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Old 01-07-2010, 01:52 AM   #21
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No 85 81 - (-4). Normally corporations have a positive interest income (e.g. money from money funds, and short term paper they hold) but last year being such horrible time even short-term safe investment suffered losses.
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Old 01-07-2010, 06:09 AM   #22
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Smooch, LOW is leaving interest income in the expense area of the income statement. Since it is income, it shows up as a "negative expense." The reason I know this for sure is that if you look at LOW's most recent 10Q, the income statement shows net interest expense of 77. So they had gross interest expense of 81 and gross interest income of 4, which nets to 81 - 4 = 77.

I do not have a book to recommend. While I learned the rudiments of forecasting in business school, I really learned most of it by doing on the job, aided by the direction of a very smart, very experienced guy who was willing to teach me.

However, I can certainly try to offer you tutelage. For starters, see if your brokerage offers research reports. If they do and have the longer reports, see if you can get one for HD or LOW that has an analyst's model in it so you can see what they look like. I can also see if I can turn up an old model of mine, although they would be out of date and tend to be very focused on certain things.

The modelling process you follow depends on the type of firm and what you are trying to learn. Having said that, my models generally have a page with a summary on it, a page with the income statement and a reduced cash flow sheet, a page that lists out all the bits of a company's debt along with a maturity schedule (mostly important for leveraged firms or junk bonds), and a page that shows how the balance sheet changes over time. In some cases my models are simpler than this, but this is the typical structure.

I would suggest that we look at the model page by page, starting with the income statement page. Did you want to try to model HD or LOW for starters?
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Old 01-07-2010, 05:48 PM   #23
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I use Vanguard. They have a lot of info on each stock. They are analyzed by S&P, First Call Consensus and Reuters. There is so much information it is making my head spin. What this has taught me is that picking a good stock is much more complicated than I thought and I should stick to mutual funds. I think you have really helped to realize my limitations and I appreciate the time you have put into this!
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Old 01-07-2010, 08:28 PM   #24
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Originally Posted by smooch View Post
I use Vanguard. They have a lot of info on each stock. They are analyzed by S&P, First Call Consensus and Reuters. There is so much information it is making my head spin. What this has taught me is that picking a good stock is much more complicated than I thought and I should stick to mutual funds. I think you have really helped to realize my limitations and I appreciate the time you have put into this!
Heh, didn't mean to scare you off. To be honest, the way I usually proceed is to see a major trend of a sector that the market is afraid of (and has priced very low) and start digging on industry fundamentals and iindividual names. Otherwise you would not get very far with the thousands of public companies out there.

If you want to pick this up again, just drop me a line.
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Old 01-08-2010, 07:48 PM   #25
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Brewer, I will definitely use the calculations you have walked me through. I am enjoying doing these calculations - haven't done much math for years. I think it would be taking on too much to get into forecasting before I put some time into analyzing. So I will be back for forecasting 101 once I get analyzing 102 down!
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Old 01-08-2010, 07:58 PM   #26
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Great! I think this stuff is simple (but time consuming). If it required more than 6th grade math, I would not be able to do it. So when you are ready, say the word.
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