Oh! This is much interesting to know about. Folks, investment is something which would always tempt every age group. Even after your studies, where ever you’ll stand, you would always be curious to know about different type of investment. The reason is as simple as ABC.To earn profits. With valuing investments homework answers, you will get a clear idea on the ways to deal with this topic.
What is an investment?
When an individual, group of individuals or companies invests/put money in any venture or ongoing commercial process to earn timely profits is known as Investment. Investments depend majorly on demand and supply. If the demand for the product increases in the market, the supply would increase and vice versa.
Hence, increase in supply directly impacts on the production which needs capital.Investment brings the profit in, and there is very less probability of bearing the loss. God forbid if market is down due to recession or any other rare critical crises, the profits or benefits of investments which also known as Return on Investments) are affected. Otherwise, people have always gained huge profits from different type of Investment.
Just sharing few types of Investments to make the concept much brighter. We can invest in Bonds, Share, Stocks, Mutual Funds, Real Estate, Saving Schemes and another type of such alternatives. Interest and time differ for all various kinds of investments.
Coming to the valuation of investments, for valuing investments homework answers, there are many investors in the market who identify the undervaluation of assets, and they then use financial tricks to analyze the actual value of the asset. They apply accounting ratios like earnings per share and sale growth.
These investors buy undervalued assets and sell overvalued ones. We must mention here that, the price to earnings ratio is a fundamental ration-dividing the share price of stock by its earnings per share.
This calculation provides the value which is evaluated by investors and makes them decisive to invest.The stock with fewer prices to earnings ratio will cost less on each share comparing with the high price to earning ratio.
Steps to solve Valuing Investment Faster:
Considering valuing investments homework answers, let us now understand few steps to solve the assignments.
The highlighted dimension for investors to know about the accurate financial health of the company for valuing investment is EBIDTA.
EBIDTA is Earning before Interest, Depreciation, Taxes, and Amortization. Since EBITDA excludes the deductions of Depreciation, Interest, and taxes, it comes out with a crystal clear view of the particular company’s operation, profitability and most vital aspect – Cash Flow.
Hey! Kindly Wait! Do not get jumbled out with questions. We indeed perceive that an example should be provided to dive into any concept and search the bottom part. Example: A firm called ABC is with revenue of $200000, and EBIDTA is $ 30000. EBIDTA margin calculation would be: $30000/$200000 which make 15%.
The higher is the EBIDT Amarg in the smaller are the company’s operation expenses with regards to total revenue. This further leads to higher profits and attracts the Investors to hugely invest. You wish to know more? A glimpse through valuing investments homework answers will help you!
It is a calculated fact that EBIDTA is an efficient way for owners, Investors or Analyst to compare between the two different sizes, categories of company. Considering the above example, If ABC is a small company with 15% EBIDTA Margin and simultaneously there is another company which is big than ABC, let say it is XYZ.
If XYZ Company has $ 300000 as the annual revenue, but it has the EBIDTA margin of 8% approximately, still the ABC Company would be considered to have effective operations while on the other side XYZ company would be likely to focus on Volume growth to increase the bottom line.
Well, there are many more methods to value the Investment fordealing with queries, Mentioned above the step to know the financial health of a company which is very essential in Investing.
Below are few more steps:
- Calculation of the Present Value of an Investment:
With this simple example, we are certain of clearing out the concept.
Now imagine that you have to plan a surprise Marriage Anniversary for your parents after 5years since they will be accomplishing great Silver Jubilee. Estimate that you need $10000 for this surprise and assume that you save $2 per year in compound Interest. (We have mentioned $2 considering your ongoing expenses on hangouts and parties.)
Now, using the present value investment formula, you can know the exact to save to meet the Anniversary expenses. Formula is:
PV= X/ ((1+r) n)
Here, PV stands for Present value,
X for Future Value required,
R for Periodic rate of return,
N for number of periods. Let us now replace the numbers in formula for your assumed case.
PV = $10000/()1+2%)5)
PV = $ 1960.784
The present value formula shows that dear; you have to save aside $ 1960 every year if you actually wish to surprise your parents on their silver jubilee. So start cutting off expenses of Pizzas, Burgers, and DATING…
Similarly, we can also calculate the future value Investment by the following formula, with valuing investments homework answers at your side.
- Future Value Investment.
Simplest one is:
FV1= PV+INT Where, FV is Future value of a year, PV is the Present value of the same year, and INT is the specified Interest rate to be mentioned.
Finally, with valuing investments homework answers, you can keep yourself updated with the financial position of few of the big and small companies in market. This kind of practice will ensure the crystallized way of understanding such financial concepts.