Mentor box Stuff

Question 1

EPS

Answer 1

Earnings per share

It is the amount of earnings paid out to their shareholders per month.

Question 2

Why don’t investors typically invest in companies that pay their total EPS to shareholders?

Answer 2

Being conservative is a sign that a company is financially cautious.
The sweet spot for a payment ratio is: 20-70%

Question 3

How do you find the EPS?

Answer 3

By dividing a companies earnings by its total number of shares

Question 4

Consumer non-cyclical industry

Answer 4

These are companies that make products consumers need on a regular basis.
Detergent-Softdrinks- beauty products.

Question 5

REIT

Answer 5

Real Estate Investment Fund

They pay dividends through collecting rent.

Question 6

COGS

Answer 6

Cost of Goods sold

Communicates how much money the company is spending to manufacture their products.

Question 7

Gross margin

Answer 7

Company makes product at .90 cents
Sellers it for $1.00
That is a gross margin of %10

Question 8

What does it mean if a companies revenue is growing but it’s net earnings are flat?

Answer 8

The companies operating costs have gone up

Question 9

What is PE ratio?

Answer 9

Taking stock price and dividing it by earnings per share.

Question 10

Dividend yield

Answer 10

Dividend payout relative to its share price.

Ideally between 2-5%

Question 11

What do you do if you don’t want to reinvest your dividends with your broker?

Answer 11

Use a DRIP

Dividend reinvestment plan.

Question 12

What are “disruptive Technologies”

Answer 12

Smaller companies challenge established businesses and invent new markets

Question 13

Net income

Answer 13

Residual amount of earnings after all expenses have been deducted from sales. Gross income is an intermediate figure before all expenses are included and net income is the amount of profit or loss after all expenses are included

Question 14

Non-cash charge

Answer 14

Non-cash charges can be found in the income statement. They are unaccompanied by a corresponding cash outflow.
Accounting expenses that change a companies financial standing without affecting short term capital.
Amortization, depreciation, stock-based compensation, asset impairments:
(Reduces earnings but NOT cash flows)

Question 15

How can you distinguish between cash and non-cash expenses?

Answer 15

Non-cash expenses from actual accounting are different from non-recurring charges related to special events. One-time charges may not reflect actual operations during that period.

Cash charge appears as an extraordinary expense in the company’s income statement and reduces net income. (A company might make a cash charge against earnings to provide early retirement packages to higher paid employees.)

Question 16

Limit down

Answer 16

Limit down also refers to the maximum decline permitted in individual stocks on certain exchanges before trading curbs kick in. The limit is generally set as a percentage of the market price of the futures or stock or occasionally as a dollar amount.

Question 17

Reversal

Answer 17

reversal is a change in the price direction of an asset. A reversal can occur to the upside or downside. Following an uptrend, a reversal would be to the downside. Following a downtrend, a reversal would be to the upside. Reversals are based on overall price direction and are not typically based on one or two periods/bars on a chart. Certain indicators, such a moving average or trendlines, may help in isolating trends as well as spotting revers

Question 18

Leverage

Answer 18

Leverage us a business term that refers to how a business acquires new assets for startup or expansion. When a business is leveraged it means that business has borrowed money to finance the purchase of an asset. Businesses can also use leverage through equity, raising money from investors.

Question 19

How do you determine leverage in a company?

Answer 19

Debt to equity ratio

Question 20

EPS

Answer 20

A company’s profit divided by its number of OUTSTANDING shares. If a company earning $2 million in one year had 2 million common shares of stock OUTSTnAnDInG its eps would be $1 per share. Uses a weighted average of shares outstanding over reporting term.

Question 21

What is a short term investment?

Answer 21

It’s an investment of 5 years or shorter. The returns should easily conver to cash when the time is right. Examples are high-yield savings accounts, CDs, money market accounts, treasury bills and gov.t bonds.

Question 22

Qualified dividend

Answer 22

Taxed at 15% (capital gains tax rate)

Question 23

Risk of REIT overweighted investment

Answer 23

REIT avoids corporate tax therefore the individual pays normal income tax rates.
You have to file a tax return and also return or capital.

Question 24

What’s another word for total assets?

Answer 24

Shareholder equity