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Financial Article Insights: EBIT, Net Present Value, and Junk Bonds

Financial Article Insights: EBIT, Net Present Value, and Junk Bonds

Introduction:

In the ever-evolving landscape of finance, understanding the market trends and investment opportunities is crucial for both investors and financial enthusiasts. This blog delves into three compelling articles that shed light on different facets of the financial world. From Amazon's impressive performance in web services to the promising economic assessment of Imperial Mining's Crater Lake Project, and the alarming decline of Chinese junk bonds, these articles offer valuable insights and lessons. This blog aims to provide you with an overview of these significant financial developments.

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Article 1: Financial Insights about EBIT

I googled the financial status of Amazon and found an article in SeekingAlpha titled “Amazon: AWS’s Brilliant, Everything Else is Pretty Good, too”. The article describes how the entity dominates web services by presenting five-year data and using horizontal analysis, it seems that Amazon is improving its margin and profitability. I learned in class that EBIT is a part of the Income Statement. A potential investor usually looks at the EBIT as an indication of whether they want to invest. Also, its positive annual change which increased by 15% in the last five years indicates that Amazon performs well. Obviously, it includes a year when the pandemic starts, and lockdowns all over the world, thus, people forcefully engage in an online world.

Moreover, I learned in a class that comparing Financial Statement ratios to other related industries is good but keep in mind that every industry has its own accounting policies which might be different from others. The article shows that as of the 4th Quarter of 2021, 33% of the Worldwide Market Share is used by AWS which is around $180 billion in Cloud Market, hence, it becomes a leading cloud infrastructure in that era.

Link to the article: https://seekingalpha.com/article/4522985-amazon-aws-is-brilliant-everything-else-is-pretty-good-too

Article 2: Financial Insights about Net Present Value

I searched “Net Present Value” on Yahoo Finance and it showed an article dated July 29 titled “Imperial Mining Files Preliminary Economic Assessment Report for the Crater Lake Project on SEDAR”. The article announced that the company (Imperial Mining Group LTD) release its preliminary economic assessment of its project located in Quebec. The project has a pretax and after-tax net present value (NPV) of $2.97 billion and $1.72 billion respectively with a 10% discount rate. Its pretax and after-tax internal rate of return (IRR) is 42.9% and 32.8% respectively. They estimated a minimum of 25-year mining life. Its pretax capital payback period is 2.5 years from the start of production. These are the results of their assessment with a help of Ernst Young.

I learned in a class that Net Present Value is the most commonly used method in capital budgeting because it uses a discount factor. It tells us how much the project contributes to shareholders’ wealth- the larger the NPV, the more project value adds to it. The payback Method is also important although not discounted because it showed the length of time required for an investment’s cash inflow to cover its cost.

Link to the article: https://finance.yahoo.com/news/imperial-mining-files-preliminary-economic-225500443.html

Article 3: Financial Insights about Junk Bonds

I searched junk bonds on Google and I saw an article in Bloomberg but it needed a subscription, so I tried to search for another and find out a site "TheEdgeMarket". It is titled “China Junk Debt on Brink as Properties Woes Grow”. The article is based on the Bloomberg site and states that the Chinese junk dollar bonds fell from 1.8% to .57%. This fall-off is caused by distress in the Chinese Economy affecting every business sector and heightening the risks for banks as loan boycotts. The said junk bonds are mostly associated with the real estate industry so numerous Chinese real estate firms are being in default.

I learned in a class that junk bonds are types of bonds that have a high risk because they have a significant probability of going into default but it yields a high return.

Link to the article: https://www.theedgemarkets.com/article/china-junk-debt-brink-record-low-property-woes-grow

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