# E/P, EPS and REG ratio



## midou7172 (30 April 2013)

Hi everybody,

Trust me, I did a lot of Google search about E/P, EPS and REG ratio. I read about them and even read Newbie Lessons - All your questions answered thread (great thread, by the way). 

Somehow, I still can’t get these concepts in my head. Usually, Math and me, we don’t really understand each other.
I understood that these should be analyzed in the context, “apple against apple” etc… But somebody can (again) explain me in very simple way what these numbers are telling me? 
And again, is good if they are high or low? If high or low is not important, what are the concept behind of them? again???

Little bit of compassion for beginners, please. Hopefully it will make you a better person

cheers,


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## burglar (30 April 2013)

midou7172 said:


> Hi everybody,
> 
> Trust me, I did a lot of Google search about E/P, EPS and REG ratio. I read about them and even read Newbie Lessons - All your questions answered thread (great thread, by the way).
> 
> ...




google investopedia ... it is invaluable!

Try these two links:

http://www.investopedia.com/terms/p/price-earningsratio.asp

http://www.investopedia.com/articles/fundamental-analysis/09/price-to-earnings-and-growth-ratios.asp

Let us know how you get on!
Cheers


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## midou7172 (1 May 2013)

Thank you burglar, I feel less lonely now.



burglar said:


> Let us know how you get on!




It hurts my brain.

First obstacle: What is "Earning" in share? Is that dividend + capital growth? 

EPS = If I paid 10$ for one share and it gives me 10 cents dividend, how can I calculate my EPS as I didn't sell my holding yet? Do I calculate this as if I sold them at that moment ? It is hard to comprehend for me as share price change everyday...


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## Klogg (1 May 2013)

midou7172 said:


> Thank you burglar, I feel less lonely now.
> 
> 
> 
> ...




Midou, it takes a while to get used to using the ratios as if they are part of normal calculations, but it does happen.

The "earnings" in earnings per share is calculated like this:

If a company made $2mil in profit, and has 1million shares available, then:

Earnings per share = Total Profit/Total Number of Shares
= 2mil / 10mil
= $2 per share

Your dividends on the other hand are _generally_ (not always) a component of those earnings.
For example, on some sites you'll see a "Payout Ratio", which is a percentage value. It's the percentage of earnings that were paid out as dividends.

So if we work on the $2 per share we had earlier, and had a payout ratio of 50%, then we get:
Dividend = 50% of $2
= $1 dividend.


Also, with your comment around calculating EPS - this has nothing to do with your purchase or sale price. Whether you bought the shares in above examples for $5 or $10, you're still getting a $2 per share earnings, as this is the profit the company made.


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## midou7172 (1 May 2013)

Thank you so much for your time. 



Klogg said:


> If a company made $2mil in profit, and has 1million shares available, then:
> 
> Earnings per share = Total Profit/Total Number of Shares
> = 2mil / 10mil
> = $2 per share




$2mil in profit, and has 1million shares available = 2mil / 10mil
Do you mean company has 10million shares available? not 1milion?




Klogg said:


> Also, with your comment around calculating EPS - this has nothing to do with your purchase or sale price. Whether you bought the shares in above examples for $5 or $10, you're still getting a $2 per share earnings, as this is the profit the company made.




Thanks !!! this is like a light in my brain!!!! So in this case, EPS(earning per share) is $2! and PE ration is calculate based on the price of the share on the market. Right?

E/P, PE, PE ration means all the same things?

Cheers,


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## midou7172 (1 May 2013)

midou7172 said:


> Thank you so much for your time.
> PE ration
> Cheers,




Sorry I mean "Ratio" not "Ration"... English is my third language and that is my only consolation.


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## burglar (1 May 2013)

midou7172 said:


> Sorry I mean "Ratio" not "Ration"... English is my third language and that is my only consolation.




Your English is Ok.

Now with the explanations you have, 
can you go back to Investopedia links and understand a little more?

I am assuming you want to be an investor and you wish to understand balance sheets.


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## midou7172 (1 May 2013)

burglar said:


> can you go back to Investopedia links and understand a little more?




http://www.investopedia.com/terms/p/...ningsratio.asp

Actually, Yey!! I do understand what is written on Investopedia about P/E ration !!! 

In my mind, I am thinking that P/E Ratio can dramatically vary depending on speculation as well.

But I am not following why technology company would have a high P/E compare to a utility company industry? 



burglar said:


> I am assuming you want to be an investor and you wish to understand balance sheets




Yes burglar, but at the moment, I am far from "being an investor" with my 5000$ bet on the roulette of shares market. thread: Bought my first shares: Am I doing OK?, that's me...

I will get back to you once I read your second link.


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## burglar (1 May 2013)

midou7172 said:


> ... Actually, Yey!! I do understand what is written on Investopedia about P/E ratio ...




P/E is only part of the jigsaw puzzle.
Lots of stuff to learn (should you so choose).

That's why I go to investopedia (albeit they are American)
No opinions, no bullsh!t definitions.


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## Zedd (1 May 2013)

midou7172 said:


> http://www.investopedia.com/terms/p/...ningsratio.asp
> But I am not following why technology company would have a high P/E compare to a utility company industry?
> .




Price is a reflection of expected future earnings. A high P/E indicates that the market is expecting future earnings to be greater than current earnings. Keeping this in mind consider the differences between earning expectations between the industries. In the tech industry, especially companies in the R&D phase of a new product, current earnings can be insignificant compared to when they launch the product. Utilities earnings are usually far more stable.


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## midou7172 (2 May 2013)

burglar said:


> P/E is only part of the jigsaw puzzle.
> Lots of stuff to learn (should you so choose).
> 
> That's why I go to investopedia (albeit they are American)
> No opinions, no bullsh!t definitions.




Thanks burglar,

I am thinking... you must be a pragmatic person. 

I guess people learn different way. I personally like opinions (and maybe a little bit of "bull****") during my learning course. It give me a strength to grow my own opinion and more personalized picture of the subject I am  learning. 
Probably this is the reason why I am not good in Math. "1+1=2" is too abstract for me to understand but I do understand when I eat 1 apple and another apple later, that means I had 2 apples in total.

Yeah... I know... typical female...


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## midou7172 (2 May 2013)

Zedd said:


> Price is a reflection of expected future earnings. A high P/E indicates that the market is expecting future earnings to be greater than current earnings. Keeping this in mind consider the differences between earning expectations between the industries. In the tech industry, especially companies in the R&D phase of a new product, current earnings can be insignificant compared to when they launch the product. Utilities earnings are usually far more stable.




Thanks Zedd, 

So, if I buy shares of a start-up business with high P/E , that means I believe in their future growth.
Guys, this is so cool. I feel that I am finally getting somewhere.

I am now reading my second link from burglar: 
http://www.investopedia.com/articles...wth-ratios.asp
and my brain feels a pain again. 
What is "earnings by the price (E/P)" ? Is this same as P/E(price-to-earnings) ? 
if so, "P/E" is same as "P/E ratio" ? 

I am struggling with terminologies issues as well when reading about shares.

As burglar said "this is only part of the jigsaw puzzle"... I hope that I will get there before I go under the ground. Otherwise, it defeats the purpose, isn't it?

Cheers,


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## midou7172 (2 May 2013)

Hey guys,

correct me if I am wrong:

If I buy 10$ share and it's EPS(earning per share) is 2$.

My Price to Earning Ratio (P/E ration) is 10/2 = 5. Right?

If I divide 2$(earning) by 10$(price): 2/10  = 0.5 is this so called (E/P) the earnings yield?


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## burglar (2 May 2013)

midou7172 said:


> ... I hope that I will get there before I go under the ground. Otherwise, it defeats the purpose, isn't it? ...




You got that right!



midou7172 said:


> ... So, if I buy shares of a start-up business with high P/E , that means I believe in their future growth ...




Yes, you and other shareholders!




midou7172 said:


> ... What is "earnings by the price (E/P)" ? Is this same as P/E(price-to-earnings) ?
> if so, "P/E" is same as "P/E ratio" ? ...




The slash "/" is a divide sign so "P/E" is Price divided by Earnings. I think it is expressed as a number.
The reciprocal (upside down) of P/E is E/P or Earnings divided by Price.
It suits a slightly different purpose.
Whenever these numbers are expressed as a ratio eg 1:2, it become the "P/E ratio" or whatever ratio.

This is all opinion.
You may wish to check it against a reliable souce!


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## midou7172 (2 May 2013)

burglar said:


> This is all opinion.
> You may wish to check it against a reliable souce!




Hello Burglar,

I like your opinions ~~  

Yeah, finally I found what "/" means = "divide"... bloody XXXX. I wish your post came bit earlier. It would save me a lot of times and my brain cells.

I am going thought about earning yield now.

Example: 
One share price is $31.56 today and it's EPS is $2.06, so E/P = 0.065(earning yield). 
Am I correct? If so, it sounds like a little earning yield.


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## burglar (2 May 2013)

midou7172 said:


> ... Example:
> One share price is $31.56 today and it's EPS is $2.06, so E/P = 0.065(earning yield).
> Am I correct? If so, it sounds like a little earning yield.




Yes, but it's like comparing the price of a house against weekly rent!!


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## midou7172 (2 May 2013)

burglar said:


> Yes, but it's like comparing the price of a house against weekly rent!!




"house price" against "weekly rent". Yes, no problem! That is really stupid thing to do.

but... any more explanation to go with ....?


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## burglar (2 May 2013)

midou7172 said:


> "house price" against "weekly rent". Yes, no problem! That is really stupid thing to do.
> 
> but... any more explanation to go with ....?




No. You misunderstood me. The share price is large, the earnings per share is small, but it is annual earnings.
Hopefully after 10 or twenty years the earnings add up and come back to you in the form of Dividends or growth.
That is why you seek year-on-year growth in earnings in your companies.


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## midou7172 (2 May 2013)

burglar said:


> No. You misunderstood me. The share price is large, the earnings per share is small, but it is annual earnings.
> Hopefully after 10 or twenty years the earnings add up and come back to you in the form of Dividends or growth.
> That is why you seek year-on-year growth in earnings in your companies.




Thank you burglar,
I am starting to understand what you are saying! In fact, I am only calculating annual earning with today's share price. 
I am going into the REG ration... but before doing that, below are my understandings about the nature of share and its market.
Correct me if I am wrong.

1. Share price goes up with inflation because the company profit grows up with inflation. Hence, people are willing to pay more for a share.

2. When share market crash, that is because investors are selling in massive volume. Less buyer=Low price. Is this one of the reason why you guys watching "volume" in thoses fancy monitors?

Dear burglar, I think we are on our way to become good mates   Your inputs are much appreciated.


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## burglar (2 May 2013)

midou7172 said:


> ... 1. Share price goes up with inflation because the company profit grows up with inflation. Hence, people are willing to pay more for a share.
> 
> 2. When share market crash, that is because investors are selling in massive volume. Less buyer=Low price. Is this one of the reason why you guys watching "volume" ?
> 
> Dear burglar, I think we are on our way to become good mates   Your inputs are much appreciated.




 *gulp*

1. A _good_ company should grow much faster than inflation!
Growth =value, hence people are willing to pay more for a share.

2. Traders watch buying & selling volumes, in those fancy monitors.


A "Value Investor" seeks good companies which are cheap (=Undervalued)
A "Trader" seeks a company with a trending Share Price (rising or falling); when indicators point to a likelyhood that it will continue to trend. 

Yes ... they make money in rising markets and in falling markets!!


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## midou7172 (2 May 2013)

burglar said:


> *gulp*
> 
> 1. A _good_ company should grow much faster than inflation!
> Growth =value, hence people are willing to pay more for a share.
> ...




Very good points. It sounds obvious but for a beginner like me, simple things are not that obvious (sometimes, I am wondering why I am not a blonde but this is a completely different subject).

I was happy to be a just “doing find investor” and then, I thought I could do better. I realize that will be a big journey ahead and somehow overwhelming. Phew~~ too many questions and it is getting embarrassing...

Pragmatic and patience, these should make you a very good trader or whatever you are in.


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## burglar (2 May 2013)

midou7172 said:


> ... or whatever you are in. ...




When I arrived in this forum Nov 2010, I thought:
1. I was an investor!
2. I was unsuccessful due to the GFC, 
the worst financial disaster since the Great Depression.

I have since learned from forum members that I am a gambler.
I was unsuccessful after the GFC due to gambling.



midou7172 said:


> ... somehow overwhelming. ...




Take baby steps! 
Dovetail what you know to be true, 
with what you learn here or elsewhere.




midou7172 said:


> ... it is getting embarrassing...




No need to feel that!
You are in the beginners lounge, any question is Ok.


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## midou7172 (3 May 2013)

burglar said:


> When I arrived in this forum Nov 2010, I thought:
> You are in the beginners lounge, any question is Ok.




Thank you buddy :bier:, 
You definitely don't sound like a gambler anymore. I really hope that you are making a lot of money now. 

Back to the business, I recapitulated these troublesome jargons in my way. Please, feel free to comment and point me if I am wrong.

1. EPS - Earning Per Share: Company profit divide by number of shares. Bigger the number better it gets (?)

2. E/P - Earning divide by(/) Price: High E/P means high expectation of growth.

3. P/E - Price divide by(/) Earning = earning yield : Not too sure what to looking for..but I guess Higher yield better it is?

4. PEG ratio - Price divide by Earning and divide again by Growth ratio : Apparently it is better when it is low. No idea why...

Hope today is a better day for all of you! Have to do some 'Real' work to pay my bills now.

Cheers,


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## Klogg (3 May 2013)

midou7172 said:


> $2mil in profit, and has 1million shares available = 2mil / 10mil
> Do you mean company has 10million shares available? not 1milion?
> Cheers,




Sorry, had a typo in there - I did mean 1million.


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## midou7172 (3 May 2013)

Klogg said:


> Sorry, had a typo in there - I did mean 1million.




No Problem~ Although.. you owe me some of my brain cells.


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## burglar (3 May 2013)

midou7172 said:


> ... 4. PEG ratio - Price divide by Earning and divide again by Growth ratio : Apparently it is better when it is low. No idea why ...




You now know more about P/E than 90% of the people in your street! 

4. The higher the growth, the lower the PEG!
By the way, I hardly never seen anyone use PEG before.

Time to look at a highly successful Tech company. Why not Microsoft Corp, what do you see?
MICROSOFT Key Statistics


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## midou7172 (3 May 2013)

burglar said:


> You now know more about P/E than 90% of the people in your street!
> 
> 4. The higher the growth, the lower the PEG!
> By the way, I hardly never seen anyone use PEG before.
> ...




  Eeeeeuh.....

1. their P/E is actually 17.11 which is higher than Apple Inc. 
2. Forward P/E = 10.80. that means... based on their estimate, less growth next year???
3. PEG Ratio: 1.36. Not very good. 
4. Their Gross Profit (ttm) is 56.19B and Total Debt (mrq) is 14.76B,  Total Debt/Equity (mrq): 19.25. Yeah, why not but Apple has NO debt and 68.66B Gross Profit! But Apple is TOO~~ expensive.

Look! Comutershare Limited.
Gross Profit (ttm): 421.00M
Total Debt (mrq):	1.78B
Total Debt/Equity (mrq): 149.94  That sounds a lot of debt! no?

Sorry, go back to Microsoft Corp.

5. During the last 52 weeks the share price was between $33.17 to $26.26
6. Dividend pay day is 12 Jun 2013 if you have been holding their share at lease since 14 May 2013.

The rest are mainly written in Gibberish to me... 

Sir, what am I getting? C, C+?


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## burglar (3 May 2013)

Another important piece of the jigsaw puzzle is debt.
A company can get money from shareholders.

They can also borrow from a bank.
Trouble with banks is; they want it back ... with interest!

Good companies are either "debt free" 
or can manage their repayments.

Bad Companies like _Babcock & Brown_ or _ABC Learning_
were so highly leveraged they were unable to refinance.
They have trouble meeting the payments, then the interest rates go up.
Next thing - liquidation! 

Learn about _debt levels_ in a company and the means to _service their debt!_


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## midou7172 (3 May 2013)

burglar said:


> Another important piece of the jigsaw puzzle is debt.
> A company can get money from shareholders.
> 
> They can also borrow from a bank.
> ...




Hello Burglar,

Did you see my post just before yours? Took a time to write & post it as I am doing this while working.

Will you give me some extra points for the comment I did about Apple & Computershres's debt level?

Looking forward to see my note.


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## burglar (3 May 2013)

midou7172 said:


> ... Did you see my post just before yours? ...




No, I took quite some time to write mine!
I even needed a Nanna nap in the middle!



midou7172 said:


> ... Will you give me some extra points for the comment I did about Apple & Computershres's debt level?




C++


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## midou7172 (4 May 2013)

burglar said:


> C++




Yey, C++!! I am happy with that. Considering that I am learning a lot more and faster during last 3 days from this forum than anything else I tried last 6 months by myself.
What do I have to do to get B now?

I guess “Market Cap” is something I should understand. 
To start with, I am having trouble with “outstanding shares” - ‘Also referred to as "issued and outstanding" if all repurchased shares have been retired.’ - Retired??? How shares can be retires???

Below are my NEW troublesome terms:
“float” 
“authorized shares”
“Capital Stock”  
These are all something to do with “Volume”?

No market today so enjoy outdoor, try to get some vitamin D!!!


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## burglar (4 May 2013)

midou7172 said:


> ... “float” ...




Start with "float"

In the begining there is "nothing but an idea". 
Alternatively there is a private company.

Next step is to float the company/(idea) on the market in an Initial Public Offering (IPO).

A launch, if you will!!


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## burglar (4 May 2013)

midou7172 said:


> ... “authorized shares”  ...





"Authorized Shares 
Authorized shares refer to the largest number of shares that a single corporation can issue. "

Read more:


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## burglar (4 May 2013)

midou7172 said:


> ... What do I have to do to get B now? ...




Step 1. Go to investopedia, 
Step 2. Use search facility to find "market cap definition". 
Then I will give you a B.

If you use cut and paste, I will give you a B+ :!

PS Hey, I learnt so much!
Re float ... did you mean _Float a company_ or_ Floating shares, and how they affect volatility_

For homework: (note;- another great resource online).
http://financial-dictionary.thefreedictionary.com/Floating+Shares.


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## midou7172 (6 May 2013)

burglar said:


> Step 1. Go to investopedia,
> Step 2. Use search facility to find "market cap definition".
> Then I will give you a B.
> 
> ...




Hello burglar,
It is so unfair that you gave me all that homework during the weekend !!
I was busy baking myself under the sun!! I don't know where you are but where I am, we had a BEAUTIFUL weather!!! so no time for homework... That is my excuses. Wasn't that you who were talking about "baby steps"? Yeah~~, that was what I was doing or more like baby naps :


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## midou7172 (6 May 2013)

burglar said:


> Start with "float"
> 
> In the begining there is "nothing but an idea".
> Alternatively there is a private company.
> ...




"Float" sounds like "more risk" to me so far.


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## burglar (6 May 2013)

midou7172 said:


> Yey, get some vitamin D!!!




I'm in South Australia.
Finally, we are getting some mild autumn weather.

Lovely for my flowers!
My thread on flowers!


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## midou7172 (6 May 2013)

burglar said:


> Step 1. Go to investopedia,
> Step 2. Use search facility to find "market cap definition".
> Then I will give you a B.
> 
> If you use cut and paste, I will give you a B+ :!




"Definition of 'Market Capitalization'
The total dollar market value of all of a company's outstanding shares. Market capitalization is calculated by multiplying a company's shares outstanding by the current market price of one share. The investment community uses this figure to determine a company's size, as opposed to sales or total asset figures.

Frequently referred to as "market cap." 

Now *B+*!! It doesn't mean I understood. So abstract definition... I will have to think about what this means.



burglar said:


> PS Hey, I learnt so much!



You see, it is becouse of me you also learn!



burglar said:


> Re float ... did you mean _Float a company_ or_ Floating shares, and how they affect volatility_




I am the one who's asking questions. How I am supposed to know which one I don't know?


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## burglar (6 May 2013)

midou7172 said:


> ... I am the one who's asking questions. How I am supposed to know which one I don't know?




Float new company ... steer clear. (IMO)
Floating shares, very important, !!


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## burglar (6 May 2013)

midou7172 said:


> ... It doesn't mean I understood. ...




If you understand, give youself an A+


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## burglar (7 May 2013)

From thefreedictionary.com

--------------------------------------------------------------------------------
cap′ital stock′ 
n. 
1. the total stock authorized or issued by a corporation. 
2. the book value of such stock.

So ... when will we discuss what's important or not?!

I am ready to learn more!


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## burglar (8 May 2013)

midou7172 said:


> ...  - Retired??? How shares can be retires??? ...




If I want your money, I sell you a share and take the money.
Things change (especially my control in my own company!) 
so I try to buy back your share.

If buyback is successful, I no longer need that share, so I retire it?


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## midou7172 (8 May 2013)

burglar said:


> From thefreedictionary.com
> 
> So ... when will we discuss what's important or not?!
> 
> I am ready to learn more!




Hello burglar, 

How are you and how is your garden today? I think these are important things too!

I realized that I may need some more basics. So, I decided to go thought the courses on ASX website. 
I started a longtime ago but things were too abstract at that time. After discussing with you guys, I am starting to have a better idea about hole concept. So I am hoping that I might be able to go through further with the course.
I am sure that I will be back very soon with more questions as I will be stuck very soon 

Hopefully questions will be tougher!! So, be ready, mate!:bier:


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## midou7172 (8 May 2013)

midou7172 said:


> Hello burglar,
> I am starting to have a better idea about hole concept.




I've done it again.. "WHOLE concept" not "hole concept"... stop laughing!!


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## burglar (22 May 2013)

midou7172 said:


> ... Hopefully questions will be tougher!! So, be ready, mate!:bier:




Ok! So where are these tougher questions?


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