Money Making: Finance And Life. Final Part

It happens that the price falls slightly as for the subjective reasons falling restrains investment banks or large investors, such, as pension or unit investment trusts. In that case it is necessary to get rid of shares as soon as possible as the first falling means not the end, but only the process beginning.

Anyway coefficient P/E is extremely important at decision making about share purchase as in it the same logic which is used by the real buyer of all company entirely is pledged: How much time it is required to me to return the put up money? How much successfully the given business can grow in the future to justify the additional award over the objective price for today?

Certainly, company incomes aren’t the unique component considered at decision making about investment. Moreover, incomes frequently can fluctuate sharply as a result of time factors. Then in calculation other indicators using instead of profitableness a general break-even sales level, quantity and growth of clientele or real receipts of cash are accepted.

The most important thing is to understand a principle of work of the given business that is how the company earns or is going to earn money. Only after that it is possible to specify what indicator reflects used model in the best way. Thus all is reduced to same: how to count up how much money the given business can earn during the existence?

Investment art consists in specifying available lacks and errors of an estimation of the today’s price of business and to use these possibilities. It is unimportant, where there the price for shares of this or that company is today: on the top or at the very bottom of the curve as and other case the market can be mistaken in that. We will assume, the general opinion consists in that incomes of computer company ABS will grow on 20 % a year, and actually – on 30 % and it is more as a result of increasing exclusive influence. It means that the market underestimates today’s shares approximately on 50 %, as constitutes an additional income for the perspicacious investor over predicted growth.

Unfortunately, the return takes place to be too. We will assume, shares of automobile company SBA have coefficient P/E equal only to 10. It means that the market practically doesn’t assume growth of sales and profitableness of the company the next years. As a result the price for shares is in the bottom of the long-term curve. It is the good moment for purchasing? It is not absolutely so! What, if sales and profitableness of operations of the automobile enterprise in the future will fall as a result of change of requirements of the market and increasing requirements against environmental contamination? Then even today’s price incorrectly reflects the validity and can be even lower in the near future. In this case low value of coefficient P/E is deceptive.

Thus, the price which you pay at purchasing of this or that business or a share of business in the form of shares has extreme value. It reflects today’s cost of that money which the company will earn in the future. As a result, the price which you have paid today determines profit which can receive tomorrow. Many investors simply forget about it!

The days when governments have been showering people with all types of grants have passed. At least for a while. But that does not mean that you must get rid of the idea of getting small business grants.

Everything is doable with smart approach; small business grants including.

Go to this blog for more practical tips about grants, how to apply for grants, grant examples, ups and downs of the grants. This info will help you to get small business grants or any other grants in a more convenient way.

About smallbiz guru

Leave a Reply

Your email address will not be published. Required fields are marked *