Cost Averaging

Ok I believe you already heard this term and you are wondering what it is really.

Well if you understand the word "average" from your investing online activities which was brought about by your interest to trading stocks online probably you know what it is. But let us assume we don't know. The term started as dollar cost averaging which originated in United States and then applied locally to the Philippines as investing advice of some stock brokers. From then on the concept was being taught to newbie investors as a investing tip

Basically cost averaging is buying stock with sound fundamentals on a period of time taking advantage of the stock markets bull - bear cycle. In the end the average cost of the stock is lower and when the time is right and the value of the stock is up one can sell all the stocks thus gaining profit. You don't worry when the stock is down all you do is buy on a regular basis, let say monthly, at a regular amount. Stocks are not always at high price there are times that they are low and sometimes very low that stock investors term it undervalued. Don't be tempted to buy a lot when its really low but buy according to plan. Always allocate your excess funds to other stocks as well so that your portfolio is diversified. A disciplined stock investor will be the perfect example of a practitioner of peso/dollar cost averaging. 

Discipline and time are the key components of a sound stock market investment strategy. Probably you have no excess money today. But if you save some little by little this little savings of yours can accumulate into the minimum amount of investment that you can place. From there don't stop saving. Every time you reach that savings amount place or add it to your investment. In the long run you would have save enough funds and built your portfolio.

Always remember that the stock market has the element of risk but with knowledge, discipline, and time such risk could be managed and sometimes can be use to your advantage

Cost Averaging

Ok I believe you already heard this term and you are wondering what it is really.

Well if you understand the word "average" from your investing online activities which was brought about by your interest to trading stocks online probably you know what it is. But let us assume we don't know. The term started as dollar cost averaging which originated in United States and then applied locally to the Philippines as investing advice of some stock brokers. From then on the concept was being taught to newbie investors as a investing tip

Basically cost averaging is buying stock with sound fundamentals on a period of time taking advantage of the stock markets bull - bear cycle. In the end the average cost of the stock is lower and when the time is right and the value of the stock is up one can sell all the stocks thus gaining profit. You don't worry when the stock is down all you do is buy on a regular basis, let say monthly, at a regular amount. Stocks are not always at high price there are times that they are low and sometimes very low that stock investors term it undervalued. Don't be tempted to buy a lot when its really low but buy according to plan. Always allocate your excess funds to other stocks as well so that your portfolio is diversified. A disciplined stock investor will be the perfect example of a practitioner of peso/dollar cost averaging. 

Discipline and time are the key components of a sound stock market investment strategy. Probably you have no excess money today. But if you save some little by little this little savings of yours can accumulate into the minimum amount of investment that you can place. From there don't stop saving. Every time you reach that savings amount place or add it to your investment. In the long run you would have save enough funds and built your portfolio.

Always remember that the stock market has the element of risk but with knowledge, discipline, and time such risk could be managed and sometimes can be use to your advantage

Cost Averaging

Ok I believe you already heard this term and you are wondering what it is really.

Well if you understand the word "average" from your investing online activities which was brought about by your interest to trading stocks online probably you know what it is. But let us assume we don't know. The term started as dollar cost averaging which originated in United States and then applied locally to the Philippines as investing advice of some stock brokers. From then on the concept was being taught to newbie investors as a investing tip

Basically cost averaging is buying stock with sound fundamentals on a period of time taking advantage of the stock markets bull - bear cycle. In the end the average cost of the stock is lower and when the time is right and the value of the stock is up one can sell all the stocks thus gaining profit. You don't worry when the stock is down all you do is buy on a regular basis, let say monthly, at a regular amount. Stocks are not always at high price there are times that they are low and sometimes very low that stock investors term it undervalued. Don't be tempted to buy a lot when its really low but buy according to plan. Always allocate your excess funds to other stocks as well so that your portfolio is diversified. A disciplined stock investor will be the perfect example of a practitioner of peso/dollar cost averaging. 

Discipline and time are the key components of a sound stock market investment strategy. Probably you have no excess money today. But if you save some little by little this little savings of yours can accumulate into the minimum amount of investment that you can place. From there don't stop saving. Every time you reach that savings amount place or add it to your investment. In the long run you would have save enough funds and built your portfolio.

Always remember that the stock market has the element of risk but with knowledge, discipline, and time such risk could be managed and sometimes can be use to your advantage

Investing terminologies 101: Fundamental and Technical Analysis

 source: http://www.babypips.com

 

I know you don't want to hear this gibberish words because as we Pinoys say it "dudugo ang ilong" (my nose will bleed) and you end up in the mental hospital because you will loose your sanity once you read and try to understand this words. But if you are really serious in investing this is a must and I insist that you start reading the business column of the newspaper instead of the horoscope section.

One thing more lest get the definitions of this two words from Wikipedia.org:

Fundamental analysis of a business involves analyzing its financial statements and health, its management and competitive advantages, and its competitors and markets. When applied to futures and forex, it focuses on the overall state of the economy, interest rates, production, earnings, and management. When analyzing a stock, futures contract, or currency using fundamental analysis there are two basic approaches one can use; bottom up analysis and top down analysis.Fundamental analysis is performed on historical and present data, but with the goal of making financial forecasts.

Technical analysis is a security analysis discipline for forecasting the future direction of prices through the study of past market data, primarily price and volume.

I think the description from Wikipedia is enough to explain these two words but let me further explain.

When buying how do you determine the price of a product? Isn't it that you either refer to the old price you know or you might do what we call canvassing right? It is the same with the stock market. You need information to determine the right price for the stock you are buying. With these information of course one should analyze so that a final prize could be pegged to such stock you are buying. In the Philippine Stock Exchange the rule is to not to be 3 level higher or lower from the last traded price based on the Board lot and fluctuation schedule. 

Fundamental analysis primarily gives you the idea what the stock's value based on the historical record which we call Financial Statement. You get to see the Assets(properties) and Liabilities(debts) of the company by looking at there Balance sheets or Statement of Position. It also shows distribution of ownership of the company in its Stockholders Equity. With these information one can analyze the valuations such as Liquidity(capacity to pay current debts), Working Capital(capacity to operate the business) and some other else.( I told you you might say "dumudugo na ang ilong ko Louis").

Another report usually called Profit & Loss report or Statement of Performance shows the companies results of operation on a particular period. This report will give you a picture of where does the company sell or earn, what expenses are spend to operate, and how much earnings did the company make. 

These information help you determine if it is wise to invest in the stock because it shows the viability of the company to earn in the near future and thus reward you with dividends(that's what we get when the board of directors are generous enough to share some profit of the company in other words its ka-ching!)

Now technical analysis on the other hand is more of a forecasting analysis. Let say its as if you are reading the horoscope of your chosen stock to invest into. These is where the word TREND comes. Data use in these analysis are the prices and trade volume of the stock. These analysis indicate the likelihood of the stock going up or going down. Usually it makes use of charts to visualize the possible outcome of the stock price. It shows when did investors and speculators bought a lot and at what price. An uptrend does not usually indicate that the stock's value is going up. It might be a result of speculators hoping to make a short gain due to some news or other market forces that is happening in the world(observe the current Greece debt crisis and debt releif and the recent Philippine election in which Noynoy was the leading presidential candidate)

Technical analysis gives you an idea when the stock price may rise or fall. With that knowledge you will be able to plan when to buy good stocks(buy stocks with good fundamental analysis when prices are down) and sell(when the price of the stock is near or above your target price or if the price surpass your breakeven price per stock). You only gain when you have sold your stock above your total acquisition cost(that is the price you bought that stock plus cost to by it like brokers commission, SCCP charges, Stock transaction tax, etc.)

Now tell me are these two words not worth knowing? If you do or you don't leave a comment and let us talk about it.

Investing terminologies 101: Fundamental and Technical Analysis

 source: http://www.babypips.com

 

I know you don't want to hear this gibberish words because as we Pinoys say it "dudugo ang ilong" (my nose will bleed) and you end up in the mental hospital because you will loose your sanity once you read and try to understand this words. But if you are really serious in investing this is a must and I insist that you start reading the business column of the newspaper instead of the horoscope section.

One thing more lest get the definitions of this two words from Wikipedia.org:

Fundamental analysis of a business involves analyzing its financial statements and health, its management and competitive advantages, and its competitors and markets. When applied to futures and forex, it focuses on the overall state of the economy, interest rates, production, earnings, and management. When analyzing a stock, futures contract, or currency using fundamental analysis there are two basic approaches one can use; bottom up analysis and top down analysis.Fundamental analysis is performed on historical and present data, but with the goal of making financial forecasts.

Technical analysis is a security analysis discipline for forecasting the future direction of prices through the study of past market data, primarily price and volume.

I think the description from Wikipedia is enough to explain these two words but let me further explain.

When buying how do you determine the price of a product? Isn't it that you either refer to the old price you know or you might do what we call canvassing right? It is the same with the stock market. You need information to determine the right price for the stock you are buying. With these information of course one should analyze so that a final prize could be pegged to such stock you are buying. In the Philippine Stock Exchange the rule is to not to be 3 level higher or lower from the last traded price based on the Board lot and fluctuation schedule. 

Fundamental analysis primarily gives you the idea what the stock's value based on the historical record which we call Financial Statement. You get to see the Assets(properties) and Liabilities(debts) of the company by looking at there Balance sheets or Statement of Position. It also shows distribution of ownership of the company in its Stockholders Equity. With these information one can analyze the valuations such as Liquidity(capacity to pay current debts), Working Capital(capacity to operate the business) and some other else.( I told you you might say "dumudugo na ang ilong ko Louis").

Another report usually called Profit & Loss report or Statement of Performance shows the companies results of operation on a particular period. This report will give you a picture of where does the company sell or earn, what expenses are spend to operate, and how much earnings did the company make. 

These information help you determine if it is wise to invest in the stock because it shows the viability of the company to earn in the near future and thus reward you with dividends(that's what we get when the board of directors are generous enough to share some profit of the company in other words its ka-ching!)

Now technical analysis on the other hand is more of a forecasting analysis. Let say its as if you are reading the horoscope of your chosen stock to invest into. These is where the word TREND comes. Data use in these analysis are the prices and trade volume of the stock. These analysis indicate the likelihood of the stock going up or going down. Usually it makes use of charts to visualize the possible outcome of the stock price. It shows when did investors and speculators bought a lot and at what price. An uptrend does not usually indicate that the stock's value is going up. It might be a result of speculators hoping to make a short gain due to some news or other market forces that is happening in the world(observe the current Greece debt crisis and debt releif and the recent Philippine election in which Noynoy was the leading presidential candidate)

Technical analysis gives you an idea when the stock price may rise or fall. With that knowledge you will be able to plan when to buy good stocks(buy stocks with good fundamental analysis when prices are down) and sell(when the price of the stock is near or above your target price or if the price surpass your breakeven price per stock). You only gain when you have sold your stock above your total acquisition cost(that is the price you bought that stock plus cost to by it like brokers commission, SCCP charges, Stock transaction tax, etc.)

Now tell me are these two words not worth knowing? If you do or you don't leave a comment and let us talk about it.

Investing terminologies 101: Fundamental and Technical Analysis

I know you don't want to hear this gibberish words because as we Pinoys say it "dudugo ang ilong" (my nose will bleed) and you end up in the mental hospital because you will loose your sanity once you read and try to understand this words. But if you are really serious in investing this is a must and I insist that you start reading the business column of the newspaper instead of the horoscope section.

One thing more lest get the definitions of this two words from Wikipedia.org:

Fundamental analysis of a business involves analyzing its financial statements and health, its management and competitive advantages, and its competitors and markets. When applied to futures and forex, it focuses on the overall state of the economy, interest rates, production, earnings, and management. When analyzing a stock, futures contract, or currency using fundamental analysis there are two basic approaches one can use; bottom up analysis and top down analysis.Fundamental analysis is performed on historical and present data, but with the goal of making financial forecasts.

Technical analysis is a security analysis discipline for forecasting the future direction of prices through the study of past market data, primarily price and volume.

I think the description from Wikipedia is enough to explain these two words but let me further explain.

When buying how do you determine the price of a product? Isn't it that you either refer to the old price you know or you might do what we call canvassing right? It is the same with the stock market. You need information to determine the right price for the stock you are buying. With these information of course one should analyze so that a final prize could be pegged to such stock you are buying. In the Philippine Stock Exchange the rule is to not to be 3 level higher or lower from the last traded price based on the Board lot and fluctuation schedule. 

Fundamental analysis primarily gives you the idea what the stock's value based on the historical record which we call Financial Statement. You get to see the Assets(properties) and Liabilities(debts) of the company by looking at there Balance sheets or Statement of Position. It also shows distribution of ownership of the company in its Stockholders Equity. With these information one can analyze the valuations such as Liquidity(capacity to pay current debts), Working Capital(capacity to operate the business) and some other else.( I told you you might say "dumudugo na ang ilong ko Louis").

Another report usually called Profit & Loss report or Statement of Performance shows the companies results of operation on a particular period. This report will give you a picture of where does the company sell or earn, what expenses are spend to operate, and how much earnings did the company make. 

These information help you determine if it is wise to invest in the stock because it shows the viability of the company to earn in the near future and thus reward you with dividends(that's what we get when the board of directors are generous enough to share some profit of the company in other words its ka-ching!)

Now technical analysis on the other hand is more of a forecasting analysis. Let say its as if you are reading the horoscope of your chosen stock to invest into. These is where the word TREND comes. Data use in these analysis are the prices and trade volume of the stock. These analysis indicate the likelihood of the stock going up or going down. Usually it makes use of charts to visualize the possible outcome of the stock price. It shows when did investors and speculators bought a lot and at what price. An uptrend does not usually indicate that the stock's value is going up. It might be a result of speculators hoping to make a short gain due to some news or other market forces that is happening in the world(observe the current Greece debt crisis and debt releif and the recent Philippine election in which Noynoy was the leading presidential candidate)

Technical analysis gives you an idea when the stock price may rise or fall. With that knowledge you will be able to plan when to buy good stocks(buy stocks with good fundamental analysis when prices are down) and sell(when the price of the stock is near or above your target price or if the price surpass your breakeven price per stock). You only gain when you have sold your stock above your total acquisition cost(that is the price you bought that stock plus cost to by it like brokers commission, SCCP charges, Stock transaction tax, etc.)

Now tell me are these two words not worth knowing? If you do or you don't leave a comment and let us talk about it.

Some lessons learn during this Philippine Election

You might wonder why I am writing about the recent 2010 Philippine Election in a blog about stock investing. If you haven't done so check PSE's website for today's(May 13, 2010) uptrend performance here.

If you haven't noticed the Philippine Stock Exchange performance last Tuesday right after the peaceful election, the PSE rose 4% on that day and mind you it is the only bourse or stock market that posted positive in the Asian market. So what is the lesson to be learn here?

One must be aware of the trend. Trend is something that any stock broker or trader should know. Any news either global or local can affect the Philippine Stock Market. For the past two weeks most market were sluggish due to the Greece debt crisis and the Goldman Sach's issue. The PSE as well went with it but this week nearly all market was down except for the Philippines due to the positive results of the 2010 election. I guess investor confidence on Noynoy is good. The stock market was rallying and has posted positive for the 3 days. Even CNBC's Worldwide Exchange TV show  had a interview of a stock analyst from the Philippines saying Noynoys lead has attracted investors due to the confidence they had with him.

Trend means the forecasted eventuality. Thus upon having the election result most stocks went beyond stock analyst target price. So always look for the trend and analyze it carefully. The trend might be tricky sometimes does one has to read and compare so that wise investing decisions can be made.

Some lessons learn during this Philippine Election

You might wonder why I am writing about the recent 2010 Philippine Election in a blog about stock investing. If you haven't done so check PSE's website for today's(May 13, 2010) uptrend performance here.

If you haven't noticed the Philippine Stock Exchange performance last Tuesday right after the peaceful election, the PSE rose 4% on that day and mind you it is the only bourse or stock market that posted positive in the Asian market. So what is the lesson to be learn here?

One must be aware of the trend. Trend is something that any stock broker or trader should know. Any news either global or local can affect the Philippine Stock Market. For the past two weeks most market were sluggish due to the Greece debt crisis and the Goldman Sach's issue. The PSE as well went with it but this week nearly all market was down except for the Philippines due to the positive results of the 2010 election. I guess investor confidence on Noynoy is good. The stock market was rallying and has posted positive for the 3 days. Even CNBC's Worldwide Exchange TV show  had a interview of a stock analyst from the Philippines saying Noynoys lead has attracted investors due to the confidence they had with him.

Trend means the forecasted eventuality. Thus upon having the election result most stocks went beyond stock analyst target price. So always look for the trend and analyze it carefully. The trend might be tricky sometimes does one has to read and compare so that wise investing decisions can be made.

Some lessons learn during this Philippine Election

You might wonder why I am writing about the recent 2010 Philippine Election in a blog about stock investing. If you haven't done so check PSE's website for today's(May 13, 2010) uptrend performance here.

If you haven't noticed the Philippine Stock Exchange performance last Tuesday right after the peaceful election, the PSE rose 4% on that day and mind you it is the only bourse or stock market that posted positive in the Asian market. So what is the lesson to be learn here?

One must be aware of the trend. Trend is something that any stock broker or trader should know. Any news either global or local can affect the Philippine Stock Market. For the past two weeks most market were sluggish due to the Greece debt crisis and the Goldman Sach's issue. The PSE as well went with it but this week nearly all market was down except for the Philippines due to the positive results of the 2010 election. I guess investor confidence on Noynoy is good. The stock market was rallying and has posted positive for the 3 days. Even CNBC's Worldwide Exchange TV show  had a interview of a stock analyst from the Philippines saying Noynoys lead has attracted investors due to the confidence they had with him.

Trend means the forecasted eventuality. Thus upon having the election result most stocks went beyond stock analyst target price. So always look for the trend and analyze it carefully. The trend might be tricky sometimes does one has to read and compare so that wise investing decisions can be made.

Why rich people grow richer and poor people become more poorer?

Okay such topic is a long discussion but my aim here is to connect that topic to investing in the Philippines.

One key thing that makes such happen is the word we all know especially when you are an employee. Yes you got it right the word is TAX.

If you notice it especially if you are an employee, before your paycheck lands to your wife's hand(so that she can start paying bills and buying the household needs) or before even you see it yourself your paycheck will surely have a line called tax withheld or tax withholding. You will also notice that this amount is different from your co-worker who is either single, married, or with dependents. If you are single the government will tax you more thus your jaw always drop especially if you are on commission based. If you made a big sale and in your check you will see that line with a whopping amount deducted to that sale you made.

Remember that as an employee you are taxed based on your earned income which we usually called active income. Active income is the earnings you get by doing something like working, doing business and the like. The opposite of active income is passive income. To simple define it, it is the income you earn by doing nothing; which in reality is passage of time.

Passive income are taxed differently. They are taxed with the same rate without regards to the amount. 

Now connecting this to stock investing, in the Philippines capital gains through stock trading is taxed at 1/2 of 1% which is 0.5% which when converted to decimal is 0.005. Remember this figure 0.005. Why because this is the figure you will multiply to get tax that will be deducted to your gain when you completed a trade. Imagine that, if you earn Php1,000.00 in a single day you will pay the government Php5.00 and what you keep is Php995.00 less other small charges and broker's commission. What if you gain Php20,000.00(let say this is your monthly salary), you will just pay tax of Php100.00. 

Now capital gain in stock are passive income because you never do any work. You just waited for the value of your stock to rise up to the level that you will be able to exceed your breakeven. One can compute its earnings thus all we we have to do is wait. That is why rich people seem to grow richer without them really exerting effort because they have well invested there hard earned money before. They have learned the investing game and they have learned the tax rules thus they chose where the tax is lesser.

I am not implying that rich people don't work to earn money, most of them do work. One thing more why they grow rich is that while working they keep on re-investing whatever they earned thus making lesser tax payment because there tax on there earnings from work are compensated by passive earnings in investments. And also earnings from stock trading are not taxed in your income tax because such was already subjected to final tax which means that is the total tax to be paid for that income source.

So now you know why rich are growing richer. Lets all learn, lets be wise in how we handle our money and taxes.

Why rich people grow richer and poor people become more poorer?

Okay such topic is a long discussion but my aim here is to connect that topic to investing in the Philippines.

One key thing that makes such happen is the word we all know especially when you are an employee. Yes you got it right the word is TAX.

If you notice it especially if you are an employee, before your paycheck lands to your wife's hand(so that she can start paying bills and buying the household needs) or before even you see it yourself your paycheck will surely have a line called tax withheld or tax withholding. You will also notice that this amount is different from your co-worker who is either single, married, or with dependents. If you are single the government will tax you more thus your jaw always drop especially if you are on commission based. If you made a big sale and in your check you will see that line with a whopping amount deducted to that sale you made.

Remember that as an employee you are taxed based on your earned income which we usually called active income. Active income is the earnings you get by doing something like working, doing business and the like. The opposite of active income is passive income. To simple define it, it is the income you earn by doing nothing; which in reality is passage of time.

Passive income are taxed differently. They are taxed with the same rate without regards to the amount. 

Now connecting this to stock investing, in the Philippines capital gains through stock trading is taxed at 1/2 of 1% which is 0.5% which when converted to decimal is 0.005. Remember this figure 0.005. Why because this is the figure you will multiply to get tax that will be deducted to your gain when you completed a trade. Imagine that, if you earn Php1,000.00 in a single day you will pay the government Php5.00 and what you keep is Php995.00 less other small charges and broker's commission. What if you gain Php20,000.00(let say this is your monthly salary), you will just pay tax of Php100.00. 

Now capital gain in stock are passive income because you never do any work. You just waited for the value of your stock to rise up to the level that you will be able to exceed your breakeven. One can compute its earnings thus all we we have to do is wait. That is why rich people seem to grow richer without them really exerting effort because they have well invested there hard earned money before. They have learned the investing game and they have learned the tax rules thus they chose where the tax is lesser.

I am not implying that rich people don't work to earn money, most of them do work. One thing more why they grow rich is that while working they keep on re-investing whatever they earned thus making lesser tax payment because there tax on there earnings from work are compensated by passive earnings in investments. And also earnings from stock trading are not taxed in your income tax because such was already subjected to final tax which means that is the total tax to be paid for that income source.

So now you know why rich are growing richer. Lets all learn, lets be wise in how we handle our money and taxes.

Why rich people grow richer and poor people become more poorer?

Okay such topic is a long discussion but my aim here is to connect that topic to investing in the Philippines.

One key thing that makes such happen is the word we all know especially when you are an employee. Yes you got it right the word is TAX.

If you notice it especially if you are an employee, before your paycheck lands to your wife's hand(so that she can start paying bills and buying the household needs) or before even you see it yourself your paycheck will surely have a line called tax withheld or tax withholding. You will also notice that this amount is different from your co-worker who is either single, married, or with dependents. If you are single the government will tax you more thus your jaw always drop especially if you are on commission based. If you made a big sale and in your check you will see that line with a whopping amount deducted to that sale you made.

Remember that as an employee you are taxed based on your earned income which we usually called active income. Active income is the earnings you get by doing something like working, doing business and the like. The opposite of active income is passive income. To simple define it, it is the income you earn by doing nothing; which in reality is passage of time.

Passive income are taxed differently. They are taxed with the same rate without regards to the amount. 

Now connecting this to stock investing, in the Philippines capital gains through stock trading is taxed at 1/2 of 1% which is 0.5% which when converted to decimal is 0.005. Remember this figure 0.005. Why because this is the figure you will multiply to get tax that will be deducted to your gain when you completed a trade. Imagine that, if you earn Php1,000.00 in a single day you will pay the government Php5.00 and what you keep is Php995.00 less other small charges and broker's commission. What if you gain Php20,000.00(let say this is your monthly salary), you will just pay tax of Php100.00. 

Now capital gain in stock are passive income because you never do any work. You just waited for the value of your stock to rise up to the level that you will be able to exceed your breakeven. One can compute its earnings thus all we we have to do is wait. That is why rich people seem to grow richer without them really exerting effort because they have well invested there hard earned money before. They have learned the investing game and they have learned the tax rules thus they chose where the tax is lesser.

I am not implying that rich people don't work to earn money, most of them do work. One thing more why they grow rich is that while working they keep on re-investing whatever they earned thus making lesser tax payment because there tax on there earnings from work are compensated by passive earnings in investments. And also earnings from stock trading are not taxed in your income tax because such was already subjected to final tax which means that is the total tax to be paid for that income source.

So now you know why rich are growing richer. Lets all learn, lets be wise in how we handle our money and taxes.

Accounting 101: Some thoughts on Break Even

The term is use to signify something about a business's Profit & Loss(click here to know more about Profit & Loss).

Break even is that level in which a business's, for example a karinderia, profit is just equal to its expenses. When I say profit that means selling price minus the cost of the thing you sold and by expenses I mean the cash out for expenses to run the karinderia like rent, salary of your cook and washer(if you hire one), cost of gas, electricity, and other expenses that you have to pay for to run your business.

Why is this important?This one is important when you are running a business because this will be the number that will tell you of you are earning or just losing in running the business. In simple terms you must surpass this amount in order to say that your business is an earning business.

In order to get an idea for this number or figure one must make an accurate assumption of what will your business sell and expend for a considerable span of time. In our case, the karenderia operates on a daily basis and its best to get a daily break even point to determine if it is worthed to stay in the karenderia business. 

The formula to get this number is shown below:

Break even = Operating cost divided by Contribution margin

Where:

Operating cost is your total expenses to operate the business
Contribution Margin is the percentage of profit on top of your item sold
                    which is (Sales - cost of item sold) divided by Sales

For example if your karenderia needs Php 5,500 to operate selling a complete meal(that is one meat, one veggies, rice, drink and dessert) at Php 50.00 of which the total cost per meal is Php 35.00 it must make more than Php 18,300.00 a day to really say that it has recovered its expenses and made a profit.

Now why am I writing about this in a blog about investing? One is that investing is not limited to stocks alone and another it is nice to know if the company you are planning to invest at is making by looking at their Profit and loss statement. Again before you dive into the investing bandwagon know what you are going into, only invest your excess, learn and always don't be shy to ask because its your hard earn money you are handing over to the broker.   

Accounting 101: Some thoughts on Break Even

The term is use to signify something about a business's Profit & Loss(click here to know more about Profit & Loss).

Break even is that level in which a business's, for example a karinderia, profit is just equal to its expenses. When I say profit that means selling price minus the cost of the thing you sold and by expenses I mean the cash out for expenses to run the karinderia like rent, salary of your cook and washer(if you hire one), cost of gas, electricity, and other expenses that you have to pay for to run your business.

Why is this important?This one is important when you are running a business because this will be the number that will tell you of you are earning or just losing in running the business. In simple terms you must surpass this amount in order to say that your business is an earning business.

In order to get an idea for this number or figure one must make an accurate assumption of what will your business sell and expend for a considerable span of time. In our case, the karenderia operates on a daily basis and its best to get a daily break even point to determine if it is worthed to stay in the karenderia business. 

The formula to get this number is shown below:

Break even = Operating cost divided by Contribution margin

Where:

Operating cost is your total expenses to operate the business
Contribution Margin is the percentage of profit on top of your item sold
                    which is (Sales - cost of item sold) divided by Sales

For example if your karenderia needs Php 5,500 to operate selling a complete meal(that is one meat, one veggies, rice, drink and dessert) at Php 50.00 of which the total cost per meal is Php 35.00 it must make more than Php 18,300.00 a day to really say that it has recovered its expenses and made a profit.

Now why am I writing about this in a blog about investing? One is that investing is not limited to stocks alone and another it is nice to know if the company you are planning to invest at is making by looking at their Profit and loss statement. Again before you dive into the investing bandwagon know what you are going into, only invest your excess, learn and always don't be shy to ask because its your hard earn money you are handing over to the broker.   

Accounting 101: Some thoughts on Break Even

The term is use to signify something about a business's Profit & Loss(click here to know more about Profit & Loss).

Break even is that level in which a business's, for example a karinderia, profit is just equal to its expenses. When I say profit that means selling price minus the cost of the thing you sold and by expenses I mean the cash out for expenses to run the karinderia like rent, salary of your cook and washer(if you hire one), cost of gas, electricity, and other expenses that you have to pay for to run your business.

Why is this important?This one is important when you are running a business because this will be the number that will tell you of you are earning or just losing in running the business. In simple terms you must surpass this amount in order to say that your business is an earning business.

In order to get an idea for this number or figure one must make an accurate assumption of what will your business sell and expend for a considerable span of time. In our case, the karenderia operates on a daily basis and its best to get a daily break even point to determine if it is worthed to stay in the karenderia business. 

The formula to get this number is shown below:

Break even = Operating cost divided by Contribution margin

Where:

Operating cost is your total expenses to operate the business
Contribution Margin is the percentage of profit on top of your item sold
                    which is (Sales - cost of item sold) divided by Sales

For example if your karenderia needs Php 5,500 to operate selling a complete meal(that is one meat, one veggies, rice, drink and dessert) at Php 50.00 of which the total cost per meal is Php 35.00 it must make more than Php 18,300.00 a day to really say that it has recovered its expenses and made a profit.

Now why am I writing about this in a blog about investing? One is that investing is not limited to stocks alone and another it is nice to know if the company you are planning to invest at is making by looking at their Profit and loss statement. Again before you dive into the investing bandwagon know what you are going into, only invest your excess, learn and always don't be shy to ask because its your hard earn money you are handing over to the broker.