Tear Sheet Definition
Tear Sheet, also referred to as fact sheets, displays the information and summary about the company to its prospective investors so that they can take informed investment decision. It usually consist of the stock price, market capitalization, shares outstanding with the company, beta of stock etc.
How to Prepare a Tear Sheet?
It can be prepared differently by the different organisations, some of the guidelines on preparation are as under –
Collect the Information from the official Source of the Company
For making the sheets, the source of information should be vital and carries proof. i.e., the information and figures should be official to give the correct information to the clients.
Determine the Valuable Information
After collecting the information, the preparer should determine the valuable information which should be known to the investors due to the nature and importance of data from an investment point of view.
Summarise the Valuable Information in the Proper Manner
After collecting the valuable information, the information should be summarised in the proper manner, which can be understood by the reader to make him capable of making the investment decisions.
Present the Sheet in a Presentable Manner
After summarising the information, the sheet should be presented properly and understandably. The information should be clear enough that it does not create confusion.
Example of Tear Sheet
Example of Tear Sheet about the security and investment details of XYZ Inc.is as under –
The following are the contents of the tearsheet –
Basic Financial Information
Tear sheet should contain the basic financial information like price of shares, the number of shares outstandingShares OutstandingOutstanding shares are the stocks available with the company's shareholders at a given point of time after excluding the shares that the entity had repurchased. It is shown as a part of the owner's equity in the liability side of the company's balance sheet., face value, week’s high and low market price, social services initiated by the company, market beta and beta of stockBeta Of StockStock Beta is one of the statistical tools and a component of the capital asset pricing model that quantifies the volatility in the prices of a security or stock concerning the market as a whole or any other benchmark for comparing its performance. etc. so that the investor can get the complete and unambiguous information and make the correct decision about the investment.
Estimates and Future Prospects
Tear sheet shall also contain the forecast of the future information to determine the future benefits to the investor and guides about the correct investment decision.
The tear sheet also contains the information about the important ratios like profit to sales ratio, price earning ratioPrice Earning RatioThe price to earnings (PE) ratio measures the relative value of the corporate stocks, i.e., whether it is undervalued or overvalued. It is calculated as the proportion of the current price per share to the earnings per share. , stock turnover ratio, liquidity ratio etc. with comparison to the previous years’ ratio so that the investor should know whether the company is growing or not.
It also contains the recommendation of the analyst about the performance of the company and also the suggestions of the analyst on investment in the company.
Sales Details by the Region
The test sheet also contains the sales data about the region-wise to evaluate future sales estimation and growth.
The test sheet also contains the stock details and process about the stock to evaluate the money blocked in the stock.
The sheet also shows the price details about the company, the average price of the last 200 days to be displayed.
This has been a guide to Tear Sheet and its definition. Here we discuss its contents, example and how to prepare. You may learn more about financing from the following articles –