⚠️𝗥𝗲𝗱 𝗙𝗹𝗮𝗴𝘀 to look out fr in Financial Statements – Part 4
What is 𝗗𝗲𝗽𝗿𝗲𝗰𝗶𝗮𝘁𝗶𝗼𝗻?
➱ How depreciation manipulation is red flag?
➱ Popular methods of calculating it
➱ Case study of Century Plyboards
➱ How to analyze depreciation tricks like a pro?
𝗪𝗵𝗮𝘁 𝗶𝘀 𝗗𝗲𝗽𝗿𝗲𝗰𝗶𝗮𝘁𝗶𝗼𝗻?
You buy car, & its value decreases each yr due to use. This reduction in value is depreciation🚗
It measures the reduction in the value of a fixed asset due to usage or obsolescence over time. Think of it as wear and tear for your assets
𝗪𝗵𝘆 𝗶𝘀 𝗜𝘁 𝗜𝗺𝗽𝗼𝗿𝘁𝗮𝗻𝘁?
Depreciation allows companies to spread cost of an asset over its useful life, reducing the immediate financial burden.
It’s an expense on the income statement that accounts for wear and tear, reflecting the asset's actual value over time.
1️⃣ Market Value
2️⃣ Face Value
3️⃣ Book Value
4️⃣ Intrinsic Value
Lets learn each one of them⤵️
#StockMarket #investor
1️⃣ Market Value
It is the current price at which an asset or company is trading in the market. It represents the collective valuation of investors based on financial performance, growth prospects, market sentiment, etc.
Imagine you own a lemonade stand, and investors are willing to pay ₹100 for each share of your business.
This ₹100 reflects the market's perception of your lemonade stand's worth, considering factors like your sales, reputation, and future potential.
• Net Interest Margin(NIM)
• Return on Assets(ROA)
• Non Performing Assets(NPAs)
• CASA Ratio
• Provision Coverage Ratio
• Capital Adequacy Ratio
• Loan to Deposit Ratio
Let's analyse each one in detail 🧵
#stockmarkets #Finance
1⃣Net Interest Margin(NIM):
NIM is tool used by both investors & bankers to measure profitability. It is diff betwn interest earned frm loans & the intrst paid out to depositors. It can be used as parameter to measure fund manager’s efficiency in managing firm’s assets.
NIM can be calculated as = (Investment returns - Interest expenses)/Average earning assets
Higher NIM shows good demand for loans or other financial products of the banks.
Negative or declining NIM must trigger caution as it reflects poor allocation or handling of assets.