Basics 101 – Valuation and Investing

Posted by Investing Freak on June 16, 2011
General

The first in many posts at the Freak Investing School is a series of videos from the awesome Khan Academy.

Over the years I’ve read and studied many books on corporate finance , accounting, investing etc and yet when it comes time to explain the basics I can’t do as good of a job as these videos by Sal Khan. They are hands-down the best interactive source to learn the basics so you will have a better idea of the companies you invest your hard earned money with.

There are a total of 12 videos and while I will link each one below I will only embed the first four.

 

1. Price and Market Capitalization (11:55)     Introduction to price and market capitalization.

[youtube=http://www.youtube.com/watch?v=fa-VZ-SDxgY]

2. Introduction to the Income Statement (15:27)   The income statement, revenue, gross profit, operating profit, net income, ROA and ROE.

[youtube=http://www.youtube.com/watch?v=Z7C4cz2HkeY]

3. Earnings and EPS (10:14)  Earnings, EPS (earnings per share) and how they relate to the income statement and balance sheet.

[youtube=http://www.youtube.com/watch?v=RouNXdkC0do]

4. Introduction to the Price-to-Earnings Ratio (14:47) Price to Earnings Ration (or P/E ratio).

[youtube=http://www.youtube.com/watch?v=cppxO67e6eo]

 

– If you were able to get through the first four videos and understood the concepts Congrats!-
Below are more videos to further enhance your learning so you can invest smarter.

  • P/E Discussion (15:34) Discussion of the price-to-earnings ratio.
  • ROA Discussion 1 (10:31) & ROA Discussion 2 (10:17)  The various ways to measure return on assets.
  • Depreciation (12:33) Depreciation a capital asset
  • Amortization (7:45)  Introduction to amortization
  • P/E Conundrum (13:41)  A situation where the price to earnings ratio seems to not fairly price an asset.
  • Enterprise Value (17:29)  Solving the P/E conundrum by looking at Enterprise Value
  • EBITDA (14:07) Review of Enterprise Value (EV) and comparing it to EBITDA

This should hopefully give you a better idea about the basics of investing (mostly fundamentals). As a fun fact if you watched all of the videos like I did you have watched nearly 2.5 hours worth of material, keep it up and soon you will be very comfortable doing your own research and investing.

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