The guy just asked for basic knowledge of how to read financial statements, and you guys are telling him its not important? Its very important to know the basics, the more advanced stuff is what you can go without, but you have to know how to tell if a company made a profit or loss, what kind of assets & liabilities they have, their cash positions, their cashflows, their future outlook. That stuff is important

@Rollout. Are you saying it's impossible to conduct an online class of accounts?

@Pesanane what do you want to know? how to value a company? i.e airline...OMC...Bank etc...Forecast profits? etc

Part 1

I would buy into a company if its:-

1. Trading on a single digit trailing/forward Price to Earnings (PE) Ratio.

Trailing PE is calculated as Current Market Price/current Earnings Per Share (EPS) where as Forward PE is calculated as Current market price/estimated EPS



2. Trading Below or slightly above its book value.

Book Value calculated as Total Assets-Total Liabilities. After calculating Book Value compare it to a companies market capitalization actually just divide Book value/market cap...if the figure is below 1 then the company is trading below its book value an indicator that the stock could be undervalued...its wise to compare the figure you get to a firms peers.

Homework.

1. Calculate Kenya Re's current trailing PE (5.2978) and forward PE if we assume that Kenya Re's FY 2012 EPS will rise by 15% (4.6068)

2. Calculate Kenya Re's Book Value? ( 12,926,788,000.00) Whats is its book value/market cap ratio? (1.48)

3. What are your conclusions?
a. Trading slightly above book value
b. If PE are to be maintained, we are looking at a TP of 19.40

After this we then move to part 2.