May 24, 2016

For stock investors, the balance sheet is an important consideration for investing in a company because it is a reflection of what the company owns and owes. There are three categories you want to look at on a balance sheet: working capital adequacy, asset performance, and capitalization structure. Within this article, the author examines cash conversion cycle (CCC), fixed asset turnover ratio, return on asset ratio, and the impact of intangible assets. The cash conversion cycle helps show the condition of a company’s working capital position. This cycle also helps show how well a company is managing its accounts receivable and inventory. Calculated in days, the CCC reflects the time required to collect on sales and the time it takes to turn over inventory. The shorter this cycle is, the better. Cash is king, and smart managers know that fast-moving working capital is more profitable than tying up unproductive working capital in assets. The CCC is also known as the operating cycle. Investors look at this cycle to determine a company’s stability and performance. Conversely, erratic collection times and/or an increase in inventory on hand are generally not positive investment-quality indicators. When you’re investing in a company, take the time to look over the balance sheet, income statement and statement of cash flows and you’ll see the heart of the company. The numbers don’t lie. Property, plant and equipment (PP&E), or fixed assets, is another of the “big” numbers in a company’s balance sheet. A lot of your manufacturing companies will have a higher concentration of fixed assets. The fixed asset turnover ratio is determined by dividing net sales by average fixed assets. The higher the number of times PP&E turns over, the better. Return on assets (ROA) is considered to be a profitability ratio – it shows how much a company is earning on its total assets. ROA is determined by dividing net income by average total assets. A higher percentage return is ideal to look for. To keep this review from being too long, intangible assets come in three categories: intellectual property, deferred charges, and purchased goodwill. A further analysis can be read in the article. Assets represent items of value that a company owns, has in its possession or is due. Of the various types of items a company owns; receivables, inventory, PP&E and intangibles are generally the four largest accounts in the asset side of a balance sheet. As a consequence, a strong balance sheet is built on the efficient management of these major asset types and a strong portfolio is built on knowing how to read and analyze financials statements. Financial literacy is essential in life to managing not just your personal finances but your investments also. I encourage you to constantly seek wisdom from those who know more than you. “Walk with the wise and become wise, for a companion of fools suffers harm.” Proverbs 13:20 NIV

To an outsider, Durango, Colo., resident Matt Kelly, now 50, was the picture of success. He had a job in banking, a large condo (complete with a pool table in his son’s room) and frequent vacations (he traveled extensively to run marathons).

But inside, he was freaking out.

The Kelly’s faced a problem that many Americans face today and that’s consumer debt. Roughly two in three Americans have consumer debt (excluding a mortgage), with nearly half carrying credit card debt (the average household has $15,762, according to NerdWallet) and one in five having student loan debt ($48,172), according to a survey of more than 3,000 American adults released in February by Gallup. The problem was that they were just paying the minimum balance, and not standing to face the behavior. But when they decided to pay down their debt, they shared these steps: slash your monthly expenses, have a garage sale, sell big-ticket, earn extra money to pay down debt, and downsize. They slashed their monthly expenses by lowering their food costs, and reducing money spent on entertainment. They had a garage sale and found there were items that they personally didn’t have an attachment to, but they also sold items of higher value which yielded $3000. The Kellys put their tax refund and some other monies they earned —Cheri worked lots of extra hours as a speech therapist — towards paying down debt. One of the biggest steps they did was to downsize. They used the proceeds of their old condo as a down payment on a smaller condo, and used the rest toward their debt. The sale of the home allowed the Kellys to erase their $65,000 in credit card, student loan and medical debt in just 15 months; without that, it would have taken them significantly longer.

“I used to look for the next shiny thing that would make me happy,” Kelly says. Now, he says, he looks to bigger goals — like getting to travel with his family — for this happiness. “It’s been a transformation,” he says. There’s “a lightness, a freedom.”

A key point is the Kelly’s didn’t just cut their expenses, they also looked to increase their income also. If you cut your expenses too far back, it’s like sawing your arm until there’s nothing left. Don’t just cut back, expand your income also. There’s good debt and there’s bad debt. Consumer debt is bad debt, because in the end, it is going to take money from your pocket if you don’t pay the balances off. Sometimes you have to lay down your life in order to take up a new life, and because the Kelly’s sacrificed a life, they began to experience a more fulfilled life. “Committed and persistent work pays off; get-rich-quick schemes are ripoffs.” Proverbs28:20 MSG‬‬

The power of investing in dividend-paying companies is underappreciated by many people. That’s a shame, because it means that their portfolios may not be performing as well as they could, and they may end up amassing less wealth than they could. Here are 17 tips provided by the author: you can start with very little, only invest money you won’t need for 5 to 10 years, save aggressively and invest regularly to build wealth, look at the dividend yield, not the dividend amount, favor big yields over smaller ones –in general, be wary of huge yields, seek strong dividend growth, check the payout ratio, understand effective yields, remember there’s a real company behind each dividend, be sure you understand the companies you invest in, seek high quality companies, invest in companies when they’re attractively priced, know what tax hit to expect, invest for the long term, there’s no shame in just sticking with index funds, keep learning. You want to look for dividend reinvestment plans (Drips) or direct investing plans that are offered by many companies and allows you to buy shares and fractions of share of stocks at very small amounts such as $25 to $50. I personally use a tool called Sharebuilder that allows me to invest in multiple stocks and gain little pieces of the stock. Doing this action will get you started in building a portfolio. Don’t use money that you’re saving for major purchases such as a down payment on a home. Use money that you are willing to lose if the market takes a downward plunge. Set a number in mind you are willing to invest and consistently invest and that amount will compound if you position yourself in the proper fund or group of stocks. If one company has a quarterly dividend payment of $0.60 and another’s is $1.00, don’t make the mistake of thinking the $1.00 dividend is better. Focus on the dividend yield instead, which is the current annual dividend amount divided by the current stock price. The $0.60 dividend might be yielding 2.4%, vs. just 0.9% for the $1.00 dividend. It all depends on the stock price. (This math is also why dividend yields jump when a stock price falls, and vice versa.) It is important to focus on a company’s yield and payout, because this information will determine if it’s worth investing in. Most dividends you’ll receive from shares of stock will enjoy a relatively low tax rate. It’s currently 0% for low-income folks in the 10% or 15% tax brackets, and 15% for most of us. Those in the highest tax bracket will face a 20% rate. If you hold your dividend-paying stocks in a traditional IRA or 401(k), you’ll only be taxed when you withdraw funds from the account, but you’ll face ordinary income tax rates on that income, which could be 25% or 28% for many of us. Of course, if you hold your dividend payers in a Roth IRA, you will likely pay no taxes at all! The key thing is to create a portfolio that you can use to invest for the long term, build a portfolio with index funds, and always be learning. In my opinion, before you invest, you must have a budget. You must know how much is really coming in, how much is going out, and what your bottom line number is. There’s a four step process I consistently use over and over which has enabled me to invest. You can reach me at the contact me section to learn more.

Audiences catapulted the first movie from the Angry Birds franchise to first place in 37 markets worldwide. According to reports, the movie grossed $43 million from 74 international markets. The markets together comprise 63% of total market for the movie. The top three markets for the movie were Russia, United Kingdom, and Germany, with revenues of $5.7 million, $3 million, and $2.9 million respectively. Currently Rovio Entertainment, the company that made Angry Birds, is hoping that the movie will be a success. Rovio has started a new strategy of diversifying its revenue base. Rovio has been experiencing declining revenues over the past few years and that’s due to its current mobile games revenue model. Nowadays, a majority of mobile games are free-to-play and game studios make money off in-app purchases made by players and an assortment of other sources such as advertising and licensing deals. When it was launched in 2009, Angry Birds was a pay-to-play game. Rovio is hoping that its various licensing and merchandising deals will help bring the studio back to profitability. For example, Disney (DIS) recorded $6 billion in Marvel retail merchandising sales. The studio’s revenue sources ranged from cars to Indian sandalwood incense sticks. Similarly, Spider man is recorded to have earned $1.3 billion in 2014. Rovio’s willingness to change its revenue model is a clear example of how quickly our world is changing. If you think about the telephone, it used to be a device for person to place, now with technology it is not just person to person, but it’s also a way to connect a person’s life to the whole world. Technology will continue to grow and change, and the people who see the abundance that this life has to offer will prosper with the proper attitude and perspective. Your job will take care of your living expenses, but your free time is yours to be a blessing to others. Information is the current currency of this age, so be willing to adapt to change. “If you think you know it all, you’re a fool for sure; real survivors learn wisdom from others.” Proverbs 28:26 MSG‬‬

If you need agreement in prayer, or if you’re in need of a financial checkup you can reach me in the contact me section.

“But those who want the best for me, Let them have the last word—a glad shout!— and say, over and over and over, ” GOD is great—everything works together for good for his servant.” I’ll tell the world how great and good you are, I’ll shout Hallelujah all day, every day.”

Psalm 35:27-28 MSG


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