How to Invest in Stocks: Valuations Part 1

One day, a friend phoned you to say she would be coming to your place the following week for dinner. You know she does not like takeouts, so this gives you the opportunity to practice your culinary skills. In your mind's eye, you know what the perfect dish would be and so set about looking for the ingredients to make it. Then came the day of the dinner; Phew! your cooked food fell short of all expectations. A lot of things may have contributed to this outcome. Well, the future outcome of the meal is what valuation of businesses tries to guess. In other words, we try to see into the future to establish what the possible outcome would be for the business using the earning power we have established. We hope you enjoy the video explanation .