Investing for Beginners .EU, investing Many of the biggest and most far-reaching investments we make in our lives are investments that have little or nothing to do with money.
Daniel Quinn

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Investing in Russia
  Investing in Russia has gotten really widely promoted for the last period. I can remember the talks that stocks in Russia are the cheapest over the world for not less than year. The fact, that those stocks are st

Investment in Bulgaria
  Starting from the very beginning I will try to make clear why I am bullish about investing Bulgarian stock market. At first I would suggest to look at the chart below.   Five year Bulgarian stock market in

US Debt Relief
  Let me give you few facts at first that we would now what are we talking about: The General government gross debt in percent of GDP in the United States was reported at 83.21 percent of GDP in 2009 (90% of GDP

Interest Coverage Ratio
  Interest coverage ratio shows company’s ability to pay interests for its financial debts. Interest coverage ratio is a ratio between operating profit (EBIT to be more exact) and expenses for interests. The

Sortino Ratio
  Sortino ratio is a financial ratio that is used to measure the performance of investment portfolio and is very similar to a Sharpe ratio. The main difference between Sortino ratio and Sharpe ratio is that Sharpe

Terminal Value
  Terminal value is a value of the business (or other asset) used in discounted cash flow (DCF) method that is added after the discontinuing of the cash flow forecasting.   DCF valuation is based on the sum

Value Investing
Investment strategy - Value Investing   Investing in value stocks is fundamentally different from investing in the growth companies. Stocks of growth company will rise up impressively during bull market when value

Investing in Unprofitable Companies
Investment Strategy - Unprofitable Companies Investing in companies that are still unprofitable is more difficult than investing in profitable companies, but may also be very successful. If the company will turn around

Investment Techniques
  Investment techniques are some combination of investment strategies and investment tactics. Investment techniques usually are middle term oriented procedures that help to reach some predetermined result. It may i

Stock Book Value
  Stock book value is a book value of one share. It is calculated dividing shareholders equity by share number and gives some very approximate investing guidance about the value of the stock. It is popular to look

Stock Buyback
  A stock buyback (share repurchase) is a company’s purchase of its own stock on the market. It is contrary way to pay out capital for shareholders to dividends. Stock buybacks are getting more and more

Investment Report
  An investment report is a for investors prepared document on purpose to provide useful and objective information that would help to make an investment decision.     Investment report may have many for

Business Valuation
  The goal of business valuation is to determine the correct market value of a business. Usually business valuation is performed by professional valuators / assessors who have required qualifications for the job.&n

Cheap Stocks
  Cheap stocks are such stocks that are traded at low valuation multiples. For example, if you see a telecom or utility company of which P/E is equal to 6 and EV/EBITDA is equal to 3, you may say it is a cheap stoc

Value Stocks
  Value stocks are opposite to growth stocks and attract investors not by growth perspectives but by stable cash and dividend flow. Market ratios (P/E, P/B and other) of value stocks are low and together with high

Net Present Value (NPV)
  Net present value (NPV) is a value calculated by discounting all future net cash flows (net cash flow is calculated taking all the forecasted future income and subtracting from them forecasted expenses in every p

Financial Leverage
  A financial leverage is a use of borrowed money to achieve more efficient capital structure. A borrowed capital is cheaper than equity capital most of the times. So usage of loaned money makes weighted average ca

Investment Performance Measurement
  Many investors are happy about investment managers until the stock market is growing, but when the decline starts investment managers gets only the worst words about their job. However, this is wrong attitud

Treynor Ratio
  Treynor ratio is another popular ratio that is used to measure the performance of investment portfolio. This ratio compares the excess return (above risk free return) of a portfolio to beta of that portfolio. Whi

Jensen’s Alpha
  Jensen’s alpha is used to measure the performance of an investment portfolio. The higher ratio means better performance of portfolio manager. Basically, this Jensen’s ratio shows the above market port

Sharpe Ratio
  Sharpe ratio measures the above risk free performance of investment portfolio in relation to its risk. This ratio was developed by William F. Sharpe which introduced the ratio in 1966. Now Sharpe ratio is the mos

Return on Investment
  Return on investment (ROI) is a percentage that shows profitability of an investment or investment portfolio. Return on investment calculation:   CALCULATION:   Return on investment = net in

Valuation Multiples
  Valuation multiples are stock ratios that include in the calculation share price and show whether stock is cheap or expensive compared to similar stocks.     Valuation multiples (or just multiples) ar

Relative Valuation
Comparative analysis    Relative valuation is stock valuation method that gained its popularity because of simplicity and practical importance. The key principle of relative valuation is about valuation multi

  OIBDA or also called operating income before depreciation and amortization is a financial measure used to represent specific type of an income. There are many types of income and each of those has some advantages

EBITDA Coverage Ratio
  EBITDA coverage ratio (also called EBITDA to Interest Coverage Ratio) shows company’s capability to deal with its financial leverage. If this ratio is too low, that may show company is in trouble and may ha

Profitability Margins
  Profitability margins are ratios that show how profitable company’s activity is. There may be many kinds of profitability margins. Normally profitability means some kind of profit divided by revenue. But al

  ROE (Return on Equity) shows profitability of company’s book value. Company’s book value (equity) is equal to company’s assets less liabilities, and ROE is usually higher if company ha

  ROA (Return on Assets) shows what profits are earned by company’s assets. Of course, assets alone usually do not earn the profit, because most of the times profit is the result of know-how and hard work of

Outstanding Share Number
  Outstanding share number is an important characteristic for the stock value of every stock company. This number represents all the issued shares in the company except the shares that are held by the company itsel

  (1) Market liquidity is a characteristic of a security or other traded investment that shows how easy it is convertible in to cash at a market value. Usually when investor decides to sell some investment and

  Earnings are calculated gains of the company and should represent the profit of that business. There are several types of earnings:   Retained earnings are equal to net profit less dividends. Net earnin

  The term income may have several meanings. In corporate finance it basically means profit or earnings that are equal to revenue less expenses. But in some cases income may also indicate company’s revenue bu

Gross Margin
  Gross margin is profitability percentage that shows the ratio between gross income and revenue. Gross margin is usually calculated when there is a need to compare company’s competiveness and effectiveness i

Operating Margin
  Operating margin is a profitability percentage that shows what company’s profit margin is before it pays interests and taxes. Operating margin simply ignores capital structure (because ignores financial act

  EBIT (also called Earnings Before Interest and Taxes) is a financial indicator of the company that provides information about company’s profitability while ignoring the impact of capital structure and corpo

Financial Analysis
  Financial analysis is an important part of investing, especially if investor wants better results from his investments. Of course it is possible to ignore financial analysis and make investment decisions based on

  Return analysis is different from profitability analysis because usually return is measured as a profitability of the assets, investments, capital or other similar asset group but not as a profitability of the re

Debt Coverage Ratio
  Debt coverage ratio (debt service coverage ratio) is a ratio that measures solvency risk and mostly is applied for property projects. There are many debt coverage ratios that are used in financial practice on thi

  Solvency analysis takes an important part in financial analysis and mostly is used by creditors. Creditors of the business (bondholders, banks that provide loans) don’t care much if company’s profit w

Debt to Equity
  Debt to equity ratio (also known as D/E ratio, Debt/Equity) measures how big is company’s debt compared to its book capital (equity). The higher is the debt to equity ratio the higher is the insolvency risk

Debt to Asset Ratio
  Debt to asset ratio (also called as D/A ratio, Debt/Asset) measures how big is company’s debt compared to its assets. Debt to asset ratio is very similar to debt to equity (D/E) ratio but normally is lower

Debt to EBITDA
  Debt to EBITDA (also known as D/EBITDA or Debt/EBITDA) is widely used ratio that measures how big company’s debt is compared to its EBITDA (earnings before interest taxes depreciation and amortization). EBI

Turnover Ratio
  (1) Turnover ratio of mutual fund shows how quickly assets of the fund are changing. Actively managed investment funds have higher turnover ratio than passively managed funds, and normally turnover ratio is measu

Cash Debt Coverage Ratio
  ‘Cash debt coverage ratio’ (also known as ‘current cash debt coverage ratio’) measures company’s ability to repay its debts. Basically, it compares cash flow that is received from op

Cash Coverage Ratio
  Cash coverage ratio measures company’s ability to repay its debts. It compares EBITDA (type of earnings) of the company and interest that is paid for company’s debts annually. EBITDA is not exactly eq

Cash Flow Coverage Ratio
  Cash flow coverage ratio measures company’s ability to repay its debt. This ratio compares operating cash flow of the company to its debts.  If ratio is low (lower than 0.2), it may indicate potential

Financial Forecasting
  Financial forecasting is a part of financial planning and also a part of a DCF valuation. But usually financial planning covers only a period of year or two while financial forecasting regularly covers about five

Strategic Financial Planning
  Strategic financial planning is a bit different from standard financial planning because standard financial planning focuses on a budget which is detailed estimation of financial statements when strategic financi

Asset Turnover Ratio
  Asset turnover ratio compares company’s sales and assets in order to identify the efficiency of assets used in the business. In simple words, it shows show much of sales are generated by company’s ass

Working Capital Management
  Why Working Capital Is Important? Working capital is one of the main parts of company’s finances and every manager, even of the small company, manages working capital despite the fact he knows about that o

Cost of Debt
  Cost of debt shows what the capital cost of the company for its debt capital is. Basically company’s capital consists of two parts: debt capital and equity capital. (A mixed capital like mezzanine financing

Price to Free Cash Flow
  Price to free cash flow (P/FCF) or EV/FCF ratio are ratios that compare company's price to its free cash flow. The main difference between those two ratios is that EV/FCF also includes the eff

Minority Interest
  Minority interest (non-controlling interest) is a part of net income or of an equity that does not belong to the shareholders of the main group. Basically there are two types of the minority interest:

  What is volatility? Volatility definition can be short: volatility is the size of the amplitude in investment’s value changes over time. In simple words, it describes the riskiness of the security because

  NOPAT (‘net operating profit after tax’ or ‘after tax operating profit’) is equal to operating profit less taxes. It is adjusted by tax rate because the part cost of debt which is part of

Financial ratios
  Financial ratios are ratios that are used in financial analysis or in other words that are using financial data of a company. Such financial data usually is found in financial statements (income statement, balanc

Fixed Asset Turnover
  Fixed asset turnover ratio is a financial ratio that measures how much of sales are created by company’s property, plant and equipment. The ‘higher asset turnover’ is the better, because it mean

Fundamental Analysis
  Fundamental analysis is the type of financial analysis that relies on company’s fundamentals. Those fundamentals depend on the target of the analysis. For example, fundamental analysis of stock depends on i

Technical Analysis of Stocks
  Technical analysis of stocks is widely known type of stock analysis. Technical analysis is completely opposite to fundamental analysis. While fundamental analysis relies on company’s ability to generate cas

Coverage ratios
  Coverage ratios are financial ratios that measure the ability of the company to repay its financial liabilities. Such ratios compare company’s operating income (or other type of income) or operating cash fl

Receivables Turnover
  Receivables turnover ratio (also called as accounts receivable turnover) is a financial ratio that measures how efficiently company collects its receivables. If receivables turnover is very low, it means company

Average Collection Period
  Average collection period is a financial ratio that is used to measure how fast company collects its receivables. ‘Average collection period’ shows what is the average time period till company gets ca

Quick Ratio
  Quick ratio (also called ‘acid test ratio’) is a financial ratio that measures company’s financial liquidity. This ratio compares company’s most liquid assets and short-term liabilities. I

Capital Employed
  Capital employed is a value of capital investments in a company. Basically, the capital of each company can be classified in these types of capital: Equity capital  Debt capital Working capital

Current Ratio
  Current ratio is a financial ratio that measures company’s financial liquidity in short term. In simple words, this ratio compares company’s short-term assets to its short term liabilities. If short-t

Cash Ratio
  Cash ratio is a financial ratio that measures company’s financial liquidity over short term. It compares company’s cash reserves to short-term liabilities. If ‘cash ratio’ is high, it may

Equity Ratio
  Equity ratio is a financial ratio that compares company’s equity to assets. Basically, it shows what part equity capital makes in total capital of a company. If ‘equity ratio’ is very high (clos

Return on Capital Employed
  Return on capital employed ratio (ROCE) measures company’s return compared to its employed capital. Return in this case is some kind of profit (mostly EBIT or NOPAT) and the capital employed means equity ca

Capital Adequacy Ratio
  Capital adequacy ratio is the main financial ratio for banks to measure whether the bank has enough of capital on which depends the riskiness of the bank. Banks are borrowing money from other depositors and it is

Net Interest Margin
Net interest margin shows the profitability of the lending business for a bank or other financial institution. Lending business is the core business for most of the banks, and the profitability of this operational segmen

Cost/Income Ratio
  Cost/income ratio is very popular financial ratio in bank analysis. This ratio measures the relation of bank’s operating costs to operating income. Basically, lower ratio is better because means higher prof

Non-Performing Loan Ratio
  Non-performing loan ratio measures the quality of the loan portfolio of the financial institution. This financial ratio compares non-performing loans to the total loan portfolio (loans are assets for the bank), a

Loan to Deposit Ratio
Loan to deposit ratio is financial ratio used for banks or other financial institutions. This ratio compares bank’s loan portfolio to deposit portfolio and measures financial liquidity of the institution.  &n

Loans to Assets Ratio
  ‘Loans to assets ratio’ is a financial ratio that usually is applied for banks (or credit unions) to measure the relation of the bank’s loan portfolio to the total assets.   Providing loa

Reserve Ratio
  Reserve ratio (reserve requirement or cash reserve ratio) is a ratio that is used by central bank of an area to regulate the financial market. This financial ratio compares the cash of the bank to the deposits th

Cash Conversion Cycle
  Cash conversion cycle is a measure that shows how many days take to convert the cash of a company in to production and to sell it. However, the formula of conversion cycle also includes ‘days payable outsta

Cash Turnover Ratio
  Cash turnover ratio compares company’s sales to its cash and measures how effectively company is using cash assets. However, this financial ratio now is a bit outworn and is not very meaningful for most of

Liquidity Ratio
  Liquidity ratio is a ratio that measures company’s liquidity. At first, it is needed to mention that liquidity may have two meanings: financial liquidity of a company or market liquidity of some asset. Liqu

Asset to Equity Ratio
  Asset to equity ratio compares company’s assets to the book value and measures the riskiness of the company. This ratio cannot be lower than 1.0, and if it is equal to 1, it means that assets are equal to e

Total Debt Ratio
  Total debt ratio compares total liabilities to total assets. The higher ratio represents riskier situation. And if this ratio is equal to 1.0, it would mean that liabilities are equal to assets or in other words

Total Debt
  Definition   The understanding of the total debt may be different depending on the experience of the user. Traditionally, ‘total debt’ includes financial liabilities of the company, although ot

Book Value
  There are two main types of values that are used in finance: Book value  Market value   Book value is a value that is recorded in the balance sheet of a company. Every asset of the company must

Leverage definition In finance leverage means usage of debt capital in addition to the equity capital in order to increase the profit. Increase in leverage is understood as increase in riskiness and volatility.

Internal Rate of Return
  An internal rate of return (IRR) is a ratio used very often to measure a profitability of some investment project. IRR is determined as a discount rate when NPV of the project is equal to zero. If IRR is higher t

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