by hosts of a couple of traditional talk show of the reputation of Glenn Beck, Mark Levin and Laura Ingraham.

While recommending buying gold coins, the website gives the example of 1933, when gold in possession of American citizens was confiscated in an attempt to bring about stability to the distressed US dollar. President Franklin Delano Roosevelt ordered citizens to deposit their gold coins into a Federal Reserve Bank, else risk detention and a heavy fine. The only type of coins, which got exemption were those documented to have exceptional value for collectors of unusual and rare coins. Under circumstances when a lot of people become uncertain of dollar losing its stability, fearing abolition of gold, this company sells rare gold coins of collectors’ interest like the ones which were earlier excused from confiscation by the government.

Blanchard

New Orleans based Blanchard, set up in 1975, takes pride in reporting that they have already served above 400,000 clients. It likes to classify gold among physical assets.   Owners can hold this asset in their palms and that is not feasible in case of stocks. The company’s website lists the American Eagle coin as an option for investment, highlighting that the coin is minted in US, from gold derived from American mines.

Swiss America

Here is another source telling you where to buy gold coins from. This Phoenix based organization instituted in 1981 maintains that it never left any grievance unsettled with any of its buyers. The company was talked about by The American’s Red Cross’ video, named “Preparing Wisely.” Other foremost publications wherein Swiss America has been mentioned include The Wall Street Journal, Newsweek and The New York Times. Their representatives have appeared as guests on economic programs of different TV channels like CNN, Fox News, Bloomberg and ABC.

HSN

Website of Home Shopping Network, HSN.com sells silver and gold coins. Its website tells us that expert members of its staff purchase valuable coins from different sources all over the world. The company sells coins in a box and provides certificate of their authenticity along with their origin and conditions of purchasing the same.

So, those were sources answering where to buy gold coins from!” If ever you doubt the authenticity of any online source selling gold coins, don’t hesitate to approach the Better Business Bureau to know more about the seller.

Which Gold Coins Are Best to Buy?

Investors are inclined to buy gold coins as an investment as gold is treated as a hedge against inflation. But the issue they face is which gold coins are best to buy.

Well, when it comes to decide which gold coins are best to buy, it is largely a matter of personal choice.  Some may like to collect and retain coins with historical significance as an investment while many are prompted to buy coins just because of their attractive looks. However, the fact that you are buying for the purpose of investment can’t be ignored altogether. So, you should look for coins that offer maximum value for your money. Here are the factors that affect value of gold coins:

Purity and weight: Undoubtedly, the most significant feature when thinking which gold coins are best to buy is the purity of metal and its weight. It is not difficult to assess these two factors in case of gold bars that come with these specifications clearly marked on them but it is not so in case of gold coins. A bit of research is often required to know the purity of coin and its weight, which is not difficult to know. On multiplying the weight with its purity you get its gold content.

Include hidden expenses: When calculating the ultimate cost of a coin, you need to take into account other associated expenses too. For instance, you would need to pay taxes and transportation charges etc.

Calculating cost per ounce: Since the unit of measurement for gold is ounce, you need to determine per ounce cost of gold contained in the coin. So, determine the weight of coin in ounces and divide the cost of procurement by its weight in ounces to arrive at cost per ounce. For example, if the coin weighs three ounces, you’ll need to divide its ultimate cost by three to know per ounce cost of gold that the coin has. The best coins would naturally be the one having minimum cost per ounce.

Miscellaneous factors: Apart from the above mentioned factors, there are other factors too that affect the price of gold coins. The most significant of these is the mint which produces coins. Government owned mints are most regarded. Another factor is rarity or age of the coin plus its physical condition. At times, it may be desirable to pay a bit more for coins having any of these or such like features.

The above information should help you deciding which gold coins are best to buy.

How to Calculate Market Share?

For its survival in present competitive world, it’s imperative for any business to compare its performance with respect to others in the same business is. Though any company would be aware of the fluctuations of its sales on yearly basis, it is insufficient for staying ahead of other in market. The sales of a company could drop due all round drop in the requirement of a product but the other and more important reason for that could be that the competitors have grabbed more hare of the available market and that could be troublesome. Unless you know your market share you can’t know your standing in that industry, making it imperative to keep calculating your share of the market periodically, preferably at the end of each quarter or annually. Here’s how to calculate market share.

Calculating Market Share

Gather maximum possible information about the product you are dealing or services offered in your region. For instance a company selling microchips at a national level would need to asses total such chips sold in your country on an annual basis and the total revenue generated by that sale. Likewise, if you are offering painting services in your district, you should find out how much money consumers in that district are spending for availing such services. When you are in an industry that deals with a lot of private companies, it may be rather difficult for you to get the required information. In such a scenario you’ll have to depend on the information available with market research organizations and chambers of commerce and industries.

2. Once you have collected all the relevant data, this is how to calculate market share.  You can do it one of the two ways, each may give different result.

a) The first way involves the number of items. Let us say that last year 150,000 microchips were sold in the US and your corporation sold 150, 00 units. So, your market share would be 150, 00/150,000X100=10 %, meaning that last year your business sold ten percent of the total chips sold in the US.

b) The other way of calculating market share takes revenue in consideration. Let us say that last year the total amount which consumers in your district spent for painting services was $ 315,000 but your revenue was $43,500. In this case your market hare would be $43,500/$315, 00X100=13.8 %

Result received by calculating on the basis of number and revenue will be different as competitors would be selling their product at prices different from yours. Generally, it is recommended to use number based calculations for products while revenue based system is appropriate for service oriented businesses. Depending on the kind of your business, you’ll need to choose either of these two when it comes to How to Calculate Market Share.

3. If you keep tracking your market share regularly, you would know where your business is heading to. If there is a remarkable change in your market share, you should find its reasons. A reduced market share may mean your competitors are bagging additional business and you have to adopt new strategy for increasing your share of market. Increased market share indicates that your business is picking up and you just need to see that it’s being profitable for your company.

Now that you know how to calculate market share, you can take necessary steps to stay ahead of your competitors by suitably amending your business plans.

Is Buying Gold as Investment Good?

Traditionally, people have continued buying gold as investment.  Though buying and taking gold bars and coins in possession is still a favorite of many, modern investors get many other options for buying gold as investment. Here are some such options:

1. Physical Gold

Possessing gold in its physical form like bar and coins had been the traditional way of buying gold as investment and is still practiced.  Physical possession of gold brings a great feeling and sense of relief to many investors as they can see and feel it, unlike holding of stocks.

However, when buying gold as investment, caution need to be exercised, especially when buying coins as counterfeit coins made in China are already in circulation in the markets of US, as warned by Swissamerica.com in the year 2009. Quite a few coin certifying agencies have jointly issued warning to buyers about such fakes, which are frequently sold through online auction sites and flea markets.

2. Gold Financial Instruments

It is worth looking for an appropriate ETF (gold exchange traded fund.) It is a positive and easy way of investing in gold. Moreover, you may use the same for retirement account. Investors may also choose to have gold futures and options.

3. Gold Mining Companies

Another way to buying gold as investment is to procure stocks of companies operating gold mines. Like buying of any other stock, the investors should choose well managed companies having been awarded good ratings by market experts.

Buyers Beware

Buyers must use caution while dealing with brokers and companies making attractive offers to prospective buyers. In California, prosecuting agencies are already looking into complaints of over hundred consumers who reported that either the sellers misguided them or failed to offer the ordered coins as per specifications.

Which Gold Coins to Buy For Purpose of Investment?

Which gold coins to buy for investment?

Ans:- There is little doubt that investing in gold has certain definite benefits, thus prompting many investors to buy this precious metal in the form of coins. But, it’s critical to decide which gold coins to buy. That would depend on what your expectations are from such an investment. An enthusiast collector of coins would look for a coin having historical significance, while someone likes buying something with exceptionally appealing looks. But on the whole, the ideal coin that one can buy for the purpose of investment is something that offers value for money.  So, one need to consider the following factors while buying gold coins as investment:

1. Purity and weight are the two most factors that add value to gold coin. So, you need to assess its weight and also its purity. Though it is a normal practice for most gold bars to have these features marked on them, it is not the case in case of coins. However, it’s not too difficult to know the purity and weight of gold contained in a coin. On multiplying the two figures, you get the content of gold the coin has. For instance a coin weighting one ounce and 0.999 percent pure means its gold content is one ounce.

2. Include additional cost: While estimating its cost, you need to include the hidden expenses like taxes and shipping charges etc. You get the actual cost of the chosen coin only after adding such expenses to its original price.

3. Calculate the cost per ounce: On dividing the final cost by the content of gold, you get per ounce cost of gold. Make sure that you take its weight in ounces. You may need to convert its weight in ounces if the same is in any other measure. If the coin weighs three ounces, divide the cost by three and in case it is just 1/10 ounce, divide its weight by0.10. Obviously, you will prefer buying coin having minimum cost per ounce.

4.  Consider elusive characteristics: apart from its gold content and weight, another factor that affects the price of coin is the name and status of the mint where it was minted. Coins minted at government owned mints are the bust buys generally. Then, you also need to consider how old is the coin and also its physical state. Some such factors make it worthwhile to pay more for a coin than its estimated per ounce price of gold.

On taking note of the above factors, when considering which gold coins to buy, will surely make it worthwhile to invest in a coin you may be inclined to buy.