Equity #27: Eq Valuation: Valuation Concepts Flashcards Preview

2018 Level 2 > Equity #27: Eq Valuation: Valuation Concepts > Flashcards

Flashcards in Equity #27: Eq Valuation: Valuation Concepts Deck (13):

Define valuation

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


DEFINE: conglomerate discount

"refers to amt by which mkt price is lower than sum-of-the-parts value...[it's] an apparent price reduction applied to firms in multiple industries"