Chapter 13 (Equities) Flashcards
Book Value
The net worth of common equity according to a firm’s balance sheet.
Constant-Growth DDM
A form of the dividend discount model that assumes dividends will grow at a constant rate.
Dividend Discount Model (DDM)
A formula for the intrinsic value of a firm equal to the present value of all expected future dividends.
Dividend Payout Ratio
Percentage of earnings paid out as dividends.
Earnings Management
The practice of using flexibility in accounting rules to manipulate the apparent profitability of the firm
Earnings Retention Ratio
The proportion of the firm’s earnings that is reinvested in the business (and not paid out as dividends).
Intrinsic Value
The present value of a firm’s expected future net cash flows discounted by the required rate of return.
Liquidation Value
Net amount that can be realized by selling the assets of a firm and paying off the debt.
Market Capitalization Rate
The market-consensus estimate of the appropriate discount rate for a firm’s cash flows
PEG Ratio
Ratio of P/E multiple to earnings growth rate.
Plowback Ratio
The proportion of the firm’s earnings that is reinvested in the business (and not paid out as dividends).
Present Value of Growth Opportunities (PVGO)
Net present value of a firm’s future investments.
Price-Earnings Multiple
The ratio of a stock’s price to its earnings per share.
Replacement Cost
Cost to replace a firm’s assets.
Tobin’s q
Ratio of market value of the firm to replacement cost.
