A Fact Of Life
April 4, 2014 Leave a comment
When a person with experience meets a person with money, pretty soon, the person with the experience will have the money and the person with the money will have the experience.-Estee Lauder
Revenue Questions
March 30, 2014 Leave a comment
This post is in continuation of these 2:Link.Link.
This post is on how to analyse the key revenue constituents of a profit and loss statement (P&L).
Some companies report the ‘total income’ earned by them within a year as ‘sales’. As an investor,its better for us if we take a company’s integral earnings or core operations only as sales and not the income that is generated from other operations. The latter could include items such income from sale of scrap, income from interest and dividends, forex gains, profit on sale of assets, export incentives and miscellaneous receipts, amongst others.While these items may not be a significant part of the total income, it is still a good practice to follow. In fact, it would be even better if we could further bifurcate such earnings under two heads – other operating income and other income. Details regarding total income are found in respective schedules.
Revenues are generated from sales of goods or services. For companies which have a presence in various businesses, it is a good practice idea to track the change in segment wise/ product wise / business wise revenues on a year on year basis. Look at how the income from each business segment (as a percentage of net sales) has changed over the years. This will give us a good idea how a company’s segments or businesses have been performing over a particular time frame. Read more of this post
IT And The Rupee
March 29, 2014 Leave a comment
Every 1% gain of the Rupee squeezes gross profit margin by 30bps for tech firms and the EPS falls by 2%
Why Go Private?
March 28, 2014 Leave a comment
Being the promoter of a public company is seen as prestigious.So why do promoters sometimes opt to make their company private again?The simple answer is often the possibility of Private Gains.Public share holders and promoters often have vastly different perspectives on making money,vastly different time horizons when it comes to harvesting gains,vastly different risk perceptions and holding power.Here is an example:
In early ’13,Dell had a total market cap of about $22 billion. They also had about $11 billion in cash, which meant the stock market was valuing the entire business at $11 billion ($22 – 11). The company had a price-to-earnings multiple of about 8.5.
So the situation was that, if Michael Dell and private equity investors put in $2 bilion, used the cash on the company’s books and borrowed the remaining $9 billion, they could control the entire company without the hassle of having public shareholders.
The flexibility of not having public shareholders would enable Michael to do what has needed to be done for years, and that is massively streamline the company’s manufacturing and sales forces (probably through layoffs), re-focus the core PC business, grow the enterprise and consulting businesses, and make the company generally more Lenovo-like or IBM-like. Read more of this post
Loyalty Pays
March 27, 2014 Leave a comment
Job-hopping can increase your pay, but good old loyalty also has its perks. Stay on with your employer for five years or more, and you are entitled to gratuity when you resign, retire or are retrenched. This monetary reward to be paid by your employer in recognition of your years of service is mandated by the Payment of Gratuity Act. Most establishments employing 10 or more workers fall under the Act.
The amount you get as gratuity depends on the number of years you have served and the last drawn monthly salary. Roughly, you get half a month’s Basic and DA for every completed year of service. Here’s the formula to calculate gratuity: (Number of years of service) * (Last drawn monthly Basic and DA) *15/26. So, if you have served 30 years and draw monthly Basic and DA of Rs 20,000 when you leave the job, you get gratuity of Rs 3,46,154 calculated as (30 * 20,000 *15/26). Your employer can choose to pay you more but the maximum amount of gratuity according to the Act cannot exceed Rs 10 lakh. Amount paid above this will be in the nature of ex-gratia — something voluntary and not mandated according to law.
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