STOCK MARKET CLASSES

1. Fundamental Analysis
Ratio Analysis
Financial Analysis
2. SIP & Compounding
3. Mutual Fund Investing
4. ETF
5. Technical Analysis
6. Support & Resistance
7. Price Action
8. Breakout / Breakdown
9. Indicators
10.Chart Pattern
11.Candlestick Pattern
12.Fibonacci
13.Volume Analysis
14.Swing Trading
15.Intraday Trading
16.Future & Option
17.Option Trading
18.Option Greeks
19.Option Chain Analysis
20.Option Strategies
21.Trading Psychology (Risk Management)
 FUNDAMENTAL ANALYSIS

PAT MARGIN : Profit after Tax or Net Margin

PAT margin = Selling price – Cost Price

Pencil
Cost price = 10
Selling price = 15
Gross Profit (Actual profit) = 5rs

Profit= selling price – cost price

Profit margin = profit / selling price % = 1/3 rd % = 33.33% is the profit margin

a) Markup %age : Profit / cost price = cost price se kitna badha ke becha %age me i.e. 50%

Markup cost price se nikalta hai.

b) Profit margin : selling price se nikalta hai

R.O.E. = Return on Equity

Equity = Investment without loan i.e. from ( SELF + PEOPLE ) in return give share to self and
share to people

or equity = investment of shareholder

R.O.E. = net profit / investment (equity)

e.g. pencil = cost 10, sell = 15

10xpencil = 100 , sell = 150 so. R.O.E. = 50%

Conclusion

PAT margin tell the %age profit per product of company

But R.O.E. tells the %age profit on total Business Equity

So R.O.E is more important that PAT margin

i.e. SASTA becho but JADA becho (e.g. like wallmart – PAT margin per product is low but the
sell more products so R.O.E. is always high)

R.O.E. can be increased

 by taking debt from bank

e.g.
ROE = NET PROFIT / EQUITY
TOTAL Investment is = 100

COMPANY COMPANY B
A
EQUITY (shareholder) 100 50
DEBT from bank 0 50 (12% of debt) i.e. 6rs
NET PROFIT 20 20-6 = 14
R.O.E. 20% 28% ( 14/50)

COMPANY A :- in case of loss of company no debt has to be paid

COMPANY B :- in case of loss of company debt is to be paid so to shareholder dividend is

very low or zero even if the profit is gained.

Conclusion : it is important for COMPANY B that debt to equity ratio is low and company
payment on debt is always there, because if payment on debt is low company is in loss.

DEBT to EQUITY ratio must be low or zero i.e. Debt free

R.O.E. is good if Debt to equity ratio is low or zero
R.O.E. > 20 is very good

But for BANKS, NBFC, Lender, Finance Company the debt to equity ratio is not important.

ASSET TURNOVER

The turnover provide by Company Asset (machines, equipments, cars, etc.)

Lower Asset Turnover must be high is good company

CASH CYCLE (Cash Conversion Ratio)

Investment to Raw Material (1ST DAY) to Final product (30 DAY) = time duration is called
CASH CYCLE i.e. 30
i.e. 30 days to take final cash.

Lower the cash cycle the company is good

Cash Cycle will be in negative if :-

Company takes advance from the final product customer

Investment raw material from vendor (with credit days of 30 days or more)

If cash cycle is high it means company takes more time to earn from their product.

CORPORATE ACTION

Split : company strategy is to split the original face value of share to increase the no. of
share , so to keep themselves more no. of share to themselves.

For 100rs share

(a) In year 2018 face value = 10 share value i.e company provide 10 share of 10rs = 100
(b) In year 2020 by split = 1 share value i.e. company provide 100 share of 1rs = 100

For stock holder = if share split it means they will get less %age of share hold in company

i.e. for company a = stock holder has 10% of holding

for company b= stock holder has 1% of holding.

So SPLIT is not good for the company

Bonus:
Bonus is a free share provided by company to stock holder

Eg.
No. of Share Bonus Total share Final Share price
Share price
100 10 0 100 10
100 10 100 200 1

i.e. company provide bonus to

 decrease the Book Value and lower the Share Price

 increase the no. of share for more trading

conclusion
for stock holder : Bonus is not good if share price is on your reach

But if share price is very high (eg. 85,000) then bonus is good i.e. if company provide ten
time of bonus it means the share price will then come to 8,500

COMPANY STATEMENT

Profit & Loss Statement

It shows net sales and net profit

CASH FLOW STATEMENT

It shows actual payment get by customer on NET profit.

Only Operating Cash flow is important

Important

(Add 5 years of Operating Cash Flow) compare it with (5 year of Net Profit)

Company in profit or loss = 5 year Net profit – 5 year Operating cash flow

Company is good if net profit and operating cash flow is equal

RIGHTS ISSUE

Right issue is similar to Bonus and split