Interactive labs: play with the ideas
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Growth on growth at an assumed rate, the Rule of 72, and why absolute return and CAGR are different measures.
Compounding: growth on growth
What you'll seeHow one amount grows at an assumed rate, with compounding (each year's growth joins the base) against straight-line growth, and the Rule of 72.
An assumption for illustration, not a forecast.
₹1,00,000 at an assumed 12% a year, with growth added to the total each year, comes to about ₹3,10,585 after 10 years. Straight-line growth at the same rate would give ₹2,20,000.
- Compounding
- Straight line (simple)
Illustration with a constant assumed rate. Real returns vary year to year and can be negative. Past performance does not indicate future results.
- Compounding earns growth on past growth, so the curve bends upward. Straight-line growth does not bend.
- Time is the big lever: the same rate for twice as long squares the multiple, not just doubles it.
- Absolute return is the total change over the whole period. CAGR is the steady yearly pace that gives the same end value. They answer different questions.
How a P/E ratio moves when the price moves, when earnings move, and why a P/E is not a verdict on value.
P/E: price and earnings, one year apart
What you'll seeA P/E ratio today, then a year later, and how each part (price and earnings) moves the ratio.
The P/E rose from 20.0 to 22.9 (+14.3%), because the price moved more than earnings.
Illustration with made-up numbers. ScripLens shows the P/E as market cap ÷ the latest annual net profit, which can differ from price ÷ EPS when share count or profit definitions differ.
- P/E is price ÷ earnings per share. A higher price with the same earnings raises it; higher earnings with the same price lowers it.
- Over a year, the change in P/E is the price factor divided by the earnings factor. A 20% price rise with 5% earnings growth lifts P/E by about 14%.
- P/E is a ratio, not a verdict. It does not say whether a share is cheap or expensive, and it compares a price with past profit, so compare it with peers and history, not a fixed number.
Why the number of shares and the price per share change together, and why ScripLens charts use adjusted prices.
Splits and bonus issues: more shares, lower price
What you'll seeHow a bonus or split changes your share count and the price per share, and why a raw price chart shows a cliff while the adjusted chart does not.
Split: ₹10 face value into two ₹5 shares (each share becomes two) changes 100 shares to 200 shares, and the price per share from ₹1,200.00 to about ₹600.00. Your total value stays at ₹1,20,000.
- Adjusted price (ScripLens style)
- Raw price (as traded)
Numbers are illustrative. On the day a split or bonus takes effect, the actual trading price can differ from the simple division shown here. Total value here is the value of your holding, not a return.
- A split or bonus changes the number of shares and the price per share in the same proportion. Your total value does not change on that event alone.
- On a raw price chart the action shows as a sudden drop. The adjusted line divides earlier prices by the same factor, so the path is continuous and comparable.
- ScripLens charts use adjusted prices for splits and bonus issues. Rights issues and buybacks are not adjusted in its prices.
Why a 50% fall needs a 100% rise, and why two changes of the same size do not cancel out.
Recovery: why a fall needs a bigger rise
What you'll seeHow big a rise is needed to get back to the starting value after a fall, and what two changes in a row do.
A fall of 20% needs a rise of 25.0% to get back to the starting value. ₹100 becomes ₹80, and ₹80 has to gain ₹20 to return to ₹100.
| Fall | Rise needed |
|---|---|
| −10% | +11.1% |
| −20% | +25.0% |
| −30% | +42.9% |
| −50% | +100.0% |
| −70% | +233.3% |
| −90% | +900.0% |
Starting from ₹100, +50% then −50% ends at ₹75.00, which is −25.0% over the two years. Changes of the same size in opposite directions do not cancel out.
Made-up round numbers. The two-year figures are simple arithmetic on the changes entered, not a forecast of any share.
- A fall and a rise of the same size do not cancel. The rise needed is X ÷ (100 − X), so it grows faster than the fall, and steeply past about 50%.
- Percentage changes multiply. A rise of 50% followed by a fall of 50% leaves you at 75% of the start, which is −25%, not zero.
- The recovery figure starts from the lower value. The drawdown, which measures the fall from the previous high, is the same kind of number on the chart.
How revenue becomes net profit line by line, and what the margins at each line measure.
Profit waterfall: from revenue to net profit
What you'll seeRevenue, costs and tax in one column of bars. Change any input and the profit at each line updates.
Costs before depreciation and interest.
Applied to a positive profit before tax.
For every ₹100 of revenue, about ₹13.50 is left as net profit after operating costs, depreciation, interest and tax.
Made-up figures in ₹ crore (1 crore = ten million). Not a company's numbers.
- Each line removes one kind of cost: operating costs first, then depreciation (a charge for wear on assets) and interest (the cost of borrowing), then tax.
- Margins compare each profit line with revenue. Two companies with the same revenue can end with very different net profit, depending on debt and tax.
- This is a simplified statement. Real filings add other income, exceptional items and deferred tax, and tax here applies only to a positive profit.
A monthly investment, the amount put in, and the value at a rate you assume, plus how XIRR measures a real SIP.
SIP: a monthly amount at an assumed rate
What you'll seeA fixed amount invested every month, the total put in, and the value at a constant rate you assume. The rate is for illustration only.
Assumed, not a forecast of any share or fund.
Putting in ₹5,000 a month for 10 years is ₹6,00,000 invested in total. With an assumed 12% a year, the illustration comes to about ₹11,20,179, which is ₹5,20,179 more than was put in. This is a model, not a result.
- Amount invested
- Illustrative value (assumed rate)
Illustration with a constant assumed rate. Real returns vary year to year and can be negative. Past performance does not indicate future results.
- Money added monthly goes in at different times, so the total invested grows in steps and the value depends on the path of returns, not just their average.
- The assumed rate matters a great deal over long periods. A constant rate is a teaching simplification; real yearly returns move up and down.
- To measure a real SIP, ScripLens uses XIRR, which works from the actual dates, amounts and prices. It gives one annual rate that matches your cash flows.
Educational explanations only, not investment advice, research or a recommendation to buy, sell or hold any security. Past performance does not indicate future results. Every example uses made-up round numbers. Read the Disclaimer before relying on any figure.