Are these good steps to find a good business?

[RandomInvestor]

A company's assets are resources that it control. Resources comprised of what the owner/s put in (equity), and what lenders and suppliers etc., loaned or yet to receive. Hence, A = L + E.

So when you do these debt/equity ratio etc., you have to interpret it in the context of the business and its financial performance. So you'd want a company that can somehow use other people's money for cheap, or for free; but don't want to be in it if business condition deteriorate those debt aren't cheap and aren't free and you go bankrupt.

Remember you're investing in a business, not investing in some historical numbers or forecasts that will hit the dots as predicted.

It's safer to go for companies with strong barriers and established pposition - all because these kind of corp. tend to be able to keep doing what it has been doing without much trouble as far as you can see. It shouldn't mean you buy big blue thinking the world it operates in will be like it had so it's safe.

Reverse that and if you understand a business enough, feel confident about its future enough... its current financials can pretty much be ignored. Risky, but so are buying big and hold thinking there's no risk.

OMG THANK YOU SO MUCH I SEE WHAT I WAS MISSING! The "equity" I thought it referred to share holders that invested in the business, not the owners. Everything is clear as a blue sky now.

 

[Value Collector]

OMG THANK YOU SO MUCH I SEE WHAT I WAS MISSING! The "equity" I thought it referred to share holders that invested in the business, not the owners. Everything is clear as a blue sky now.

The share holders are the owners.

Think of it like a house, if you bought a $500k house but to do it you borrowed $400k from the bank, then you have $100k equity we can call you an owner/shareholder/equity holder and the bank has $400k ownership in the form of debt we can call them debt holders/ bond holders etc

When you buy shares in a company, you are buying some of the equity and becoming an owner.

 

[RandomInvestor]

The share holders are the owners.

Think of it like a house, if you bought a $500k house but to do it you borrowed $400k from the bank, then you have $100k equity we can call you an owner/shareholder/equity holder and the bank has $400k ownership in the form of debt we can call them debt holders/ bond holders etc

When you buy shares in a company, you are buying some of the equity and becoming an owner.

The whole equity thing always confused me, not sure what it mean't by you own equity in a business, on a house isn't equity the capital appreciation that you get each year and isn't it your own money?

So in the d/e ratio the "equity" refers to company owner, share holders, or anyone who has invested in the business?

 

[Value Collector]

The whole equity thing always confused me, not sure what it mean't by you own equity in a business, on a house isn't equity the capital appreciation that you get each year and isn't it your own money?

So in the d/e ratio the "equity" refers to company owner, share holders, or anyone who has invested in the business?

The equity is the part of the business or houses capital value that is owned by the owners/ shareholders (owners and shareholders are the same thing)

For example if you owned a $500k house but owed $500k on it, you have zero equity, because if you sold it you would have to give the whole $500k to the bank to pay off the loan.

But if you only owed $400k to the bank, you would have $100k equity, because if you sold it and paid he bank back you would have $100k left, that $100k is your equity.

If the house was only worth $400k but you owed $500k you would have negative equity, meaning you owe the. And more than what the asset is worth.

You can build equity in a few ways, you could put more of your own money in at the start, you could use the earnings of the asset to pay off the loans, or the asset could go up in value.

 

[luutzu]

The share holders are the owners.

Think of it like a house, if you bought a $500k house but to do it you borrowed $400k from the bank, then you have $100k equity we can call you an owner/shareholder/equity holder and the bank has $400k ownership in the form of debt we can call them debt holders/ bond holders etc

When you buy shares in a company, you are buying some of the equity and becoming an owner.

I that $500k house next to a toxic dump or what?

 

[Value Collector]

The whole equity thing always confused me, ?

This video might clear some things up for you.

I that $500k house next to a toxic dump or what?

It's next to your mum's house.

Juss Kidding

 

[luutzu]

This video might clear some things up for you.





It's next to your mum's house.

Juss Kidding

So it's the one behind us.

That explains why I have this super ability to be a pain in the behind. Dad's bonsai and plants attracts (breed?) mosquitos; they became toxic and I was bitten quite frequently. Dam, should've let those spiders bit me instead.


Have a HS friend who has great talent with that "your momma" joke. The guy could go on for quite a while with it.

 

[Klogg]

This video might clear some things up for you.





It's next to your mum's house.

Juss Kidding

I would have thought it more appropriate if he used a drug company in the example....

 

[andy777]

I would have thought it more appropriate if he used a drug company in the example....

herbalife or valeant?