Capital Investment Essay Example | Topics and Well Written Essays - 2250 words

Capital Investment - Essay Example What market share the company enjoys? Some of the financials such as debt-equity ratio, earning per share, dividend payout, yield, current price-earnings (P/E) ratio, net profit margin, liquidity or quick ratio are calculated to look at the current state of the company versus others in the industry (Arnold, 2008). These ratios provide only current status of the company but it does not give information about future potentials. It is essential to know whether the company is growing and if yes, then at what rate? Does its growth rate exceed its rivals? Is the market share of the company rising or stable? Is the industry growing or stagnating due to the reasons that lie in external environments? No analysis is complete unless qualitative factors such as brand equity, quality of man power, research and development activities, patents owned and its future implications, the company’s image among stake holders in terms of its management, ethical business dealings and corporate social responsibility factors, the new markets discovered, new projects undertaken for growth are evaluated thoroughly though one many question about the tangibility of these factors; nevertheless, they are equally important. Investors tend to buy any stock because they see the potential of appreciation in its price; in other words, when the stock trades much below its real value also called the intrinsic value then it is a right time to buy the stock. Opposite is also true that when the stock price exceeds its intrinsic value then it is time to sell the stock; however, there are certain important questions to be asked whether calculated intrinsic value is correct and how long will it take to reflect the intrinsic value of the stock in the stock market. Timing is an important factor while deciding about the investment on fundamental factors (Bodie, Kane & Marcus, 2011). It will be interesting to know about the key investment secrets that Warren Buffet