Valuation

Derivatives, Swaps and Options: A Guide

Derivatives, Swaps and Options: A Guide Derivatives are financial contracts that derive their value from an underlying asset or index – in fact, anything that has an objective, independent measure of value. They have become essential tools in corporate finance and risk management. Swaps, forwards, futures and options are common types of derivatives

By |2024-01-24T15:40:39+00:00January 24th, 2024|Valuation|Comments Off on Derivatives, Swaps and Options: A Guide

Pecking Order Theory: Definitions, Concepts and Examples 

Pecking Order Theory: Definitions, Concepts and Examples Deciding how to finance a company's operations and growth is a what corporate finance is all about! Companies must choose how to raise capital from various internal and external sources. The pecking order theory provides an influential model for thinking about how companies make these financing

By |2024-01-24T11:25:12+00:00January 17th, 2024|Valuation|Comments Off on Pecking Order Theory: Definitions, Concepts and Examples 

Earnings Per Share (EPS): Definitions, Formulas, Examples

Earnings per share (EPS) is a key metric used to evaluate a company's profitability on a per-share basis.  EPS indicates profitability for per ordinary share over the company reporting period and is disclosed in its financial statements – usually on the same page as the Income Statement. EPS provides insights into a company’s financial health

By |2023-11-09T13:12:23+00:00November 8th, 2023|Valuation|Comments Off on Earnings Per Share (EPS): Definitions, Formulas, Examples

Equity Risk Premium (ERP): Definitions, Formulas and Examples

The equity risk premium (ERP) is a crucial concept in corporate finance and investment analysis. It signifies the additional return that investors demand to invest in stocks versus risk-free assets like government bonds. Understanding the equity risk premium is vital for estimating the cost of equity and determining if an investment opportunity is worthwhile.  

By |2023-10-23T16:57:15+00:00October 23rd, 2023|Valuation|Comments Off on Equity Risk Premium (ERP): Definitions, Formulas and Examples

Discounted Cash Flow Models (DCF): Guide and Examples

Discounted cash flow (DCF) analysis is a method used in corporate finance and valuation to estimate the attractiveness of an investment opportunity. DCF analysis uses future free cash flow projections and discounts them to arrive at a present value estimate, which is used to evaluate the potential for investment.   What is a Discounted Cash

By |2023-11-09T13:17:05+00:00October 17th, 2023|Valuation|1 Comment

EBITDA Explained: Definitions, Formulas and Examples

EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) is perhaps the most important financial metric used in valuing companies. EBITDA as a metric was pioneered by companies like Donaldson Lufkin and Jenrette (DLJ) during the high yield bond boom of the 1970s and 80s. This gave the impression that companies were less leveraged than they

By |2023-10-19T09:53:06+00:00October 17th, 2023|Valuation|Comments Off on EBITDA Explained: Definitions, Formulas and Examples

Internal Rate of Return (IRR): Formulas, Examples and Implications

The Internal Rate of Return (IRR) can be viewed as the rate of return implicit within a set of cashflows. It could be interpreted as a sort of compound average growth rate (CAGR) – because it essentially is, but the cash flows are periodic rather than from one point in time to another.  Think of

By |2023-10-19T09:49:09+00:00October 17th, 2023|Valuation|Comments Off on Internal Rate of Return (IRR): Formulas, Examples and Implications

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