Login

Reality Check - Additional metrics

Creating a world of fictious stocks complete with company history, news events and assorted market conditions is a lot of work, but this still barely compares with the information available in the real world.

Much more information is available for real-world investors.  One important document is a company's annual report.  It is a report of a company's performance.  It shows accounting results such as income and expenses.  It typically addresses company initiatives, such as large purchases (machinery, companies, etc.) and long-term strategy.

Company profits (or potential) are an important factor.  A company can have really popular products, but if it doesn't make enough money from them, it isn't as valuable a stock.  For example, consider Zynga (NASDAQ: ZNGA).  They've developed extremely popular games on Facebook such as Farmville. They have high expenses, so their profits aren't very high.  That is why (as of August 2012), their stock is still almost 80% down from when it was first offered at $10 per share.

There are other additional factors such as credit ratio and various ratios such as Price-to-Earnings (P/E) ratio.

These are just a couple real-world examples of information available to real-world investors.