02 - Shareholder Value Analysis Flashcards by Sina Mietz

Übersetzung
Pivotal role

Schlüsselrolle

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Übersetzung
Valuation

Bewetung

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Bedeutung
Discounted Cash Flow Method

A valuation method used to estimate the attractiveness of an investment opportunity by estimating future CFs and discounting them.

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Formel
Discounted future cash flows

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Übersetzung
Net present value

Nettobarwert, Kapitalwert

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Bedeutung
Net present value (NPV)

The difference between the present value of cash inflows and the present value of cash outflows. NPV is used in capital budgeting to analyze the profitability of an investment or project.

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Formel
Net present value (NPV)

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Bedeutung
Present value (PV) (oder auch: Discounted value)

The current worth of a future sum of money or stream of cash flows given a specified rate of return. Future cash flows are discounted at the discount rate, and the higher the discount rate, the lower the present value of the future cash flows. Determining the appropriate discount rate is the key to properly valuing future cash flows, whether they be earnings or obligations.

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Bedeutung
Value-additivity

Value of firm rises by the NPV of the project

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Bedeutung
Shareholder value (SHV)

The value delivered to shareholders because of management’s ability to grow earnings, dividends and share price. In other words, shareholder value is the sum of all strategic decisions that affect the firm’s ability to efficiently increase the amount of free cash flow over time.

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Bedeutung
Residual value (RV)

In the Discounted Cash Flow valuation model, RV (or Terminal Value) represents the value of all future CFs that occur after the short-term estimation of CFs over the next couple of years.

RV is valued as a perpetuity: RV=CF_T*growth rate g / (r-g)

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Übersetzung
Enhance cash flows (CF)

verbessern, erhöhen

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Übersetzung
Accelerate cash flows (t, T)

beschleunigen

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How to reduce volatility of CFs (3 aspects)

(and thus, enhance NPV)

Enhance loyalty and switching costs
Shift to services and consumables
Integrate operations to reduce capital requirements

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Bedeutung
Discount rate (r)

r is used to discount CFs in the DCF analysis to get their Present Value (PV). It represents the cost of capital that the underlying investment incurs.

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Übersetzung
Sales growth

Umsatzsteigerung

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Bedeutung
Sales growth

The amount a company derives from sales compared to a previous, corresponding period of time

Formel
Operating profit margin / Operating margin / EBIT margin

Operating profit margin / Operating margin / EBIT margin

= Operating Income / Net Sales

= EBIT / Net Sales

Careful: Net Sales is often used interchangeably with (Operating) Revenues

Bedeutung
Operating profit margin / Operating margin

A ratio used to measure a company’s pricing strategy and operating efficiency. Operating margin is a measurement of what proportion of a company’s revenue is left over after paying for variable costs of production such as wages, raw materials, etc. A healthy operating margin is required for a company to be able to pay for its fixed costs, such as interest on debt.

Bedeutung
Cost of capital

The cost of funds used for financing a business or investment project. Cost of capital depends on the mode of financing used – it refers to the cost of equity if the business is financed solely through equity, or to the cost of debt if it is financed solely through debt. If a project/business is financed with both equity and debt typically the WACC (Weighted Average Cost of Capital) is used.

Formel
Market capitalization (market cap)

Market capitalization (market cap) = shares outstanding * share price

Formel
Market-to-book ratio

Market-to-book ratio (equity) = Market value of equity / Book value of equity

Bedeutung
Tobin’s Q

Ratio of market value to replacement cost of tangible assets (q value greater than 1 indicates that firm has intangible assets)

Formel
Economic value added (EVA)

Economic value added (EVA) = profit - cost of financing capital net operating profit after tax (NOPAT) - (capital employed * WACC)

Formel Market value added (MVA)

Market Value Added (MVA) = market value - capital employed

Bedeutung Weighted average cost of capital (WACC)

A calculation of a firm's cost of capital in which each category of capital is proportionately weighted. All capital sources - common stock, preferred stock, bonds and any other long-term debt - are included in a WACC calculation. All else equal, the WACC of a firm increases as beta *ß*_E(=risk of a firm's equity relative to the market) and rate of return on equity r_E increase, since an increase in WACC notes a decrease in valuation and a higher risk.

Formel Weighted average cost of capital (WACC)

Übersetzung arbitrary

willkürlich, beliebig z.B. accounting earnings can be arbitrary

Bedeutung (Stock Price) Volatility

Volatility is the degree of variation of a trading price series over time. Higher volatility = higher risk

Beispiele Market-based assets

z.B. brand relationships customer relationships channel relationships partner relationships

Bedeutung Sales volume

The quantity or number of products sold or services provided by a company in a particular period of time

Bedeutung Market share

The percentage of an industry or market's total sales that is earned by a particular company over a specified time period. Market share is calculated by taking the company's sales volume over the period and dividing it by the total sales of the industry over the same period. This metric is used to give a general idea of the size of a company to its market and its competitors.

Bedeutung Gross margin

The gross margin represents the percent of total sales revenue that the company retains after incurring the direct costs associated with producing the goods and services sold by a company. The higher the percentage, the more the company retains on each dollar of sales to service its other costs and obligations.

Formel Gross (profit) margin

Gross Margin (%) = (Revenue - Cost of Goods Sold) / Revenue

Bedeutung Asset

...any physical, organizational or human resource with economic value that a firm owns or controls with the expectation that it will provide future benefits in the marketplace (tangible/intangible, on/off balance sheet, internal/external to the firm)

Bedeutung Relational market-based assets

**Outcomes of the relationship between** a **firm and key external stakeholders** (including distributors, retailers, end customers, strategic partners, community groups, governmental agencies)

Bedeutung Intellectual market-based assets

Types of **knowledge a firm possesses about the environment** (emerging and potential state of market conditions and entities in it, includig competitors, customers, channels, suppliers, social and political interest groups)

Bedeutung Stock

specific amount or extent of brand equity or knowledge of customers’ purchasing criteria possessed by firm

Bedeutung Flow

extent to which a stock of particular asset is augmenting or decaying

4 reasons why accounting earnings are bad as a measure of firm performance

Accounting earnings are bad because they are 1. **Arbitrary** and **easily to manipulate** (flexibility in reporting, accounting methods, international standards) -\> Profits are an opinion, cash is fact 2. **Exclude investments** 3. **Ignore** the **time value of money** 4. **Produce** a **short-term managerial focus**