Brain Teaser. Feel free to work with your friends

Transcription

1 Brain Teaser 3 opaque buckets. The first has 2 white marbles. The second has 1 white marble and 1 black marble. The last has 2 black marbles. You blindly pick one marble out of one of the buckets and get a white marble. What is the probability the other marble in that bucket is a white marble? Feel free to work with your friends

2 Introduction to Scraping & Financial Statement Analysis November 29, 2016

3 Agenda I. Three Financial Statements II. Financial Ratios III. Scraping

4 Three Financial Statements Income Statement - a summary of revenues and expenses over a set period of time (usually quarterly or annually). Balance Sheet - a snapshot in time of a firm s assets, liabilities, and shareholders equity. Cash Flow Statement - notes all sources and uses of cash over a set period of time. Reconciles the income statement with the balance sheet. Note: This is a common topic covered in financial services interviews.

5 Income Statement Operating Activities - revenues and expenses directly associated with a firm s regular business activities. Non-Operating Activities - any revenues and expenses NOT directly related with a firm s regular business activities. Examples: Unit Sales and Production Costs Examples: Legal Settlement and Administrative Costs Investopedia Video

6 Balance Sheet Fundamental Accounting Equation Assets - a resource with economic value that an individual, corporation or country owns or controls with the expectation that it will provide future benefit. Categories: Current, PP&E, and Intangible Liabilities - a company's financial debt or obligations that arise during the course of its business operations. Assets = Liabilities + Shareholders Equity Categories: Current and Long-Term Shareholders Equity - represents the equity stake currently held on the books by a firm's equity investors.

7 Cash Flow Statement Cash Flow from Operating Activities converts items on the income statement from the accrual form to cash basis. Cash Flow from Investing Activities reports the purchase and sale of long-term investments and PP&E. Cash Flow from Financing Activities reports the issuance and repurchase of the company s own bonds and stock and the payment of dividends.

8 Sample Interview Questions Walk me through the three financial statements. Can you give me an example of a [balance sheet category] account? If depreciation increases by $10 how does this affect the three statements? If you purchase a piece of equipment with cash for a $100 and it depreciates by $10 a year, walk me through how this affects the three statements in year one, year two, etc.

9 Financial Ratios Liquidity - measure a company's ability to pay off its short-term debt obligations. Solvency - measure a company s ability to pay off its long-term debt obligations. Activity - measure a firm's ability to convert different accounts within its balance sheets into cash or sales. Performance - give users a good understanding of how well the company utilized its resources in generating profit and shareholder value.

10 Liquidity Ratios Cash Ratio = Cash & Cash Equivalents / Current Liabilities Most common conservative measure of a company s ability to pay short-term debt Current Ratio = Current Assets / Current Liabilities Measures a company's ability to pay short-term obligations. Quick Ratio = (current assets inventories) / current liabilities Measures a company's ability to meet its short-term obligations with its most liquid assets These ratios are used to assess creditworthiness, but can also be used by investors.

11 Solvency Ratios Debt to Equity Ratio = Total Liabilities / Shareholders Equity Used gauge the extent to which a company is taking on debts as a means of leveraging. A high debt/equity ratio = aggressive in financing its growth with debt. Aggressive leveraging practices = high levels of risk. volatile earnings as a result of the additional interest expense. Interest Coverage Ratio = EBIT / Interest Expense Used to determine how easily a company can pay interest on outstanding debt.

12 Activity Ratios Average Collection Period = ( Days in Period * Average Amount of Accounts Receivable) / Credit Sales Represents the average number of days between the date a credit sale is made and the date payment is received from the credit sale. Inventory Turnover = (Sales / Average Inventory) / 365 Days Inventory turnover is a ratio showing how many times a company's inventory is sold and replaced over a period of time.

13 Performance Ratios Return on Assets (ROA) Return on Equity (ROE) Potential returns to equity holders Price to Earnings (P/E) Indicates returns to equity holders Earnings per Share (EPS) Indicates efficiency of assets Investment required to generate $1 of earnings EV / EBITDA Measures return on investment normalized for capital structure

14 Resources EDGAR - an SEC database for company filings. Bam SEC - an alternate site to retrieve company filings (recommended) FinViz - a site which specializes in visualizing financial data and information pertaining to equities. Includes many of the ratios we covered today. Yahoo! Finance / Google Finance

15 Introduction to Scraping Traditionally, when we think of data, we think of structured data, i.e. csv files, tables with rows and columns, SQL and ad-hoc queries, etc. Transition into unstructured data Scraping is the process of retrieving unstructured data from websites Often done by parsing through a webpage s html code or using some kind of API

16 Lesson Objective Scrape a list of the S&P 500 companies from Wikipedia Obtain today s current price and opening price of all of those companies.

17 Required Tools - Python (2.7) Pip - - Beautiful Soup 4 - Python library used for parsing HTML and XML files - - python -m pip install bs4 Yahoo Finance API - - Mac OS X (sudo easy_install pip) python -m pip install yahoo-finance See the code here:

18 Step 1: Scraping Wikipedia We want to iterate through all the <tr> tags in <table>, and retrieve the information in the 1st <td> tag. (Note that there are 8 total <td> tags in each <tr> tag.)

19 Step 2: Understanding the Code

20 Step 3: Yahoo Finance API We will be using.get_price() and.get_open()

21 Step 3: Running the Program python stock_scraper_template.py

22 Questions, Comments, and Concerns

23 Thank you and check us out on GitHub!