Discount model part 2: Cash flow

In part one of the discount model series, the different discount model types and the calculation of the discount model are discussed. Part two of the discount model article series is aimed at the cash flow discount model (or discounted cash flow model). In this article the reason why the cash flow is used in the discount model, what the different types of cash flows are and the shortcomings of the discounted cash flow models.

Why nature and the economy are similar

The economy and biology are strangely connected. In both the economy and biology similar events occur that have similar causes. In this article, I will name some causes and effects. Within the plant- and animal life, there are periods of growth and decline, just as in the economy. But that is just a comparison on a very high level. What can we learn from the science of biology?

Discount model part 1: Basics

In the next four articles I will discuss the discount model and the various variances: the cashflow discount model, the dividend discount model and the profit discount model. In this article, the idea behind the discount model, the one and two stage discount model, and the calculation of the discount models are explained. In the following articles I will discuss each of the three variances.

Buy, sell or hold

Investment analysts always love to give an advice about shares. Most of the time they use the words buy, sell or hold to give a short statement about their advice. These opinions are easy to understand and can be counted to get an overall advice (and to determine the buy-to-sell advice ratio).

Five investment tips

Everyone knows some investment tips or stock market wisdoms. Many of these stock market wisdoms exist because a certain event has happened in more than 50% of the occasions in the past. An example of such a wisdom is the expression ‘Sell in May, and go away, but remember to be back in September’. Of course, this saying does not apply for all years, just think of the year 1997, when the shares did rise during the summer.

Investment questions - part 1

Like mentioned in earlier articles, investing is not just buying and selling of shares, but buying or selling of (a part of) a company. This means that you need to have a clear picture about the company. It is essential to know what the company does, with what activities it earns money and who decides about the direction of the company. This article hands questions that can be asked to gather information about a company and to draw a picture of the company. To keep track of the short-term performance of shares, a question about the current sentiment is discussed.

Investment questions - part 2

Questions about the operations of a company have been discussed in an article which was published earlier. With the answers on the questions mentioned in that article, you can make a general overview of the company. Besides the general information, it is important for investors to know the financial situation of a company, especially the profit and cash flow. In this article, profit and cash flow questions are discussed.

Unpredictability and investment strategy

A lot of different investment strategies exist, but all these investment strategies have their roots in two main strategies. These main strategies are based on two extremes: assurance and making the highest possible profit.

People invest to make the highest profit that is possible, but for a large part of the investors, assurance means a lot to them. This assurance involves the preservation of capital and the possibility to earn some extra money above the current interest rates.

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