The Business Master (3rd Edition)

home *** CD-ROM | disk | FTP | other *** search

/ The Business Master (3rd Edition) / The Business Master (3rd Edition).iso / files / finacial / securean / sa.doc < prev next >

Wrap

Text File | 1992-03-25 | 32.3 KB | 1,124 lines

Security Analyst Version 3.10 March 25, 1992 Copyright 1989, 92 by Donald T. Rosenberger INTRODUCTION Security Analyst is a program for fundamental analysis of stocks. It takes balance sheet numbers and makes sense of them. There may be ratios or formulas that I have left out of the program, but there is no way to make this program right for everyone. Any comments or suggestions about what you would like to see in the next version would be greatly appreciated. I plan to make future program upgrades, hopefully with suggestions from users. The only things I will not consider putting in the program are technical analysis tools. I have nothing against technical analysis but I do not use it myself and there are plenty of programs out there for that. For those of you who do not know the difference, Fundamental Analysis is the analysis of balance sheet and income statements of companies in order to forecast future price movements. The idea is to determine if the current market price reflects an undervalued or overvalued stock. Technical Analysis relies on price and volume movements of stocks and does not concern itself with financial statistics. I personally prefer fundamental analysis. I believe that if you buy good companies in good businesses you can not go wrong. SHAREWARE LICENSE AGREEMENT This software must be used in unmodified form, complete with this documentation file included. This software may not be sold or distributed with any other product without the written permission of the author. No user may modify Security Analyst in any way; this includes disassembling or reverse engineering the program. Security Analyst Version 3.10 is not public domain software. You hereby agree to register your use of this program after a reasonable test period. Use of this software constitutes an agreement to the above terms. Page 1 REGISTERED VERSION LICENSE AGREEMENT This software must be used in unmodified form, complete with this documentation file included. This software may not be sold or distributed with any other product without the written permission of the author. No user may modify Security Analyst in any way, this includes disassembling or reverse engineering the program. Security Analyst Version 3.10 is not public domain software. This program is for use on one computer only. Use of this software on more than one computer requires a site license. Use of this software constitutes an agreement to the above terms. LIMITED LICENSE TO COPY Security Analyst Version 3.10 in its Registered State may not be copied except for archival purposes only. Security Analyst Version 3.10 in its Shareware State may be copied and distributed freely. DISCLAIMER The author, Donald Rosenberger, makes no warranties expressed or implied as to the accuracy, quality or performance of this program. There is no guarantee to the completeness or fitness of this program for any particular use. The author shall not be held liable for any damages from the use of this program. YOUR USE OF THIS PROGRAM CONSTITUTES YOUR AGREEMENT TO THIS DISCLAIMER and your release of the author from any form of liability or litigation. WHY THIS PROGRAM IS SHAREWARE AND WHY YOU SHOULD REGISTER Security Analyst is a part time project of mine. It is my hobby not my occupation. I am a small investor and found myself in need of this program. Since programming is a hobby, I wrote this program. I am distributing this program as shareware since computing is an expensive hobby. Turbo Pascal (Numerous Upgrades), toolkits, long distance charges, distribution expenses and a bulletin board system are just some of the costs involved in this operation. Page 2 Also I believe I get more feedback because of registered users than I would if the program were public domain. I believe this program represents good value. I have found several programs that in my opinion are not as good as Security Analyst and cost more. I have only found one program I believe to be better than Security Analyst; it costs over 20 times what this program does. For your money I think Security Analyst is the best deal. COMPATIBILITY This program should be compatible with all IBM PC's and compatibles. It has been written on a Advantage 386, Compaq 286 and a IBM PS2 model 50. I have had no problems on any of these machines. The program runs under DOS 3.1 and up. I have not checked but DOS 2.1 and up should be ok. The program will need a minimum of 256K of RAM, although I recommend more. If anyone has any problems running the program please write me describing the problem and list your hardware and software configurations. WHERE TO FIND DATA Most of the data used in this program can be found in corporate annual reports. This yearly information can be updated with quarterly reports. After some practice I have found it takes about five minutes to find and enter the data into the program and get your report. Page 3 INSTALLING SECURITY ANALYST The program will run from your hard disk or floppy disk. I recommend using a hard disk if available. If you are not sure how to install the program to a hard disk follow the directions below. Using the Install Program: This version of Security Analyst comes with a install program. To use the install program just type the following. A:INSTALL Just answer a couple of questions and your done. OR if you have any problems with the install program or would prefer to use the DOS commands. Type the following. C: Or any other drive of your choice MD\SA3 Make a directory called SA3 COPY A:*.* C:\SA3 Copy files to your SA3 Directory If you have any other questions about installing Security Analyst please refer to your DOS manual. RUNNING SECURITY ANALYST Type the following at your DOS Command line: C:\SA3> SA This will load the program in memory. You many run the setup program from the command line or from inside the program. HOW TO USE SECURITY ANALYST NAVIGATING THE MENU When you first load the program you will be presented with a horizontal menu. At this menu you have four choices - Main Menu, Help, Utilities, and Quit. Main Menu is where you will find the main part of the program. Help is a small section just for getting you started and familiar with the program. Utilities contains a DOS Shell, Setup Program, and Registration Information. Below each section will be explained in detail. Page 4 MAIN MENU Entering Data And Saving Files At the main menu pick ENTER DATA. The next window will ask you to enter a file name. You will have eight spaces to fill in a file name. I suggest using the ticker symbol and the last two digits of the year, such as "FDX87" for Federal Express Corporation 1987. What you want to call it is up to you but the file extension ".SB3" is fixed and can not be changed. If you just hit ENTER and do not give the file a name the program will name the file "NONAME.SB3". You may rename this at DOS or not worry about it. After choosing your File Name start at the top of your first data input screen and enter the Company name, Ticker and Data Date. This may be in any format you like because the program does not care. Then start inserting the numbers. You must not use commas between the numbers (999,000) because the program can not handle this and will probably crash. (I'm working on this, next version I promise). After you finish inputing your numbers press the Page/Dn key to go to the second input screen. You may toggle between the input screens using the Page/Up Page/Dn keys. After you have finished entering your numbers at the end of the second input screen press the Page/Dn key to calculate and display the results. Navigating the input fields is fairly easy. The following keys may be used in the input and edit fields: Delete Key: Deletes text to the right of the cursor. Backspace Key: Deletes text to the left of the cursor. Home Key: Moves the cursor to first position of the current field. End Key: Moves the cursor to the last character in the current field. Cursor Keys: All four cursor keys (arrow keys) move the cursor in the direction you indicate. Insert Key: Allows you to insert text into the current field at the cursor position. You may call up a pop-up calculator while using the input screens. Press F4 to call the calculator. To insert the value from the calculator into the program just press F10. Page 5 RETRIEVE REPORT At the main menu pick "RETRIEVE REPORT". Pick the file name from the directory box. If no files are present either no files exist or you have not chosen the correct directory path in the setup program. After choosing the file name the program will load the data, recalculate and display the results. Navigating The Output Screens The results are displayed on two output screens that you use the Page/Up and Page/Dn keys to switch between. In this version the results are displayed in categories. This makes the ratios easier to analyze and read. You have a choice of doing two things from the output screens: (1) Press F2 to save the file (this is automatically done by the program but you may find this useful if you wish to change the file name or have changed the data in the Edit section), or (2) Press F10 to Edit the data (this is useful for preforming What If scenarios). EDIT DATA FILE At the main menu pick "EDIT DATA FILE". Pick the file name from the directory box. If no files are present either no files exist or you have not chosen the correct directory path in the setup program. After choosing the file name the program will load the data and bring up the input screens. At this point make any changes you like and recalculate the results. Be sure to Save your File because the program will not do this automatically. You may repeat this cycle as long as you like. PRINTING A REPORT At the main menu pick "PRINT REPORT". Pick the file name from the directory box. If no files are present either no files exist or you have not chosen the correct directory path in the setup program. After choosing the file name the program will load the data, recalculate and print the results. If your printer is not ON the program will tell you. Page 6 RETRIEVE 3 YEAR REPORT At the main menu pick "RETRIEVE 3 YEAR REPORT" then pick the file name from the directory box. Repeat this step two more times. There will be a window in the upper right corner of the screen that will tell you the files you have picked. After you have chosen your files they will be displayed in three columns on three screens. PRINT 3 YEAR REPORT At the main menu pick "PRINT 3 YEAR REPORT" then pick the file name from the directory box. Repeat this step two more times. There will be a window in the upper right corner of the screen that will tell you the files you have picked. After you have chosen your files they will be printed in three columns on one page. INTERPRETING THE RESULTS While it is up to you to interpret the results, listed below are the formulas used in this program. There may be different ways to achieve the ratios. I have sometimes seen two or three different formulas for 1 ratio. I have used the least complicated ones for this program. Most are from financial management textbooks, investment books and magazines. I do however recommend the following books for your consideration: Security Analysis Graham & Dodd ISBN 0-07-013235-6 Quality Of Earnings Thornton O'Glove ISBN 0-02-922630-9 One Up On Wall Street Peter Lynch ISBN 0-671-66103-5 The Intelligent Investor Benjamin Graham ISBN 0-06-015547-7 Fundamental Analysis John C. Ritchie ISBN 1-55738-034-1 A NOTE ABOUT USER FRIENDLINESS I have tried to make the program very user friendly. If you find you have done something you do not wish to, just hit the escape key and usually it will get you back to the main menu. You may of course lose any work you have done at that point. Page 7 PROGRAM SETUP There is a setup program included with this version that will allow you to set colors, maintain a separate directory for your data files, and register your copy of the program. This program may be called from within Security Analyst provided your system has enough memory or may be run as a stand-alone program. To run it as a stand-alone program just type SA3SETUP.EXE at the DOS prompt. Choosing Program Colors At the Main Menu pick "Choose Colors", then you have two choices. First, you may reset all the program colors to the original defaults. Second, you may customize the program colors to suit your choice. To make color changes pick from the menu which section of the program you wish to change (menus, help, calculator, etc.). An example for changing help screen colors is: pick a number between 0 and 7 to set the background color, then pick a number between 0 and 15 to set the foreground and border colors. If you decide to do this please remember not to set a background color to a value larger than 7. If you do this the color will blink. If you decide to change colors have no fear you can always return to my original defaults using this section of the setup program. The Setup Program colors are preset and can not be changed. I would be interested in hearing from users as to whether the program and setup program should share the same colors. Setup File Directory With this version of the program you have the option of keeping your data files in a separate subdirectory from the program files. Example: C:\SA3 Security Analyst Directory C:\SA3\FILES Security Analyst Files Directory To setup your files directory pick "Setup File Directory" from the setup menu and enter the drive and path name of the directory. If the directory does not exist you will be prompted to try again. Page 8 Display System Info This is a simple screen that will tell you a little about your system. You may find it helpful or you may not. You may notice something in this screen called EMS with an OFF next to it. I hope EMS Memory will be supported in the next version. Register Program This section is for those users who have sent in the registration fee. It will allow you to customize your copy of the program with your name and company name. It is not necessary to enter a company name, but it is necessary to enter the correct serial number. Each registered user will receive a serial number. The only changes to the program when you register is that your name will appear in the program title box and the shareware screens will not come up at program startup and exit. The program is fully functional in both cases. Save Setup Info This will create a new setup file that will reflect any changes you have made. The setup program will not automatically save the new setup file so you must do this. DATA INPUT DEFINITIONS These remain essentially unchanged from previous versions except that Preferred Stock Obligation is no longer needed. 1. Name Of Company : Any Name you choose up to 25 characters. 2. Ticker Symbol : The symbol of the company under which the stock trades. 3. Data Date : The date for the data you are analyzing. Any format for the date is acceptable. 4. Stock Price : The Closing price of the stock for the date that corresponds with the data. You may experiment with this, these are only guidelines. Page 9 5. Dividend : The amount of the yearly dividend. If none set to 0. 6. Shares Outstanding : The number of shares of common stock outstanding. Preferred stock not included. 7. Gross Income : The total amount of sales, income or revenues. 8. Net income : The amount equal to gross income minus all expenses. Sometimes called net earnings. 9. Total Assets : The Total Assets on the companies balance sheet. 10. Current Assets : Cash, accounts receivable, inventory, and other assets that can be converted into cash or sold within one year. 11. Current Liabilities: Debt or other obligation coming due within one year. 12. Stockholder Equity : The Equity that belongs to the holders of common stock. 13. Fixed Assets : Plants, Equipment, and other forms of hard assets. 14. Accounts Receivable: Money owed to the business for goods or services sold on open account. 15. Inventory : The value of a firm's raw materials, work in progress, supplies and finished goods. There are two valuation methods (FIFO) First In First Out and (LIFO) Last In First Out. This is not a major concern for the basic use of this program. 16. Total Debt : The total long and short term debt. 17. Income Before taxes: Net Income before Income Taxes are paid. 18. Interest Expense : The amount of Interest paid on debt during the year. Page 10 FORMULAS USED IN THIS PROGRAM 1. Price to Earnings Ratio The P/E ratio gives the investor an idea of how much you are paying for one dollar of the company's earnings. Price to earnings = share price / earnings per share 2. Price to Sales Ratio The P/S ratio gives the investor an idea of how much you are paying for one dollar of the company's sales. Price to sales = (share price* shares outstanding) / Gross Income 3. Price to Dividend Ratio The P/Dividend ratio gives the investor an idea of how much you are paying for one dollar of the dividend. Price to Dividend Ratio = Share price / Dividend 4. Price to Book Value The P/Book Value ratio gives the investor an idea of how much you are paying for one dollar of the company's book value. Price to Book Value = Share Price / Book Value 5. Dividend Yield The percent of return you are receiving in dividends for your investment Dividend Yield = (Dividend x 100) / Share Price Page 11 6. Earnings Yield The inverse of P/E ratio. It is used to compare the attractiveness of stocks to bonds and money market instruments. Earnings Yield = Earnings per Share / Share Price x 100 7. Earnings Per Share The amount of after tax earnings per shares outstanding Earnings per Share = Net Income / Shares Outstanding 8. Sales Per Share The amount of total sales per shares outstanding Sales per Share = Gross Income / Shares Outstanding 9. Book Value per Share The liquidation value per share of a company's assets after all liabilities have been subtracted Book Value per Share = Stockholder Equity / Shares Outstanding 10. Payout Ratio The Percent of earnings that are paid out in dividends Payout Ratio = Dividend / Earnings per Share 11. Profit Margin The percent of revenue that is left over after expenses Profit Margin = Net Income / Gross Income x 100 Page 12 12. Return On Investments This ratio is the key indicator of profitability for a firm. Companies efficiently using their assets will have a relatively high return. Return on Investments = Net Income / Total Assets 13. Return on Equity This ratio is used to analyze the ability of the firms management to realize an adequate return on capital invested by the owners of the firm. Return On Equity = Net Income / Stockholder Equity * 100 14. Current Ratio This ratio measures the degree to which current assets cover current liabilities. The higher the better. Current Ratio = Current Assets / Current Liabilities 15. Quick Ratio This ratio is a better indication of how well a firm can cover the current debt. Quick Ratio = (Current Assets - Inventory) / Current Liabilities 16. Average Collection Period The average number of days it takes for a company to collect on accounts receivable Average Collection Period = Accounts Receivable / ( Gross Income * 360 ) Page 13 17. Market Value The total market value of all the firm's outstanding shares Market Value = Share Price * Shares Outstanding 18. Inventory Turnover How many times the inventory of a firm is sold and replaced during the current period Inventory Turnover = Gross Income / Inventory 19. Fixed Asset Turnover How many times the fixed assets of a firm is turned over in the current period Fixed Asset Turnover = Gross Income / Fixed Assets 20. Total Asset Turnover How many times the total assets of a firm is turned over in the current period Total Asset Turnover = Gross Income / Total Assets 21. Debt to Total Assets The amount of debt(total) to the amount of total assets Debt to Total Assets = Total Debt / Total Assets * 100 22. Debt to Equity The amount of debt to the amount of Stockholder Equity Debt To Equity = Total Debt / Stockholder Equity Page 14 23. Interest Coverage ( times interest earned ) The number of times that income before interest & taxes covers the interest obligation Interest Coverage = Income Before Interest & Taxes / Interest Expense 24. Reinvestment Rate The amount of retained earnings that are available for reinvestment in the company Reinvestment Rate = ( EPS - Dividend) / Book Value * 100 The following are Ratios new to this version of the program: 25. Retention Rate The inverse of dividend yield. It is the percent of earnings retained by the company. Retention Rate = (( EPS - Dividend ) / EPS ) * 100 26. Current Assets Per Share The amount of the companies current assets divided by shares outstanding Current Assets Per Share = Current Assets / Shares Outstanding 27. Total Assets Per Share The amount of the companies total assets divided by shares outstanding Total Assets Per Share = Total Assets / Shares Outstanding Page 15 28. Working Capital Per Share Working Capital is the dollar amount of current assets minus current liabilities. This ratio expresses this in a per share amount. Working Capital Per Share = ( Current Assets - Current Liabilities ) / Shares Outstanding 29. Total Price to Sales Same as the Price to Sales ratio, but this ratio adds total debt to the market value. Total Price to Sales = ( Mkt Value + Debt ) / Gross Income 30. Net Sales To Inventory Used as a measure of calculating inventory turnover Net Sales to Inventory = Net Income / Inventory 31. Assets To Sales A ratio that is used to measure asset utilization Assets to Sales = Total Assets / Net Income 32. Current Liabilities To Inventory This ratio helps measure the extent to which the business relies on inventory to meet debts. Current Liabilities to Inventory = Curr Liab / Inventory 33. Receivable Turnover This is used as a indicator of the level accounts receivable in relation to the amount of sales. Receivable Turnover = Gross Income / Accounts Receivable Page 16 VERSION NUMBERS Version 1.1 released early 1988. written in basic. Public Domain Version 2.0 released April 10, 1989. completely re-written in Turbo Pascal 5.0 Public Distribution Version. Version 2.10 released April 20, 1989. Same as version 2.0 but with file save/retrieve/print. Version 2.11 released July 1989. Minor bug fixes, Market Value displayed in millions. Version 2.50 released November 12, 1989. Error checking for files ability to edit data. Version 2.51 released February 1, 1990. Minor Spelling corrections. Version 2.52 released July 15, 1990. Fixed possible bug in input routines. Added Error reporting on program aborts. Added CRC Checking to program on startup. CRC checking is a measure to help protect against virus infection. Version 3.0 released October 1, 1991. Major Overhaul. Features include Directory Boxes, greater ease of use. Ability to toggle between input screens. Improved output screen layout. DOS Shell and Setup Program. Ability to display or print three files. Mouse Support in Directory Boxes and Menus. Eight new ratios. Version 3.10 released March 25,1992. Minor changes. Added keyboard status indicators to input and edit screens. The ticker symbol input line is now automatically capital letters now. Introduction of NEW SUPPORT BBS for program. I encourage everyone to get the latest version available. Page 17 PROGRAM UPDATE SERVICE All registered users of Security Analyst will be notified of any significant future upgrades by mail and how to get the latest version. These notices will describe the changes to the program. The cost of the upgrades has not been determined but will probably be less than the original cost to register. If you are a registered user who is not interested in upgrading to a current version but would like to be kept on the mailing list please notify me in writing. Otherwise, you may not receive future program upgrade notices. This is only a measure to help keep costs down. ADDITIONAL INFORMATION Any questions may be directed to me by mail. I like to hear from my users. Most of the changes to this program and some future changes are because of one of my registered users suggestions. You can make a difference. I now offer a support Bulletin Board System for Security Analyst. Please call with any comments, bug reports, suggestions or just to download the latest version. Send Correspondence To: Don Rosenberger c/o Chelsea Systems P.O. Box 10774 Alexandria, Va 22310-0774 Chelsea Systems BBS (703) 922-4077 WHAT'S CHELSEA SYSTEMS Chelsea is my Chocolate Labrador Retriever. So it seems like a good name to put on this endeavor. Chelsea Systems is not a business, it is my hobby. Page 18 THE LATEST VERSIONS I will upload the latest versions of this program to the following Bulletin Boards. Chelsea Systems BBS (703) 922-4077 Compuserv NIAC & Investment Conference VA Connection BBS (703) 648-1841 Computer Connections (202) 547-2008 The Main Frame BBS (301) 654-2554 WHAT'S NEXT Version 3.5 is next. It will have the same look and feel as this version. At this time the majority of programming is complete on version 3.5, but some complex problems remain. I will do my best to get the next version out in a timely manner, but at this time I am not setting a target date. Version 3.5 will have the following features while remaining compatible with Version 3.0. Some of the changes will be: 1. Addition of cash flow ratios, EBDIT (earnings before depreciation, interest & taxes). In all, the program will have over 50 ratios. This will be contained in a separate section so that users will have two different levels of analysis. 2. Online Help. 3. A miscellaneous ratios sections with the following: Z-Score Business Multiple Intrinsic Value Dividend Discount Valuation Value Ratio Registered Users will have first shot at upgrading to version 3.5. Please send any comments or suggestions to me. With your help Security Analyst will be the best program for Fundamental Analysis. Page 19 CREDITS The following people have been of great help with this program and deserve credit. Richard Fleeson My Turbo Pascal Wizard. Jerry Persall One of my first registered users who has been instrumental in helping shape this program. Joanna Rosenberger For correcting all my spelling mistakes. Paul Hanulya For Typesetting this documentation. Rick Fothergill For writing a great Menu and Windows Toolkit. Technojock Software For making life easer. Eduardo Ferreira For loaning me the computer to start the BBS. END