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● Read together; this guide will equip you with the tools to analyse great stocks! For this exercise, I’ll continue using the fictitious chicken rice company Seedly Chicken Rice Limited to explain the basics of evaluating a company in simple, delicious, bite-sized terms. Remember what we talked about in the first article about ? This is the profit that the owners of Seedly Chicken Rice Limited can pocket. Convinced that he needed new and better stoves, he upgraded the stoves and sold off the old ones. Intangible assets (for example, Seedly Chicken Rice Limited’s brand reputation) are tested for ) at least once a year or whenever there is an indication of impairment, whichever comes first. occurs when the fair value (the market or recoverable value) is lower than the book value (what is stated in the financial statements). For example, if you buy a Huawei smartphone worth $1,000 and are supposed to use it for five years, the annual depreciation of the Huawei smartphone would be $200. But because their reputation suffered, the fair value of the smartphone was affected. So, if you wish to sell your phone after the first year, the book value of the smartphone is $1,000 – $200 = $800 (what it’s supposed to be worth). But because of the whole Google Huawei fiasco, the second-hand phone shop offered to buy your phone at only $300. Essentially, that means there is a $500 impairment (loss in value) to the phone’s value. The cash outflow you experience when you gain other assets is because you have to pay for your purchase of inventory. However, this only applies to only. Some points to take note of: If you would like to stretch your learning further, w Why not check out our and participate in the lively discussion about stock investing there!