7 Effective Ways to Determine the Worth of a Stock

You have to look beyond the annual financial report of a company to decide the worth of a company‘s shares. The people behind the scene are pivotal in deciding the fate of an establishment. However, the people and the figures will give you a fair view of a company:

1.      Management: It is important to look into the strength and competency of the team and its succession plan to ensure the continuity of the company. Do they look after the interests of the shareholders and operate with integrity, reliability, credibility, and transparency? Are they innovative and introducing new ways of generating more income?  

2.      Earnings per share: It is to determine the profitability of a company. The higher the earnings, the more successful is the company.

The formula: Net income/ total outstanding shares

Example: Profit after expenses, interest, taxes, and preferred dividend: $200000

Total shares: 1000000

 200000/1000000=20 cents per share     

3.      Net asset value per share: The net asset value or the book value of each share of common stock is arrived at by taking the value of a company’s total assets less total liabilities and divided by the number of outstanding common shares. This is to illustrate what you would get if a company is liquidated.  

4.      Price-earnings ratio: It is the market price of a stock divided by the current per-share earnings of a company. Taking from the earnings per share as shown in No.2, with a current stock price of $2, its P/E ratio is 15 ($3/0.2). The ratio is used to determine whether a share is cheap or expensive 

5.      Cash flow: Cash flow is important to meet the ongoing obligation of running a business. The surplus find is also essential to pay a dividend to shareholders. There is a possibility that the company is showing a profit but not generating enough cash because of high outstanding accounts receivable. It is a dangerous sign.

6.      Yield: It is actually the relationship between the annual cash dividend and the current market price of a stock.

Example: Dividend per share 50 cents, current market price per share $2.5

 Calculation: 0.5*100/2.50=20%

7.      Debt-to-equity ratio: It is risky to depend too much on external borrowings to run a business, especially during an economic downturn. However, get more information to find out the high DER. It is possible that the company is expanding.

The formula:  Total liabilities/shareholders’ equity

Example: Total liabilities = 50 million and shareholders’ equity = 100 million

50/100=0.5 (For every dollar of equity there is a debt of 50 cents)

Do you have other ways to evaluate the worth of a company‘s stock? 

Source: http://www.allaboutlivingwithlife.blogspot.com/2011/10/7-effective-ways-to-determine-worth-of.html

Are You Financially Responsible?

There are plenty of ways to get ahead.  The first is so basic I'm almost embarrassed to say it:  spend less than you earn. 

Paul Clitheroe

Here are some soul-searching questions to ask yourself about your financial responsibilities:  

1.      Do you spend less than what you earn?

If you don’t, it means you do not care about overspending and getting into debt. You do not consider the long-term negative consequences. You are thinking that things will sort it out by themselves, but the situation can only get worse because more and more interest will be added to your outstanding debt.  

2.      Do you discipline yourself to avoid spending unnecessarily on your wants?

A wise person will spend only when he or she can afford it. It is only prudent to stick to your budget faithfully and avoid getting into money problems later. 

3.      Are you financially prepared each time you charge an item to your credit card?

 Do not spend impulsively. You have to back each credit card transaction with the same amount of money in your bank account. You do not want to live on credit and get into debt and pay extra on interest charges. You treat a credit card as a convenience and a documented way of making purchases.  

4.      Have you considered all factors before getting a personal loan application?

Is the loan necessary? Are you spending on what you need? Have you factored the monthly repayment amount into your monthly budget? Are you comfortable with the additional outlay? Think carefully before you sign on the dotted line.

5.      Do you honor your monthly loan repayment commitments?

Do you treat your monthly repayments seriously?  Do you always pay when it is overdue or you miss one or two installments? It indicates that either you are taking the matter lightly or you are in financial difficulties.

6.      Do you make it a point to pay your credit card bills promptly and fully every month?

Paying in full when you receive the monthly statement is the only sensible thing to do. Paying the minimum amount is asking for trouble because credit card interest rates are among the highest in the industry. More people are declared bankrupt as a result of unmanageable credit card debt.   

7.      Do you value your creditworthiness?

It involves your financial reputation.  Can you be trusted to get a loan? Are you committed to pay the monthly installments?  The only way to establish your creditworthiness is to demonstrate a good record of your loan repayment pattern and make timely credit card payments.

You are a financially responsible person when you can say yes to all the above questions.  

Source: http://www.allaboutlivingwithlife.blogspot.com/2012/09/are-you-financially-responsible.html

Financial Freedom, Lifestyle and Loan Sharks

According to recent newspaper reports those borrowers who approach loan sharks are no longer confined to gamblers who are heavily in debt. Nowadays more and more professionals are going to them to get financial assistance. They are doctors, lawyers, and even company chief executive officers. As reported in the paper, they are desperate and they have no choice and they are fully aware of the consequences. They are hit by the financial meltdown.

The root of their problems is their lifestyle habit. The rich people work hard and they think long term. They invest their money to earn passive income. While poor people use their hard-earned money to invest in their current lifestyle because they think short term. The habit of managing money is more important than the amount of money that you have.

As long as they follow these tips they will never need to approach loan sharks or “Ah Long”, popularly known in Malaysia and Singapore.

* Save or pay yourself first 10% of your income for your retirement and children’s education fund.

* Do not spend more than what you earn by using your credit cards. Inadvertently you are building up debts that you can't settle later.

* Have a budget and always adhere to it. Your budget will cover your daily essential expenses as well as your monthly housing loan, insurance premiums, and others.

* Always set aside an amount to cover three to six months’ expenses just in case you are out of work. This is your emergency fund.

You can’t live without money, but money is not everything in your life. Your life is made up of your health, your family, your relationship with others, and most importantly, your happiness.

Source:http://www.allaboutlivingwithlife.blogspot.com/2008/11/financial-freedom-lifestyle-and-loan.html

Wise Transition from Debit Cards to Credit Cards

According to an article, Uh-oh: 63% of Millennials don't have credit cards, more than six in 10 people ages 18 to 29 don't have a single credit card in their wallets, reveals a survey conducted for Bankrate.com. 

They prefer to use debit cards. I think it is a good move to get involved with plastic cards, first a debit card, and then a credit card.

Advantages of debit cards

A debit card is linked to your bank account. Each time you use it to purchase an item; the amount is deducted from your account. It is straightforward and no credit is involved.  The most important thing is that no debt will be incurred.

It is a good learning process. You can’t use your card when there is no money in your account. In a way, it is effective to limit overspending. You spend only when you have the money. In the end, you develop a good habit to live within your means     

The bank only charge a nominal yearly fee for the issuance of a debit card

You use the card like cash and yet you don’t have to carry a large sum of money while travelling and reducing the risk of loss and theft.

By using a debit card it is easier to budget your expenses because whatever payment made it is deducted from your bank account immediately.

Like a credit card, a debit card is accepted worldwide.    

Advantages of credit cards

It is a good move to switch to a credit card after using a debit card for some time. After a while, a good habit has already established to use your credit card like a debit card only when there is a fund available in your bank account.  As you grow older you will be more mature to handle a credit card.       

A credit card is essential in your financial life. A credit card is an excellent tool to establish your creditworthiness and build credit scores.   

When you make a prompt payment you don’t incur late fees and interest charges. As a credit cardholder, you can earn cash back or reward points for each dollar you spent.

Furthermore, it is much safer to use a credit card because you can always dispute a transaction that is not in order.

Conclusion

Manage your finance by using a debit card first. Switch to a credit card when you are in control of your money by not spending impulsively. 

How to be a highly skilled individual and Earn Top Money

According to an article, “Study: US Wealth Gap Is ‘Unsustainable’",

A truly competitive U.S. economy would lift both firms and citizens. But our survey findings and other evidence reveal that that is not happening today in America. Instead, our “recovering” economy is doing just half its job: The typical large or midsized firm in America is rallying or even prospering, as are highly skilled individuals. But many middle- and working-class citizens and small businesses are struggling.

As an individual what can you do to be highly skilled?

Technological skills involving science, technology, engineering, and math (STEM) are highly sought after by employers. According to LinkedIn 20 of the top 25 skills most in-demand by employers in 2013 involved technology. Companies are interested in collecting data and making sense of it, therefore skills in information related areas are in demand:

• Statistical analysis and data mining
• Retail payment and information systems
• Business intelligence
• Data engineering and data warehousing
• Database management and software
• Information security
• Strategy and strategic planning

Accordingly, STEM education is now a top priority for many of the world's governments. Aim for a degree course because a degree holder will command a higher starting salary than a diploma holder as reported in an article, Grads’ starting pay up to 46% higher than diploma holders, 

 

A survey conducted by management consultancy Hay Group of 95 organisations here found that employers are likely to pay up to 46 percent more in starting salaries for degree holders than for diploma holders. The respondents comprised largely multinational corporations and local companies, as well as about a dozen government organisations.

The average monthly starting salary for degree holders without honours is S$2,741, about 2 percent higher than the S$2,683 last year. Diploma holders can expect an increase of a similar proportion, with average monthly starting salary going up to S$1,878 from S$1,840 last year.

The difference in starting salaries between the two groups was about S$1,000 across various industries.

It is worth mentioning here that a diploma holder’s salary will most likely be stagnant in the long run. 

Apart from acquiring hard skills, you need the following soft skills to complement and sustain your career:·    

    Able to work as a team

·        Effective communication skills

·        Solve problem creatively

·        Be confident

·        Flexible and adaptable 

·        Positive attitude

·        Effective time management to meet deadlines

Get the right skills and be one of the top earners. 

5 Effective Ways to Manage Your Money

Managing your personal finance is about increasing your capacity to earn so that you can save more. It is also about spending wisely and avoiding getting into debt so that you can make your money grow faster. When you need to borrow, you do so sensibly.

1.       Maximize your earning power: Acquire the knowledge and equip the necessary skills which are in demand to boost your earning potential. IT is a hot subject and so is finance and accounting which are required in any business.  Your technical skills are not enough to get ahead and be outstanding. Polish your soft skills so that people will like you and are more inclined to work with you.  Like and enjoy what you do, the money will come.

2.       Maximize savings: You will not spend much on essential items. When you earn more you should save more and not spending on what you want. Your savings serve many purposes:

·         An emergency fund

·         Down payment for a car

·         Down payment for your house

·         Big tickets item- buy in cash and save on interest

·         Start early to save for  retirement

3.       Spend wisely: Look for durability and quality and not just the brands. Popular brands are more expensive because you are paying for their heavy advertising cost. Buy what you need and not what you want to impress others. As long as you have budgeted for savings as an “expense” item, you are doing fine.  It means there are savings and you do not overspend and get into debt. 

4.       Grow your wealth: When you have accumulated your savings over time you should take out the money in the bank and make it work harder. You can leave your emergency fund in the bank. Invest in property, stocks, bonds mutual funds, and precious metals. Each investment vehicle has its own merits and you should diversify your portfolio to minimize financial risks. Look for long term investment and not for a quick gain. Do not be greedy. Slow and steady wins the race.

5.       Borrow wisely: Most likely you will need to borrow to purchase a car and buy your dream house. When you have earmarked and saved a bigger amount of down payment for these two items, you will borrow less and pay less for your monthly installments and for a much shorter term.

Life is about earning your own way, save for a rainy day, live within your means, and be happy for many years to come.

Source: 5 Effective Ways to Manage Your Money

7 Advantages of Paying Yourself First

When you pay yourself first every month you are paying your way towards financial freedom. Paying yourself first is a wonderful thing to do in personal finance. 


1. The savings habit: The earlier you start to save the more you will be able to save. Time and compound interest work wonder for you. This is the best habit as far as money is concerned.

2. Free from debt: The most important thing is that when you can pay yourself you are spending less than your income. It means you will stay out of debt. Debt is the most dreadful thing in money matters 

3. Emergency fund: Life is unpredictable, that is why it is necessary to save for an emergency fund in case you are out of work or in serious illness. The fund will be able to take care of your expenses for a couple of months

4. Big-ticket item: Isn’t it good to get a big-ticket such as a flat-screen TV without paying extra. Save enough and pay for it in cash by shopping around to get the best deal.

5. Down payment: You can get your dream car or your dream house when you have saved enough to pay for the down payment. 

6. Education and retirement: It is a farsighted move to save and invest so that you can send your children to higher education. It is also a great way to save early for a care-free retirement.

7. Wealth building: The starting point to build your wealth is when you can pay yourself first. The amount will snowball over time and you can maximize your return by prudent investment to make your money grow. 


When you pay yourself first you get paid by yourself forever.

Source: 7 Advantages of Paying Yourself First