Financisl Literacy Flashcards
(15 cards)
To be successful on a B quadrant you need to have these two things
Ownership or control of systems and the ability to lead people
which is the file report that companies release quarterly?
8k
which is the file report that companies release anually
10k
What is valuation?
Valuation is determining a company’s fair value.
Why is valuation important?
It’s used for M&A, IPOs, equity research, and issuing debt/equity.
What are the four main valuation methods?
- DCF Analysis 2. Comparable Company Analysis 3. Precedent Transactions 4. Asset-Based Valuation
What is DCF Analysis?
A valuation method based on projected future cash flows.
Why is DCF commonly used?
It provides intrinsic valuation based on a company’s cash flow potential rather than market prices.
How does DCF work?
- Forecast cash flows (5-10 years) 2. Calculate terminal value 3. Discount with WACC.
What is the formula for Free Cash Flow (FCF)?
Net Income + D&A ± Changes in Working Capital - CapEx - Dividends.
What is Comparable Company Analysis (Comps)?
A relative valuation method comparing a company to publicly traded peers.
What are common valuation multiples in Comps?
EV/EBITDA, P/E, EV/Revenue.
How does Precedent Transactions differ from Comps?
It analyzes past M&A deals instead of public peers.
Why do Precedent Transactions often have higher valuations?
Acquisition prices include a control premium, making them higher than market values.
What is asset-based valuation?
Valuation based on the fair market value of assets minus liabilities.
