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Excess Earnings (Residual Income) Valuation is an interesting approach to firm valuation, often commercialized by consulting companies because it can also serve as the foundation for management incentive […]
Below is a chart showing how dramatically a company’s equity beta can change with the expiration of derivative securities: Source: Corporate Valuation: Theory, Evidence and PracticeMark E. Zmijewski; […]
Compensation through options and shares, as well as the issuance of similar warrants to external parties, represents a regular source of financing for an organization. Therefore, in valuation, […]
💼 Employee compensation tied to company capital is a widely used practice that sometimes significantly affects the organization’s Free Cash Flow and, consequently, its valuation. 📈 This refers […]
The total value of an organization (EV) does not include operating liabilities, as there is no specific interest rate assigned to them. Therefore, these are considered in operating […]
While Valuation, Excess assets should be separated from core operations and valued separately, but here it is important to see what effect this separation has on the right-hand […]
In some cases, when valuing an organization, using the WACC method for discounting cash flows can be misleading, and it is better to use the APV method.To understand […]
The table presents an example illustrating a widespread and significant error in valuation, related to the assumption of ignoring the beta coefficient of debt or other non-equity sources […]
In the final sections, I want to address themes of capital valuation, where the formulas for financial “levers” and “revenues”, formulas you are familiar with, come into play. […]
One reason for using comparable companies’ data to derive the beta of a listed company is that it yields a more accurate beta. Is it worth the effort? […]
When valuing an organization, it’s easy to make mistakes if you approach the calculation of Cost of Equity and WACC superficially — because intrinsic value is highly sensitive […]
Among a CFO’s typical target KPIs is improving the company’s credit rating, as it directly impacts the organization’s value through its effect on the Cost of Debt (CoD) […]
💬 How to Estimate Cost of Debt for Private Companies? For “listed” companies, the Cost of Debt (CoD) is more or less accessible. But how do we estimate […]
How to Calculate Expected Default Loss on a Bond? The cost of debt is often confused with the yield to maturity (YTM) of a bond/loan. The promised return […]
Adjusted β – It’s important to understand that statistical analysis provides an approximate rather than a “true” beta. Different commercial sources (as shown in the table) provide different […]
An organization’s capital (#equity) is subject to systemic risk related to industry cyclicality, operational leverage, and financial leverage… The most significant impact on this uncertainty is seen in […]
In business valuation, a common mistake is the incorrect determination of free cash flow (FCF [t+1]) at the beginning of the stable, or long-term growth period, which can […]
It’s interesting that the valuation of an organization could be influenced by a simple analysis of growth rates despite the organization possibly experiencing rapid growth in the initial […]
