Working Capital vs Current Ratio – Don’t Calculate WC the Wrong Way!
There’s a subtle difference between working capital and current ratio. Though both can be calculated from the same place in the balance sheet, they are not one and the same. Working capital and current ratio paint two separate pictures about a business. To understand those pictures, we need to know the subtleties of each formula. […]
5 Key Metrics: Balance Sheet vs Income Statement (Example with $AAPL)
Financial statements can look intimidating. There can be many line items. To learn how to navigate a company’s balance sheet and income statement– break it up into sections. In this post, we will chop the financial statements for Apple ($AAPL) into key sections, so you can better understand and learn what’s most important. To start– […]
Applying the Lessons of Enron’s Mark-to-Market Accounting Scandal Today
It may be surprising, but companies today are still using the same mark-to-market accounting that led to Enron’s fraud and bankruptcy in 2001. Mark-to-market accounting is a special way to record assets on a balance sheet. I will try to explain the basics as simply as possible. While it’s hard for any investor to predict […]
Debunking the Belief that Life Insurance is a Waste of Money
As a young adult, spending money on something with no return can feel wasteful, but I can assure you the belief that life insurance is a waste of money is far from the truth. Until you near retirement age, it’s really difficult to think about planning for the future. It’s easier (and more fun) to […]
What is a Stock Proxy? What’s a Voting Proxy? | Simple Guide for Beginners
A stock proxy is a document that public companies have to release every year. In it, investors will find details about management, the board of directors, and voting on major company matters. Investors should know how to look up a stock proxy and skim through the important parts. This guide will show you how, in […]
A Beginner’s Guide to Cloud Computing
Updated 6/3/2024 What is cloud computing? How does the cloud work? We need to understand the basics of cloud computing to invest in companies such as Microsoft, Shopify, Google, or Crowdstrike. In today’s world, most of us use some form of cloud computing. For example, your Gmail, Hotmail, or Outlook utilize the cloud. Instead of […]
The Short Ratio, Short Selling, and Short Squeezes Explained
Updated 9/25/2023 The short ratio is widely used when understanding the short selling behind a stock. It can tell you how many fund managers or retail investors bet a stock will fall. The short ratio indicates the number of shares that investors sell short over the average daily volume of the stock, on the basis […]
How to Use Net Tangible Assets from a Company’s Balance Sheet
Net tangible assets can be a very useful metric for evaluating a company’s future profitability, especially in capital intensive industries. In this blog post, I’ll explain the basics behind net tangible assets and include a few easy and practical metrics for it. We’ll break it up into these simple parts [Click to Skip Ahead]: What […]
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What is PPE in Accounting?
PPE accounting refers to long term assets categorized as PPE (plant, property, and equipment), which are tangible assets that are expected to create cash flows over the long term. These can be significant to investors because their depreciation schedules directly influence the bottom line (earnings). This post will cover: The Basics of PPE and Depreciation […]
