Financial tools that investors should apply to investment decisions

Written by Andy George


The early parts of this century were painful years for most foreign investors with world markets falling significantly. I believe it is important that investors pay more attention torepparttar fundamentals when making their investment decisions. The purpose of this article is to highlightrepparttar 112393 main financial tools that investors should apply when making investment decisions.

PRICE EARNINGS RATIO The most important ratio that investors should look at isrepparttar 112394 Price Earnings (P/E) Ratio. In layman’s terms this isrepparttar 112395 share price divided byrepparttar 112396 profit per share. The P/E Ratio of a Company should be compared against other companies inrepparttar 112397 sector and againstrepparttar 112398 market as a whole. I also believe a good test is to comparerepparttar 112399 P/E Ratio of a company with other similar companies quoted on other international stock exchanges.

The P/E Ratio to be used in investment decisions should berepparttar 112400 prospective P/E Ratio and notrepparttar 112401 historical P/E Ratio. Unfortunately in most ofrepparttar 112402 financial pressrepparttar 112403 P/E Ratio stated isrepparttar 112404 historic one that may not reflectrepparttar 112405 future prospects of a business. Hence investors should look atrepparttar 112406 P/E Ratio based on current and future earnings and notrepparttar 112407 previous year’s figure.

An illustration of how an investor could properly carry out this exercise is as follows: A food retailer has a Prospective P/E Ratio of 10 times. It is currently expanding into all towns in Cyprus by opening new supermarkets. Its main competitor in Cyprus is estimated to have a Prospective P/E Ratio of 15 times. When one comparesrepparttar 112408 rating to other international quoted businesses inrepparttar 112409 same sector one has found that these businesses command a P/E Rating of 20 times. This information would appear to indicate thatrepparttar 112410 investor should seriously consider an investment in this company since there is a case to suggest it is under valued.

NET ASSET VALUE (NAV): A useful ratio forrepparttar 112411 evaluation of investment companies isrepparttar 112412 net asset value per share. In Cyprus most companies disclose their NAV on a two weekly basis whereas some companies go as for as to discloserepparttar 112413 figure on a weekly basis.

In my opinion, those companies that have an NAV that is lower thanrepparttar 112414 share price should be tread on carefully by investors since they have a higher risk. The opposite is true for investment companies that are at a huge discount to their NAV.

Bread, Milk and Car Insurance

Written by Andrew Bowen


With increased competition between supermarkets to gain market share and improve profitability,repparttar range of products on offer is getting ever diverse. Now,repparttar 112392 big three chains, Tesco, Sainsbury’s and Asda have caught on torepparttar 112393 fact that their brand name can sell just about anything, including of all things, car insurance.

Car insurance is one of those very boring expensive products that you loathe having to pay for but have no choice if you want to drive a car on Britain’s roads. Why therefore would supermarkets want to be associated with such a seemingly expensive pain inrepparttar 112394 pocket? Well it seems thatrepparttar 112395 public think it’s a great idea and are buying it from these stores in their thousands withrepparttar 112396 belief that it must cheap ifrepparttar 112397 supermarkets are selling it. The strange thing is thatrepparttar 112398 companies behind these deals, who are actually underwritingrepparttar 112399 risk, arerepparttar 112400 same companies who have been selling you car insurance for years.

Tesco for example seem to be incredibly successful in selling motor insurance to their customers with statements proclaiming that you could save up to £150 compared to some leading insurers. Tesco of course is not an insurer. If you look closely atrepparttar 112401 bottom ofrepparttar 112402 Tesco car insurance webpage, you will notice it says thatrepparttar 112403 policy is provided and underwritten by a company called UK Insurance Limited. Who on earth is this company you may ask. UK Insurance Limited is part of Royal Bank of Scotland who also own Direct Line along with Churchill and Privilege.

Sainsbury’s state that you could save up to £165 on your car insurance compared to other leading insurers - £15 better than Tesco. Of course, like Tesco, Sainsbury’s is not an insurer either. A quick look at their webpage shows that policies are arranged and administered by Esure, who are part ofrepparttar 112404 Halifax Bank of Scotland group. Maybe Sainsbury’s are about to swap Jamie Oliver for Michael Winner – maybe not.

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