50

The net worth is based on an estimate of how much he would get if he relinquished his stake. The total funding is based on how much he has relinquished thus far. Suppose I have a candy jar with 100 candies. I'm not sure how much these candies are worth, so I start off by selling 10% of the jar for $10. Now I have 90 candies and $10, a total value of $100....


36

It doesn't go anywhere. It stays in the company as undistributed profit. If the company has too much cash and no opportunities to invest it in further growth, it can be harmful to the company's return on equity. Therefore typically the company will sooner or later choose to distribute it to shareholders either in the form of (regular or extraordinary) ...


19

If a company earns $1 Million in net profit (let's say all cash, which is not entirely realistic), it can do one of three things with it: Invest it back in the company (by buying more assets to generate future profits or paying off debt to reduce interest expense) Distribute it to shareholders (dividends, stock buyback) Do nothing (keep it as cash) On the ...


18

It has got to do with market perceptions and expectation and the perceived future prospects of the company. Usually the expectation of a company's results are already priced into the share price, so if the results deviate from these expectations, the share price can move up or down respectfully. For example, many times a company's share price may be beaten ...


14

It is true that operation profit comes from gross profit however it is possible for a company to have negative net profit yet have postive cash flow , it has to do with the accounting practice A possible example is that a company has extremely high depreciation expense of fixed asset hence net profit will be negative but cash flow will be positive. Assuming ...


14

They may keep the cash sitting in a bank somewhere as a cash reserve. They may invest it in stocks or bonds in other companies or in government units. They may invest in new factories or equipment. They may pay down debt. Etc. Do they have a "responsibility" to do anything in particular with it? In a sense. A corporation has a legal, fiduciary ...


13

He is worth $17.5 billion today Note that he is worth that dollar figure, but he doesn't have that many dollars. That's the worth of his stake in the company (number of shares he owns times the assumed value per share), i.e. assuming its total value being several hundreds of billions, as pundits assume. However, it is not a publicly traded company, so we ...


12

The company's value (which should be reflected in the share price) is not how much money it has in the bank, but something along the lines of 'how much money will it make between now and the end of times' (adjusted for time value of money and risk). So when you purchase a share of a company that has, say, little money in the bank, but expects to make 1M$ ...


9

I can think of a few good reasons: A company, especially public, usually wants their fourth-quarter earnings to be the strongest of the year. That ends each fiscal year on a high note for the company and its investors, which helps public sentiment and boosts stock prices. So, travel agencies and airlines usually like ending their year in October or March, ...


8

What littleadv said is correct. His worth is based on the presumed worth of the total company value (which is much greater than all investment dollars combined because of valuation growth)*. In other words, his "worth" is based on the potential return for his share of ownership at a rate based on the latest valuation of the company. He is worth $17.5 ...


8

Warren Buffet isn't using any special sauce. He looks for value and ignores hype, greed, and fear. He buys what he knows and looks for companies that generate cash and/or are available for a discount of their true value. He explains what he looks for in a company and his reasons for buying it. He has said on numerous occasions, "I look for intrinsic value." ...


8

Your formula for compound growth is slightly off: |*****| (EPS in year 2017 / EPS in year 2013) ^ (1/4) - 1 = (6.00 / 1.00) ^ (1/4) - 1 = 1.565 - 1 = 56.5% So the compound growth is much closer to the arithmetic average growth in the first case (60%), but still does not match the second case. However, the ...


7

You are omitting how the company made 120 million in the previous year and may be facing a shrinking market and thus have poor future prospects. If the company is shrinking, what will the shares be worth down the road. Remember companies like AOL or Blackberry? There was a time they had big profits before things changed which is the part you aren't ...


6

No, the stock market is not there for speculation on corporate memorabilia. At its base, it is there for investing in a business, the point of the investment being, of course, to make money. A (successful) business earns money, and that makes it valuable to its owners since that money can be distributed to them. Shares of stock are pieces of business ...


6

In a very basic sense you can only issue a dividend from distributable profits, which in practice is usually the businesses retained profits. As a new company you will not have any retained profits and therefore technically no distributable profits. In practice though, many companies issue interim dividends before the year end, however you are best taking ...


6

Stating poor estimates in advance will lower your share price to compensate for thge extras boost it gets later ... And may run afoul of stock manipulation laws. More pain than gain likely.


5

My grandfather owned a small business, and I asked him that very question. His answer was that year-end closeout is very time-consuming, both before and after EOY (end of year), and that they didn't want to do all that around Christmas and New Year.


5

When my daughter thought to get into the donut business, I asked what she'd sell the for. $1 each. She sold 12 dozen the first weekend. Sales = $144 Cost of goods = $54 (flour sugar, etc) Profit = $90 Profit would always be less than the total sales (let's ignore odd situations that contradict this, such as an IP / patent sale) as there's the cost of goods,...


5

Sales are how much product a company sold. If a company sells 1,000,000 widgets at $100 a widget then the company as $100,000,000 in sales. Earnings are how much money the company has left after paying all the bills to make, market and sell that product. Thus, companies can often have sales much higher than their earnings because the sales aren't taking ...


5

Assuming you are saying that the company issues 20,000 additional shares of its own stock and sells them for $8 each: The money from the sale is not income and not part of earnings. It is capital and appears on the balance sheet as part of shareholder's equity. With no other transactions, yes, the total of shares outstanding is increased by 20,000 to 100,...


5

IANAL (and nor am I an accountant), so I can't give a definitive answer as to legality, but AFAIK, what you propose is legal. But what's the benefit? Avoiding corporation tax? It's simplistic – and costly – to think in terms like that. You need to run the numbers for different scenarios, and make a plan. You can end up ahead of the game ...


5

The question isn't sales but profits. Banks traditionally profit by making loans. Just as with a physical product, there are costs involved, income produced, and the difference between the two is gross profit. From there you can get net profit, and from there you can look at efficiency or profit per share or whatever other metric floats your boat. Or you ...


5

No. Revenue is the company's gross income. The stock price has no contribution to the company's income. The stock price may be affected when the company's income deviates from what it was expected to be.


5

Basically, because people want it. Shareholders like frequent updates because they like to keep tabs on how their money is doing. I haven't read the latest op-ed by Buffett and Dimon, but the idea they're espousing is not new. In general, the anti-quarterly-guidance position is not that companies should never issue projections, but more specifically that ...


5

The Securities Exchange Act of 1934 formed the SEC and granted it the power to oversee all securities as well as the markets, the conduct of brokers, dealers, and investment advisers as well as the financial reports required of publicly traded companies. More specific to your question, its anti-fraud provisions prohibit misstatements or omissions in an ...


4

There are regulatory deadlines in the US set by SEC. You can read about it here. The annual report deadline will remain 90 days for year one and change from 90 days to 75 days for year two and from 75 days to 60 days for year three and thereafter. The quarterly report deadline will remain 45 days for year one and change from 45 days to 40 days for ...


4

Aside from the market implications Victor and JB King mention, another possible reason is the dividends they pay. Usually, the dividends a company pays are dependent on the profit the company made. if a company makes less profit, the dividends turn out smaller. This might incite unrest among the shareholders, because this means that they get paid less ...


4

You need to distinguish a company's guidance from analysts' estimates. A company will give a revenue/earnings guidance which is generally based on internal budgets. The guidance may be aggressive or conservative - some managements are known to be conservative and the market will take that into account to form actual estimates. When you see a headline ...


4

Apart from investing in their own infrastructure, profits can be spent purchasing other companies, (Mergers and Acquisitions) investing in other securities, and frankly whatever they please. The idea here is that publicly traded companies have a fiduciary duty to their shareholders to make as much money as they can with the resources (including cash, but ...


4

Imagine that I run Justin's Lawnmowing Inc. In the first year of operation I make $1,000. I spend $100 on gas and other consumables to run my lawnmowers. I also spend $1,200 on a new lawnmower for the business. From a cash perspective, the business lost $300 ($1,000 came in, $1,300 went out). From an accounting perspective, though, I have some ...


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