Book Value

Book value is the actual accounting net worth of the company. This is probably the easiest analysis to calculate. Book value is calculated by taking the company's total assets and subtracting the company's total liabilities. Another term for book value is equity.

Book Value Per Share

Book value per share is the actual accounting net worth of the company per outstanding share. Book value per share is calculated by taking the company's book value divided by the number of shares outstanding.

Price to Book Ratio

Price to Book Ratio is the book value per share in relation to the current stock price. Price to book ratio is calculated by taking the company's current stock price divided by the company's book value per share. This ratio will tell you if the current price is too high in relation to the book value, or if it is a fair price. The fair price number for P/B ratio is exactly 1.

Revenue

Revenue can be found on the income statement and is a total of all sales and operating income.

Net Income

Net income is the company's profit. Net income is calculated by subtracting the cost of goods or services and all operating expenses from the revenue.

Earnings Per Share

Earnings Per Share shows how profitable a company is per share of stock that is outstanding. Earnings per share is calculated by taking the company's net income divided by outstanding shares.

Price to Earnings

Price to Earnings measures the relationship between the stock price and the earnings per share. The price to earnings ratio will often vary depending on the quality of the company, future potential, company debt, and economics. Price to earnings is calculated by taking the company's stock price divided by the earnings per share.

Price to Sales

Price to Sales measures the relationship between the stock market cap and the company revenue. Price to sales ratio is determined by taking the company's market cap divided by revenue. The price to sales ratio will often vary depending on the type of the company, products, and economics.

Return on Equity

Return on equity measures a company's net income in relation to their book value. To calculate return on equity you take a company's net income divided by the book value.

Debt Ratio

Debt Ratio measures a company's total assets against its total liabilities. Debt ratio is calculated by taking the company's total liabilities divided by total assets.

Consider
- some types companies have a high debt that is acceptable.
   Consider borrowing money to buy a house with 20% down; your debt ratio would be 4.0 - This is acceptable to banks as long as you have the credit rating and income to make the payments. If you do not pay the payment, the bank will own your property, which would not necessarily be a loss for the bank, especially if the property has a high value.
- A company with most assets in property, plant, and equipment, would be able to have a much higher debt ratio that is acceptable.
- A company with most assets in accounts receivable, inventory, supplies, intangibles or intellectual property, may need to have a lower debt ratio.

Current Debt Ratio

Current debt ratio measures a company's ability to pay its current liabilities due within 1 year. Current debt ratio is calculated by taking the company's current assets divided by current liabilities. A company's current assets may include cash, accounts receivable, and liquid assets. A company's current liabilities include bills and expenses, dividends payable, and accounts payable.

Quick Debt Ratio

Quick debt ratio measures a company's ability to pay its bills and expenses with cash or cash equivalents without selling anything or borrowing. Quick debt ratio is calculated by taking the company's current assets - current inventory divided by current liabilities. A company's quick assets may include cash, accounts receivable, and market securities. A company's current liabilities include bills and expenses, dividends payable, and accounts payable.

Market Structure

There are 4 types of market structures: perfect competition, monopoly, monopolistic competition, and oligopoly. Considering monopolies are illegal in the US, and perfect competition almost never exists, most companies that you can invest in fall into 2 of these - monopolistic competition, and oligopoly.

Monopolistic Competition is a market structure where there are many companies that sell similar, but slightly different products and services. It is fairly easy to create a new company in this market structure and compete with other companies. These companies can set the prices of their products due to the slightly differentiated products, quality or believed quality of products, location, and marketing strategies. An example of a monopolistic competition would be drugstores, restaurants, toy companies, clothing stores, or supermarkets. These companies are price makers, but only if there is a demand for their products. For example, Apple makes products with perceived high value and great demand, therefore, they set their prices as they want. If the quality of their products were to decrease and demand for their products decreased, they would lose pricing power. An example would be Foot Locker, Stanley Black and Decker, and Energizer.

Oligopolistic Competition is a market structure where there are few companies and have the most domination and the most pricing power. It is difficult or impossible to create a new company in this market structure and compete with other companies. These companies can set the prices of their products due to the limited competition from other companies. An example of an oligopolistic competition would be an oil company, a pipeline, utility company, a car maker, a bank, an airline, or a weapons manufacturer with US Government classified data. These companies are price makers and have extremely high pricing power. An example would be Enterprise Products Partners pipeline company, Black Hills Energy, Citi Financial, and Exxon Mobil.