How Investment Works..

[Yang Guo 7]

Once upon a time in a village, a man appeared and announced to the villagers

that he would buy monkeys for $10 each.

The villagers seeing that there were many monkeys around, went out to the

forest, and started catching them.

The man bought thousands at $10 and as supply started to diminish, the

villagers stopped their effort. He further announced that he would now buy

at $20. This renewed the efforts of the villagers and they started catching

monkeys again.

Soon the supply diminished even further and people started going back to

their farms. The offer increased to $25 each and the supply of monkeys

became so little that it was an effort to even see a monkey, let alone catch

it!

The man now announced that he would buy monkeys at $50! However, since he

had to go to the city on some business, his assistant would now buy on his

behalf.

In the absence of the man, the assistant told the villagers. "Look at all

these monkeys in the big cage that the man has collected. I will sell them

to you at $35 and when the man returns from the city, you can sell them to

him for $50 each."

The villagers rounded up with all their savings and bought all the monkeys.

Then they never saw the man nor his assistant ever again, only monkeys

everywhere!

Now you have a better understanding of how the stock market works.

[lotte.world 0]

Once upon a time in a village, a man appeared and announced to the villagers

that he would buy monkeys for $10 each.

The villagers seeing that there were many monkeys around, went out to the

forest, and started catching them.

The man bought thousands at $10 and as supply started to diminish, the

villagers stopped their effort. He further announced that he would now buy

at $20. This renewed the efforts of the villagers and they started catching

monkeys again.

Soon the supply diminished even further and people started going back to

their farms. The offer increased to $25 each and the supply of monkeys

became so little that it was an effort to even see a monkey, let alone catch

it!

The man now announced that he would buy monkeys at $50! However, since he

had to go to the city on some business, his assistant would now buy on his

behalf.

In the absence of the man, the assistant told the villagers. "Look at all

these monkeys in the big cage that the man has collected. I will sell them

to you at $35 and when the man returns from the city, you can sell them to

him for $50 each."

The villagers rounded up with all their savings and bought all the monkeys.

Then they never saw the man nor his assistant ever again, only monkeys

everywhere!

Now you have a better understanding of how the stock market works.

sweet and to the point. cheers

[bepgof 20]

A company always deals with 3 decisions:

1. ID: Investment decision: What to buy to make more money.

2. FD: Finance decision: Which funds to use to minimise the costs of borrowing

3. WCD: Working capital decision: What to do with the $, declare as dividend or re-invest? Associated with ID.

So, mathermatically, value of company = ID/FD = cf/k

ID=cash flow = handles by CEO

FD=lowest possible operating cost= handles by CFO

Role of CEO is to make sure to increase cf as large as possible.

Role of CFO is to make sure to reduce k to as low as possible.

Thus, V= CEO/CFO for a company!

What abour the value of an household?

V= Husband/Wife !

Children are assets! which generate cash inflow in due time!

[bepgof 20]

We borrow $ for investment which generate cash inflows.

Not borrow $ for consumption which causes cash outflows.

We save $ by defer personal consumption thus lending others for consumption, get 'yield' in return.

Owning/buying a car is an investment(asset)?

How it generates cash inflows?

How it causes cash outflows?

Take a 1.6 liter car for example:

Fixed costs:

Road tax(6 month)= $369. 1 day=2.1

Insurance(1yr)=$1.2k. 1 day=3.3

Parking(1 month)=$85. 1 day=2.8

Say COE(10yr) = $70k. 1 day = 19.2

Variable costs:

Fuel(1month): $300, 1 day=$10

ERP(daily): $1

Total cash outflow daily = 2.1+3.3+2.8+19.2+10+1 = $38.4

Not mentioning maintenance + car cost!

Worth? Consumption? Investment?

[Lauer 15]

How is the stock market nowadays?

Cheers!