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22 Cards in this Set
- Front
- Back
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Market value vs implied value |
Market value is based of the stocks and the implied value is based off of analysts. They will differ because each group has different discount rate assumptions. |
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Equity value is the entire business. |
H |
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Enterprise value |
The value of the firms core business to the investors in the company. |
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G |
J |
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Changes in core business effects enterprise Value and financial or operational effect Equity Value |
, |
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A higher equity or enterprise value doesn’t mean the firm is more valuable. It all is determined by the multiples. |
H |
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How does capital structure changes effect the enterprise value? |
As debt increases from zero it will reach an optimum amount where enterprise value is highest. As it grows more the EV will decline |
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Calculate equity value |
Market Capitalization |
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Diluted equity value is a more accurate companies current equity value. |
. |
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3 ways to factor in dilution |
Treasury stock method (options/warrants) If converted method (convertible bonds) Straight up addition method (add up all potential shares) |
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Rules of thumb for calculating enterprise value. |
1. Add Long term funding sources (unfounded pensions, capital leases, restructuring liabilities) 2. Add items that will be costly to new acquirer (repaid or refinancing due to “change in control) 3 subtract non operating assets (investments,) |
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At what % do you consolidate a parent companies financial statements? |
50% full consolidation |
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If only 30% you find what 30% or that partially owners companies net income and add it before NI as equity investment earnings |
F |
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What are non controlling interests? |
Owning 50%-99% of another company |
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What are non controlling interests? |
Owning 50%-99% of another company. And the liabilities on the BS has the portion of the ownered company that you do not control |
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In the money vs out of the money |
In the money is when exercise price is below the stock price Out of the money when the exercise orise is above the stock price |
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Goodwill is part of the core business and increase enterprise value |
D |
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Goodwill is part of the core business and increase enterprise value |
D |
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Use ev/ebitda if you want to exclude capex, d and a, and cap structure. Ev/ebit is for when you want to include capex and d and a. They both exclude capital structure bc it is prior to interest expense |
F |
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What is the interest expense comparison to convertible debt in traditional debt? |
Convertible that has a lower interest-rate and has a higher net income. Traditional that has the higher interest-rate and will cause a lower net income |
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Minority interest effects on EV or ENTERPRISE value? |
If a parent company owns 30% then you have to subtract this 30% stake when moving from equity value to enterprise value. Minority interest Is included directly above net income. So net income reflects this minority interest but when you work to move to enterprise value you must subtract the 30% stake to compare apples to apples |
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Non controlling interest effects from equity value to EV |
You add |
