Module 32.2 LOS 32.d: Fundamental determinants of Residual Income
Using a single-stage residual income model, we can highlight the fundamental drivers of residual income. We can equate B0 to …
Module 31.1 LOS 31.c: Leading and Trailing P/E ratio
The P/E ratio is the most widely used price multiple in the investment community. There are reasons why it is …
Module 33.2 LOS 33.e: Normalizing earnings for Private Companies
When valuing private companies, normalized earnings are appropriate. However, in this context, normalized earnings refer the earnings of the company …
Module 31.4 LOS 31.n: Enterprise Value Calculation and EV ratios
Enterprise value is the total value of a company: EV = market value of common stock + market value of …
Module 22.2 LOS 22.m: FCFF/FCFE Coverage Ratios
Dividend safety metrics are used to analyze the probability that dividends will continue in the future. A few commons ones …
Module 24.1 LOS 24. D and 24.e: Effective Corporate Governance Audits and Other Best Practices
In order to determine the effectiveness of a board of directors, investors or investment analysts must assess: The composition of …
Module 24.1 LOS 24.a and 24.h: Core purpose of Corporate Governance and Its Impact on Valuation
The corporate governance in a company should strive to eliminate or reduce conflicts of interests and use company assets with …
Module 21.2 LOS 21.a: Costs That Affect Capital Structure
Costs of financial distress comprise of costs of bankruptcy and probability of financial distress. Costs can be direct, like increased …
Module 21.1 LOS 21.a: MM I and MM II
MM I is a theory that shows that the value of a firm is not affected by the firms capital …
Module 20.1 LOS 20.a: Expansion/Replacement Project Initial Cash Outlay Calculation
Capital projects can be broken down into three main incremental cash flows, the initial investment outlay, the operating cash flows …