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Valuation

Value Investing Venture Capital Volume Weighted Average Price (VWAP)Wealth Management Whale Activity

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Category – Valuation

Valuation is the process of determining the worth of an asset, such as a stock, bond, or company. In trading, accurate valuation is key to identifying underpriced or overpriced assets. Traders use various methods, such as discounted cash flow (DCF), price-to-earnings (P/E) ratios, and comparative analysis to assess whether an asset’s market price is justified. Understanding valuation helps traders make informed decisions about entry and exit points, while ensuring that investments align with their risk-return expectations.

BALANCE SHEET

Balance sheet is a financial statement that reports a company's assets, liabilities, and shareholders' equity at a specific point in time.

FUNDAMENTAL ANALYSIS

Fundamental Analysis assesses a security's intrinsic value by examining economic, financial, and qualitative factors, including financial statements, industry conditions, and macroeconomic indicators, to determine if an asset is over- or undervalued.

RETURN ON INVESTED CAPITAL (ROIC)

Return on Invested Capital (ROIC) measures how efficiently a company generates profits relative to the capital invested in its operations, indicating its ability to create value above the cost of capital.

WORKING CAPITAL

Working Capital represents a company’s short-term liquidity, calculated as the difference between current assets and current liabilities, indicating its ability to meet short-term obligations.

RETURN ON EQUITY (ROE)

Return on Equity measures how efficiently a company generates profit from shareholders' equity, expressed as a percentage.

RETURN ON ASSETS (ROA)

Return on Assets measures how efficiently a company uses its assets to generate profit, expressed as a percentage.

QUICK RATIO

Quick Ratio measures a company’s ability to meet short-term liabilities using its most liquid assets, excluding inventory.

PRICE-TO-SALES RATIO (P/S RATIO)

Price-to-Sales Ratio compares a company's market value to its revenue, assessing its valuation relative to sales performance.

PRICE-TO-BOOK RATIO (P/B RATIO)

Price-to-Book Ratio compares a company's market value to its book value, assessing whether a stock is over- or undervalued.

INTEREST COVERAGE RATIO

Interest Coverage Ratio measures a company’s ability to cover interest expenses using EBIT, highlighting financial resilience.