Valuation & Analysis Flashcards
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Read the first 6 Valuation & Analysis flashcards as text
The Discounted Cash Flow (DCF) valuation method determines intrinsic value by:
Answer: Discounting future cash flows to present value using an appropriate discount rate
DCF analysis discounts projected future cash flows back to their present value using a discount rate that reflects the investment's risk.
Enterprise Value (EV) differs from market capitalization because EV:
Answer: Accounts for both debt and cash in addition to equity market cap
EV = Market Cap + Total Debt - Cash, representing the total value of a company to all capital providers (equity and debt holders).
A company's EBITDA represents:
Answer: Earnings Before Interest, Taxes, Depreciation, and Amortization
EBITDA removes non-cash charges (depreciation, amortization) and financing/tax effects to measure operating cash generation.
Technical analysis primarily uses which information to forecast security prices?
Answer: Price patterns, trading volume, and historical market data
Technical analysis uses historical price and volume data to identify patterns and trends that may predict future price movements.
Return on Equity (ROE) measures:
Answer: Net income generated per dollar of shareholders' equity
ROE = Net Income / Shareholders' Equity, measuring how efficiently management generates profits from shareholder-provided capital.
The Price-to-Book (P/B) ratio compares a company's market value to:
Answer: Net asset value (book value) per share
P/B ratio = Market Price per Share / Book Value per Share, comparing market valuation to accounting net asset value.
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