Flashcards in Equity #27: Eq Valuation: Valuation Concepts Deck (13):
valuation is process of determining the value of an asset
Going concern vs. liquidation value
going concern assumes the company will continue to operate and liquidation value does not assume this but assumes the company will continue to operate as a business
define fair market value
"price at which a hypothetical willing/informed seller would trade an asset to a willing/informed buyer"
Define investment value
value of stock to a particular buyer
What are Porter's 5 forces?
1. threat of new entrants 2. threat of substitutes 3. bargaining power of buyers 4. bargaining power of suppliers 5. rivalry among existing competitors
What are the 3 generic stages a comp employs to generate profits?
1. cost leadership (being lowest cost provider) 2. product differentiation 3. focus (gain comptetitive advantage)
Define absolute value model
estimates an assets intrinsic value without regard to the vlaue of other firms
types of absolute value models
Dividend discount models, asset-based models
Define relative valuation models
determine value of asset in relation to values of other assets
types of relative valuation models
EPS, P/E, etc
Qualify of earnings issues such as expense recognition and losses, reclassification of gains/non op income may be found where in financial statements?
may be found in footnotes and disclosures
DEFINE: sum-of-parts valuations
valuing individual components of a company and adding together