If you are buying and selling stocks in the stock market, you should determine well which stock you should buy. If you invest in the wrong stock, that is, you invest your money, you can cause both your money to melt and your money to be locked in order not to lose value.

You should analyze the companies in the stock market very well, and you should know some of the important values explained by them. Companies have to make a statement 4 times a year. They should provide information about their functioning every 3 months. This is called the balance sheet statement. When the company makes a statement, they report what they have done in the last 3 months or the last 12 months, how much goods they have sold, how much they have gained, how much they have lost.

## Earning in the Stock Exchange

They report not only the gain or loss, but also the company’s cost of establishment, that is, its capital and the number of shares it issues. In addition, they have to report their liabilities, that is, how much property there is that is used and unused money belonging to the company. This property is called liabilities. If the company earns more than before, and its assets, namely liabilities, are increasing, this is reflected in the value of its shares. In other words, the share price with the value of x takes a plus value and rises from x+0.1 to x+1000 (usually) with an increase in value.

For example, if the earnings status of a company with a market value of 5 $ per 1 share is increasing, if the property belonging to the company increases, its value will increase proportionally. The share value of 5 TL can reach values such as 6 $ or 10 $ or 100 $ , increasing by a maximum of 10 percent per day. When the value of the company’s share you bought for 5 $ is 100 $ , it means that the money you invested has increased 20 times. If you deposited 1000 $ , your money became 20 thousand $ . There are shares that have increased 20 times this way in a year or two. In some stocks, they increase 5-6 times in a short time, usually within 12 months. Some stocks, on the contrary, decrease by 5-6 times. In the case of a decrease, your money has lost 5-6 times its value.

For example, if a share you bought for 20 $ fell to 4 $ , it would be reduced by 5 times. If you bought 10.000 TL from 20 $ , your money will decrease 5 times to 2000 $ . Here is how to determine the right stock when buying shares in this stock market environment? How do we know when the stock we buy will go up? How do we avoid buying shares that will decrease exponentially?

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CAPITAL
EQUITY
LIABILITIES
PROFIT AND LOSS DISCLOSURES
EXCHANGE RATE
PE (PRICE EARNING RATIO)
MV/BV (REPORT OF MARKET VALUE TO BOOK VALUE)
LONG-TERM INVESTMENTS OF THE COMPANY
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Let’s examine the values I wrote above one by one. We must purchase the stock or shares whose values are appropriate.

### Capital – Equity – Liabilities

First we look at the Capital of the company we will buy, then its Equity and then its Liabilities. If these values we look at are increasing gradually, it is a good company. For example, if its capital is 1, its equity is 10 and its liabilities are 15, we can consider it as a good company. Don’t get hung up on 1-10-15, 1-2-3 is fine too. 1-1-2 is risky. Capital and equity should not be the same, equity capital should be higher and liabilities should be even higher. In this case, the company is doing well.

### Profit and Loss Disclosures

Then we look at the earnings announced if the first three are complete. We check how little profit he has made from his capital. In case of loss, we stay away from that bill. In other words, companies that declare losses are risky. It’s not worth the trouble if he’s made very little profit on his capital. We proportion his earnings to his capital. There are such stocks that sometimes they have earned more than their capital. In this case, they should go to a capital increase soon. This raises the share price.

### Exchange Rate

The exchange rate is also important. Swap means how many shares are in the market. In other words, how many percent were sold, how many percent were opened to the public. A person who buys 51 percent of a 51 percent publicly traded company becomes the owner of the company. They make less than 51% public to avoid situations like this. Sometimes 20 percent, sometimes 30 percent, sometimes 0.5 percent like Kent Gıda, they go public. The important thing in the exchange is to understand how many of the companies are in the market. Why do companies go on the stock market? Of course, to receive money input. In other words, the company needs money, opens to the stock market, that is, puts some of its shares up for sale. The rate opened for this sale is called swap. Stocks, which are very tight with money, exchange a large amount as a percentage, that is, they open them to the market. This is not well appreciated. Valuable shares are those with a low percentage of swaps. Usually up to 30 percent is good.

### PE – So Price Earnings Ratio price/earnings

What does PE mean in the stock market? How to check the PE value of the stock? P/E means price/earnings. That is, we divide the price of the share by the earnings of 1 share. For example, let’s say that the price of A share increased from 4 TL to 5 $ and its closing was 5 $. What does $5 mean? It means the value of one share, that is, its market value. If we have 10 shares, we have shares with a market value of 50 $ . Let the company announce a profit of 100,000 $ and have 100,000 shares in the exchange, that is, in the market. This means 100,000/100,000 = 1 $ . If the company has made a profit of 100 thousand $ , since there are 100 thousand shares, we divide by hundred thousand and we learn the earnings of one share. This will be 1 $ . Now let’s find P/E . P is 5 $ , so is E certain? Yes, that’s a certain 1 $ . Then what happens to the P/E ? Of course, 5/1 = 5 $ .

What if this stock had announced a gain of 400,000 $ instead of an income of 100,000 $ . In this case, what would the PE value of the stock be? Does it increase or decrease? Of course, the pe of 400 thousand earnings is better than 100 thousand earnings.

400,000/100,000 = 4.00 $ I divide 400 thousand by 100 thousand since we have 100 thousand shares and I get earnings per share. How many $ did I find, of course, I found 4 $ . So what was the share value? Since one share is 5 $ it becomes 5/4=1.25.

In this case, while PE was 5 $ in 100 thousand $ earnings, PE in 400 thousand $ earnings became 1.25. Which P/E do you think is better? Of course, the lower value PE is better. He may say that it makes sense to look at the p/e value when buying shares and to choose the lower one.

### MV/BV Ratio of Market Value to Book Value

Let’s continue with the example above. The market value of our stock had increased from 4 to 5. So the market value is 5.00 $.

We cannot call pd 5 $ , we must multiply it by the total number of shares and find the actual pd. In other words, we need to find out how many shares the Company has in the market so that we can determine the PD. Let’s say the company has 40 million shares in the market. Then if we multiply 40 million by 5 $ , we get PD. In this case, PD = 200 million $ . The market value of this company was 200 million for that day. If its price is 10 $ , that is, if it increases from 5 $ to 10 $ , then its market value will be 400 million.

We learned MV, so how do we detect BV? BV means book value. If we find the value of 1 share in terms of disclosed equity and multiply it by 40 million shares, we get the book value.

There are 2 different ways to calculate the book value. The first way is calculated by dividing the company’s equity by its capital. The second way is calculated by dividing his capital by the total stock.

### Book Value Calculation

Companies have Assets and liabilities. Equity of a company with all assets of 1 million and debts of 400 thousand $ would be exactly 1 million-400 thousand = 600 thousand $ . He has a clean 600 thousand $ . If we continue according to the example above, we had 100,000 shares. In this case, 600 thousand / 100 thousand = 6 $ . The book value of this company is 6 $ . The market value was also 5 $ . In this case, MV/BV = 5/6 = 0.83.

MV/BV values are written on sites or programs that show the balance sheets of all companies, it is unnecessary to try to calculate it. The main thing to check here is that if MV/BV = less than 1, it shows that the value of that company is cheap, if it is higher than 1, it is expensive and the price is inflated. This value is taken into account when purchasing shares, and those with 1 or less than 1 are preferred.

When looking at the MV/BV ratio, it should be considered as the same sector. Yes, we cannot say that this company is good if this stock is low. Other companies in the sector of that low company should be looked at and the lowest mv/bv should be found in this sector. Because the MV/BV of some sectors may always be low and some sectors may always be high. Fully clear information cannot be obtained by looking at the MV/BV because the company’s work may be very valuable and hard to find. He may be doing something not everyone can do. Or their lands are in regions where they will be very valuable in the future. For now, their lands are not very valuable, but they are known to be in certain regions where they will be valued. In this case, the share should not be considered as lame even if its value is low, as it will reach its real price at the time of valuation.

### Company’s Long-Term Investments

Before buying shares of companies in the stock market, after examining them thoroughly and looking at their values such as pe, MV/BV capital, equity, it is necessary to look at their investments. In particular, companies with long-term investments, which have given importance to these investments, have always promised a future. Prices tend to always go up.

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