Expenditures

1.
A capital expenditure (“capex” for short) is the payment with either cash or
credit to purchase long-term physical or fixed assets used in a business’s
operations. The expenditures are capitalized on the balance sheet (i.e., not
expensed directly on a company’s income statement) and are considered an
investment by a company in expanding its business.
Capex is important for companies to grow or maintain business by investing in

new property, plant and equipment (PP&E), products, and technology. Financial
analysts and investors pay close attention to a company’s capital expenditures,
as they do not initially appear on the income statement but can have a
significant impact on cash flow.
Capital expenditures normally have a substantial effect on the short-term and

long-term financial standing of an organization. Therefore, making wise capex
decisions are of critical importance to the financial health of a company. Many
companies usually try to maintain the levels of their historical capital
expenditures to show investors that they are continuing to invest in the growth
of the business.
2. Capital expenditures are often difficult to reverse without the
company incurring losses. Most forms of capital equipment are
customized to meet specific company requirements and needs.
The market for used capital equipment is generally very poor.
• Deciding between capital projects and prioritizing capital projects
• Making choices between technologies, solutions, trends
• Forecasting future demand
• Time horizon - it gets more difficult the further you project into the future
• Which discount rate to use, as interest rates for loans etc. might change over
time
• Correct treatment of sunk costs and allocated costs
• Unintended consequences of a specific course of action
• Financial methods employed in the decision-making process does not take
into account non-financial criteria such as goodwill, reputation, the skill of
employees or market share
• The opportunity cost of a wrong decision
6. The Definition of Technical Analysis
Technical Analysis is built on the assumption that a security's price and volume history can serve as an
indicator for future price movements.
Technical Analysis assumes that trading behaviors of other investors occur in patterns and that history will
repeat itself.
The Purpose of Technical Analysis
Generally, Fundamental Analysis is used to focus on a security's long-term profitability, whereas

Technical Analysis is used for anticipating short-term patterns which can be leveraged for
shortterm profits.
Technical Analysis has several limitations which investors must consider when using it. The first
is that history does not always repeat itself in the same way exactly.
Especially in efficient markets where information is symmetrical, investors will learn over time to
preempt identifiable trends and behave differently, therefore changing the trend itself.
Similarly, Technical Analysis can be a self-fulfilling prophecy. In our earlier example, if every
investor uses Analysis Method A, then the security price will never reach 1.5% because the
closer the security gets to 1.5%, the less investors will purchase it and push the price higher.
What questions for technical analysis?
Technical Analysis: Questions to Ask Yourself
• How large is the spread? ...
• Is the stock currently trending or trading sideways or within a range? ...
• Is the stock potentially at the beginning or end of this trend? ...
• How many consecutive up or down days have there been recently?
7.
Technical analysis is a form of security analysis that uses price data and volume data, typically
displayed graphically in charts. The charts are analyzed using various indicators in order to make
investment recommendations.
What are the important aspects of technical analysis?

The charts are analyzed using various indicators in order to make investment
recommendations. Technical analysis has three main principles and assumptions: (1) The
market discounts everything, (2) prices move in trends and countertrends, and (3)
price action is repetitive, with certain patterns reoccurring.
Technical analysis can be used on any freely traded security in the global market
and is used on a wide range of financial instruments, such as equities, bonds,
commodities, currencies, and futures. However, in general, technical analysis is
most effectively applied to liquid markets. Therefore, technical analysis has limited
usefulness for illiquid securities, where a small trade can have a large impact on
prices.
The primary tools used in technical analysis are charts and indicators. Charts are
graphical displays of price and volume data. Indicators are approaches to analyzing
the charts. While the tools can be used on a standalone basis, many analysts, fund
managers, and investors will find added value in combining the techniques of chart
analysis with their own research and investment approach.
11.
Wealth maximization's ultimate goal is to keep the stockholders invested in

a business by increasing overall value.
the shareholders have benefited from investing in a particular stock
over some time. Because the company's net worth has grown, this has
positively impacted the share values, too and thus increasing shareholders'
wealth.
Shareholders' wealth maximization is the only way to measure the value of a
company. This is because shareholder value represents a company's ability
to make money for its shareholders in the future.
17.
Creating a sound business model is the first step to building a

successful venture. The model may be so simple that it can be
expressed on one-half page of paper, but its importance can't be
overstated. Business models that work well in the marketplace
give companies a tremendous competitive advantage.
In general, a business model should identify your customers, understand the problem you are
trying to solve, select a business model type to determine how your clients will buy your product,
and determine the ways your company will make money.
Value Creation
1. The core concept of a business model is the value the company will provide
customers -- the package of benefits that customers will receive from using its
products or services. The business model looks at the strength of these benefits
from the point of view of potential customers. The customer has a problem --
sometimes called a need -- which the company will address with its products or
services. The benefits must be so powerful that customer demand is created.
Methods of Generating Revenue
1. A company can generate sales from a variety of means, including selling its
products, licensing them, charging maintenance or service fees, or charging
subscription fees. The business model shows which revenue sources were chosen --
and why. The management team and potential investors in the company must
carefully evaluate the viability of the revenue model.
Building Blocks of Profitability
1. A sustainable competitive advantage makes it easier for the company to grow and
maintain profitability. The advantage is created by factors within the organization,
and in its relationship to the marketplace, that will allow it to earn a higher profit
margin than similar companies. Internet companies that sell products have the
advantage of lower staff and inventory costs than bricks and mortar stores. Being
able to turn customer loyalty into repeat business is an advantage because finding
new customers requires additional marketing expense.
Innovative or Proven
1. Creating a new and different business model is one of the ways a company can grow
quickly, but investors are sometimes reluctant to back an unproven model. Applying
a successful model from one industry to a completely different one can work also.
The model of discounting or giving away a product that requires refills or ancillary
products -- such as razors and razor blades--has been emulated in many other
industries, including video game equipment companies that reduced the price of the
game player knowing that they would more than make up the difference with the
sales of game software.
Perception of Price
1. Pricing and consumer perception of pricing are usually key considerations in a
business model. A company might elect to employ a low price model to introduce
the product to the market in the hope of spurring sales, or take the opposite
approach and have a higher price that results in higher margins even with lower unit
sales. The management team must be able to state with confidence why the
customer will be willing to pay the price the company has chosen. The business
model compares the value delivered to the customer in relation to the price. The
value must be strong enough that the customer perceives he is getting the product
or service on favorable terms.

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1.

Capex is important for companies to grow or maintain business by investing in

Capital expenditures normally have a substantial effect on the short-term and

The Purpose of Technical Analysis

Generally, Fundamental Analysis is used to focus on a security's long-term profitability, whereas

What are the important aspects of technical analysis?

Wealth maximization's ultimate goal is to keep the stockholders invested in

Creating a sound business model is the first step to building a

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