Why do we divide earnings by the number of shares outstanding? We know that we cannot compare earnings of one company to another because that does not tell us how cheap or expensive a company is. Just because DropoutEdu has $100M in net income and UnlearnEdu has $50M in net income, we cannot conclude that UnlearnEdu is cheaper. It could
We’re hiring interns 🥳 7 years ago, I started working my first job. And, that was the start of my teaching career. After instructing thousands of students, I could not have asked for it any differently. I signed up for the experience to help me stand out when applying to colleges. This was wrong. Rather, I ended up building many
Key Events 👉 Headline and core CPI both increased 0.4% month over month in March. This is hotter than expectations for a 0.3% increase. Core services were driving the hotter number – transportation and medical care services. What does this mean? Inflation is ahead of expectations. Means the fed needs to stay patient. Fewer rate hikes, pushed to later in
Why do journalists and investors use earnings per share? It tells us the amount of earnings a company generates. But, why don’t we just look at net income. Why create a new line that companies must report under GAAP accounting. There is a mathematical difference between net income and EPS. Take this example. DropoutEdu earns $100 million a year. UnlearnEdu
Share count is completely arbitrary. Just because a company has more shares than another, does not mean it is bigger. Just because a company has fewer shares than another, does not mean it is smaller. Why? Because the value of equity of a company is a function of two things. (i) Share price (ii) Shares outstanding Just because there are
It’s not worth explaining. This might juxtapose what you would expect to hear from me. As an educator. Isn’t my job to teach and explain things in simple and intuitive ways? Yes. But, I am not referring to teaching in the traditional sense. I am talking about explaining the unacquainted. I have learned the hard way – I cannot change
Flexibility leads to value. Imagine that you have an assignment due at 11:59pm. That assignment is worth 50% of your grade. It is currently 11:00pm and you haven’t started. You are panicking. Say I am the professor of that class. How much would you pay me to give you the option to submit the homework 1 day late? Well, you
Why do asset-light, IP business trade so high? In recent years, the separation of asset-heavy from IP business units has increased. This phenomenon is known as Nikefication. Nikefication was pioneered by, hint, Nike. This operational strategy separates design from production and distribution. Corporations adopt a decentralized approach by outsourcing various functions like production and distribution to contractors. By separating the
Does competition stifle improvement? Last night, I was running a mid-distance workout. On my third split, I had a thought come to mind that I jotted down after the workout. When I used to run competitively in high school, I resented running. It was extremely painful because I was very competitive. I wanted to be the best long-distance runner in
When does an item show up on the income statement? A) The revenue or expense recognized or incurred in the period listed on the statement. B) When the cash is transferred from one party to another. C) Earnings to equity investors are affected. D) When cash is expected to be transferred from one party to another. Answer Answer: A and
