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A snapshot of the summary - A practical guide to interpreting financial statements and valuing companies
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1 Financial reporting
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On which things do investors
predominantly focus on?- Growth
- Composition of
revenues - Development of operational earnings
- Profit
margins - Net earnings
- Cash flow figures
- Dividends
- Growth
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On which things do regulators
predominantly focus on?- Capital
expenditures - Other investments
- Capital
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On which things do (trade) unions
predominantly focus on? Why?- Development of staff
- Employee expenses
Earnings Dividends
magnitude of potential salary increases. - Development of staff
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Next to his/her
predominant interest, everystakeholder should also be interested in what? And why?A company'soutlook and financial health.
These are the obvious key ingredients of a company's ability to deliver on anystakeholder expectation in the future. -
Why should every stakeholder understand how the owners view their investment?To
anticipate likely board and management actions in the future, which mayaffect the interest of its otherstakeholders other thanshareholders . -
Why is it often very insightful to analyse the revenue breakdown companies provide in their annual reporting?To better understand the development of growth drivers and -
draggers , and of theevolution ofcompetitive pressure over time. -
2 Shareholder return
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What does the return that a shareholder gets for being (partial) owner of a company consist of?
- Capital gains
Dividends Share buybacks
- Capital gains
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What are
yield plays in the investment world?Shares that are considered to have a lower level of risk andvolatility because they are usually found among larger, more established companies. -
What are growth plays in the investment world?Shares that will usually
refrain from paying outdividends and will insteadreinvest back into the company to expand. -
2.1 Capital gains
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What is the most straightforward way in which shareholders can earn money from being shareholders in a company?By buying shares at a certain price, which rise over time, and hence by profiting from a share price increase.
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