firm value Flashcards
(59 cards)
1
Q
What does P&L stands for?
A
Profit & Loss statement
(Gewinn- und Verlustrechnung)
2
Q
What does BS stands for?
A
Balance Sheet
3
Q
What does EBITDA stands for?
A
earning before interest, taxes, depreciation and amortization
(Ergebnis vor Zinsen, Steuern, Abschreibungen und Amortisation)
4
Q
What does the EBITDA measure?
A
Measures the operative profitability of the company
5
Q
What does the EBIT measure?
A
Measures the company incomes before taxes, financial revenues/expenses and extraordinary components
(Misst das Unternehmensergebnis vor Steuern, Finanzerträgen/-aufwendungen und außerordentlichen Komponenten)
6
Q
What does EBIT stands for?
A
earning before interest and taxes
(Ergebnis vor Zinsen und Steuern)
7
Q
Earning before interest and taxes.
What is it?
A
EBIT
8
Q
earning before interest, taxes, depreciation and amortization.
What is it?
A
EBITDA
9
Q
What measures the operative profitability of the company?
A
EBITDA
10
Q
What measures the company incomes before taxes, financial revenues/expenses and extraordinary components?
A
EBIT
11
Q
Definition von EBT?
A
earning before taxes
12
Q
EBT is the earning before considering taxation.
True/False?
A
True
13
Q
What does NFP stand for?
A
net financial position
14
Q
What is the net financial position?
A
It is an index of the level of indeptness of an industrial company. It is computed as difference between financial debts and cash.
(Deutsch: Es ist ein Index für den Grad der Unabhängigkeit eines Industrieunternehmens. Er berechnet sich aus der Differenz zwischen Finanzschulden und Barmitteln.)
15
Q
When is the NFP (net financial position) positive?
A
when the company has more debts than cash.
16
Q
what does CE stands for?
A
capital employed
17
Q
What does CE (capital employed) stands for?
A
It represents the amount of invested resources in a company. It is computed as
sum of shareholders equity and NFP (net financial position)
(= eingesetztes Kapital)
18
Q
The objective of Valuation is to assess what?
A
the fair value of an asset
(Ziel der Bewertung ist es, den beizulegenden Zeitwert (fair value) eines Vermögenswerts zu ermitteln)
19
Q
Focusing on the Valuation of Campanies
Two types of methodologies:
1) methodologies that provide an estimate of the ??
2) methodologies that provide an estimate of ??
A
1) Equity Value (= Eigenkapitalwert)
2) Enterprise Value, from which the Equity Value can be then derived
(Enterprise Value = Unternehmenswert)
(derived = abgeleitet)
20
Q
Price is referred to the ?? Value
A
Equity
21
Q
Equity (E) = ?? (Formel)
A
Enterprise Value (EV) - Net Financial Position (NFP)
22
Q
Woraus setzt sich die NFP (Net Financial Position) zusammen?
A
Financing sources (bank, loans, …)
23
Q
Equity (E) is what?
A
capital invested by shareholders
(equity = Eigenkapital/Aktienkapital)
24
Q
Wie kann der Enterprise Value (EV) berechnet werden?
A
= Equity + NFP
25
Enterprise Value (EV) = Assets (Vermögen/Aktiva)
--> Capital invested in the company
...
26
Value and Price:
equity market conditions
communication
negotiation
...
27
Valuation Principles
The Union Europeenne des Experts Comptables Economiques et Financiers (UEC) recommends some principles to be respected in a correct valuation process: (Nenne die 4 (!))
1. The value is relative
-> it depends on the reason why we are valuing the company
2. The value is also general
->the estimation must be objective. Different analysts valuing the same company for the same purpose should get to the same results
3. A correct valuation should be composite
--> it should both assets and profits, weighted in a proper way
4. Value and price
--> are two different things and this difference should emerge from the valuation criteria
28
Deutsche Version:
Die Union Europeenne des Experts Comptables Economiques et Financiers (UEC) empfiehlt einige Grundsätze, die bei einem korrekten Bewertungsverfahren beachtet werden sollten: (Nenne die 4 (!))
1. Der Wert ist relativ
-> er hängt von dem Grund ab, warum wir das Unternehmen bewerten
2. Der Wert ist auch allgemein
->die Schätzung muss objektiv sein. Verschiedene Analysten, die das gleiche Unternehmen zum gleichen Zweck bewerten, sollten zu den gleichen Ergebnissen kommen.
3. Eine korrekte Bewertung sollte zusammengesetzt sein
--> sie sollte sowohl Vermögenswerte als auch Gewinne enthalten, die in angemessener Weise gewichtet werden
4. Wert und Preis
--> sind zwei verschiedene Dinge, und dieser Unterschied sollte aus den Bewertungskriterien hervorgehen
29
Sources of information
In valuing a company, we draw on three sources of information: (3) ??
1. the current financial statements of the company, for all the inputs that are required in any valuation model
2. the past history of the company, to make judgements on the growth and the cyclicality of company
3. the company competitors or peer group, to gauge how better, or worse, the company is than its competitors. This process is also called benchmarking
30
Deutsch:
Bei der Bewertung eines Unternehmens stützen wir uns auf drei Informationsquellen: (3) ??
1. die aktuellen Finanzberichte des Unternehmens, um alle für ein Bewertungsmodell erforderlichen Angaben zu erhalten
2. die Vorgeschichte des Unternehmens, um das Wachstum und die Zyklizität des Unternehmens beurteilen zu können
3. die Konkurrenten des Unternehmens oder die Vergleichsgruppe, um zu beurteilen, ob das Unternehmen besser oder schlechter ist als seine Konkurrenten. Dieser Prozess wird auch als Benchmarking bezeichnet.
31
Motivations for evaluation
What are the general objectives (allg. Ziele)? (4)
Trading (Handel)
Capital increases (Kapitalerhöhung)
Company transformations (Unternehmenstransformationen)
internal check (interne Kontrolle)
32
Motivations for evaluation
General objective: Trading
What are the specific objectives? (5)
Sale to an external acquirer
Sale to another company of the group
Secondary market
Carve out
IPO/Listing
33
Motivations for evaluation
General objective: Capital increases (5)
Issue of new shares
Issue of new convertible bonds
M&A and LBO (leveraged buyout) /MBO (Management by objectives)
Private Equity
Seasoned offers
34
Motivations for evaluation
General objective: Company transformation (5)
Company restructuring
Strategical changes
Sale/Purchase of business units
M&A
JV (Joint Venture?) & Private Equity
35
Investment Banking
Kann in welche 4 Bereiche unterteilt werden?
Public and Private Placement
M&A Transaction
Securitization
Advisory
36
Investment Banking
Public and Private Placements umfassen? (5)
IPO (Initial Public Offering)
Convertible issues
stock private placements
debt structuring, marketing and pricing
leveraged buyout
37
Investment Banking
Der Bereich M&A Transaction beinhaltet? (6)
Acquisitions
Divestures (Ausgliederungen/Veräußerungen)
Mergers
JVs
Restructurings
Spin-offs
38
Investment Banking
Securitization beinhaltet? (3)
Assets (Vermögen/Besitz/Aktiva)
Businesses
Risks
39
Investment Banking
Advisory beinhaltet? (6)
Capital structure
Risk management
Credit ratings
Liquidity management
Cost of capital
Value drivers
40
What affects firm value?
Maximierung des Unternehmenswertes durch welche Art von Entscheidungen? (3)
Investment decision
-> Hurdle rate (Basisvergütung)
-> Return
Financing decision
-> Financing mix
-> Financing type
Dividend decision
-> how much?
-> what form?
Folie 13 ansehen/durchlesen (!!!)
41
Valuation approaches and methods
Name them! (5 approches mit in Klammern die jeweiligen zwei Methoden)
Asset based (Simple / Complex)
Flows of results (Earnings-based / Financial (DCF)
Economic profit (Mixed method with goodwill / Economic value added)
Relative valuation (Traded multiples / Comparable transactions)
(Folie 14 ansehen!)
42
There are two important values for each company.
What are they called? On what are they looking at?
Equity Value (E) (Eigenkapitalwert)
-> at the centre of every deal but it isn't more important than EV
Enterprise Value (EV)
--> includes the industrial, operational, business site
43
If you want to know if the business of a company is working properly you should look at what value?
Enterprise Value (EV)
44
?? is basically the number of a company's shares outstanding multiplied by the current price of a single share.
Market cap/Market capitalization
45
The difference between market value and market cap/market capitalization.
https://www.fool.com/knowledge-center/the-difference-between-market-value-market-capital.aspx :
Market capitalization reflects the equity value of a company only; it does not necessarily reflect its true market value. Whereas market capitalization represents a single measure of what a company is worth, market value takes numerous factors into account to create a broader picture of a company's financial standing.
https://www.ruleoneinvesting.com/blog/financial-control/market-capitalization/ :
"Market capitalization, or market cap, is not the same as market value (even if someone uses the terms interchangeably).
To determine a company's true value, many metrics are used rather than only the company's stock price and outstanding shares.
Not only are market capitalization and market value calculated differently, but they also affect our potential returns very differently.
While market cap and market value are each a measurement of corporate assets, they each take incredibly different roads to get to what is essentially the same destination.
Market cap is a very straightforward calculation, but market value is infinitely more complex. It's assessed using factors like price-to-earnings, return-on-equity, and others.
Other metrics that are usually considered when calculating market value include outstanding bonds, corporate debt, interest payments, and even long-term growth potential.
Market cap also tends to fluctuate over time, particularly during a business or economic downturn, such as a recession."
(...)
46
Welcher Wert ist eine gut Einschätzung darüber wie hoch Shareholder (Käufer und Verkäufer) das Unternehmen bewerten
....
47
Um bewerten zu können, ob eine Preisänderung (von Aktien) bedeutsam ist sollte man neben dem Preisanstieg auch das Volumen betrachten. (also wie viele Aktien gehandelt wurden)
...
48
Wichtige Kennzahlen:
Equity value
market cap
Net earnings
(book value equity nicht so wichtig)
...
49
Wann ist der book value equity (Buchwert des Eigenkapitals) wichtig?
Wenn Informationsmangel herrscht. Also wenn kein equity value (E) gegeben ist.
50
Der die Anzahl an Aktien kann das Unternehmen individuell festlegen.
Wahr/Falsch?
Wahr
51
Invest in a capital increase or not?
Welche Möglichkeiten (4) gibt es für die injection of new capital from shareholders?
1. Asking current shareholders if they are willing to join the capital increase
--> yes (capital increase with the same stake)
--> no (stake decreases), also called "Dilution" effect (the number of shares stays constant and value of the investment stays constant --> nur der Anteil verändert sich --> man hat also weniger Mitsprache
2. If a shareholder isn't willing to join the capital increase, the company can ask the remaining shareholders if they want even a bit more (so they get offered the increase that the other shareholder refused)
3. private placement (Privatpersonen anfragen nach den eigenen individuellen Präferenzen)
4. public placement (stock exchange, "list" bzw. listing)
--> everyone has the opportunity to be a part of the capital increase --> kein Einfluss darauf welche neuen Shareholder hinzukommen --> verursacht allerdings höhere Kosten
(Folie 17 ansehen !!)
52
Examples of applications
Whether you are working in M&A, restructuring, or Private placement, virtually every investment banking activity is influenced by valuation analyses:
Determining what an acquiror should pay for a target company
Determining an appropriate value expectation for a target company seeking a sale of its business
Valuing a company that is emrging from bankruptcy as part of a plan of reorganization
Structuring a private placement or an IPO
Valuing a division of a public company to assess potential divestiture proceeds
...
53
A certain amount of judgement is required to interpret the significant amount of data
Value is theory, but Price is the reality!
We can evaluate companies based on the number we obtain from the valuation methods, however, the acquisition can be done at a very different price
Name some factors that have an influence on the final price!
market conditions
communication
negotiation
(...)
54
a) What does financial analysis allows someone in gerneral?
b) And what in particular? (3)
a) to understand information reported on a company financial statement
b) and in particular:
highlights the most relevant information regarding the comppany's operations management (profitablity, structure of sources and uses, etc.)
Harmonize data and information to allow for a comparison of certain results / indicators through time (company's history evolution)
Isolate information related to the core activities from extra-ordinary / non-recurring items / events
55
To allow for a meaningful evaluation of historical performances, analyses need to be carried at constant perimeter, i.e. no influence of extra-ordinary operations like spin-off, M&A, or similar events. In those cases, when possible, you should rely on pro-forma data (e.g. backward constant perimeter "proformization")
-...
56
Income statement (P&L)
What is P&L reclassification about?
About calculating measures of profitability (e.g. EBITDA, EBIT, net income etc.) which requires not only a review of the written management discussion and analysis of the financial data
57
Balance sheet (BS)
Traditional balance sheets identify total assets (current and non-current) as opposed to total liabilities (shareholders'equity, financial and non-financial debt, and provisions).
...
58
BS reclassification requires highlighting of? (2)
Total sources of funding through which the company finances its ordinary and extra-ordinary operations
Capital employed
--> which reflects the level of capital used by the business to finance operating assets and working capital - better proxy for the investment of the company
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