Investor Foundations Blueprint
Business quality, financial statement analysis and the principles of valuation. The introductory Blueprint and the prerequisite for the remainder of the curriculum.
Introductory treatments of investing frequently begin with securities markets. This Blueprint begins instead with the enterprise, on the premise that a market price can be evaluated only against an independent estimate of the value of the underlying business.
The Blueprint covers four subjects in sequence: the economic characteristics that distinguish a high-quality business; the analysis of the income statement, balance sheet and statement of cash flows as an integrated set; the distinction between accounting profit and free cash flow; and the principal methods of valuation, together with the assumptions on which each depends.
The Blueprint is offered without charge, requires approximately four weeks at three hours per week, and is the recommended prerequisite for every other Blueprint on the platform.
By the end you will be able to
- Analyse the income statement, balance sheet and statement of cash flows as an integrated set
- Distinguish returns generated by the operating business from returns attributable to financial leverage
- Estimate free cash flow and the reinvestment required to sustain the existing asset base
- Construct a basic valuation and state its principal assumptions explicitly
- Document an investment thesis with defined, verifiable conditions of disconfirmation
Curriculum
The economic characteristics of a business, and the criteria that distinguish a high-quality enterprise from one that merely generates activity.
The income statement, balance sheet and statement of cash flows as an integrated set, and the principal limitations of each.
The principles of valuation, the relationship between multiples and discounted cash flow, and the explicit statement of assumptions.
The formulation of a documented investment thesis and the record-keeping practices that support disciplined decision-making.