Factors that Affect Sensitivity to Business Cycles
[vsw id=”labqtlwTF_c” source=”youtube” width=”611″ height=”344″ autoplay=”no”] Sensitivity Factors A cyclical company is likely to experience wider-than-average fluctuations in demand, high demand in economic expansion, and low demand in economic contraction. It may be subject to greater-than-average profit variability related to…
Peer Group for Equity Valuation
A company’s industry classification is useful as a starting point for identifying a company’s peer group. While some comparable companies are likely to exist within the same industry group, others will likely require significant adjustments before comparison or compete in…
Elements Covered in a Thorough Industry Analysis
Thorough industry analysis will often split the industry into strategic groups (groups sharing distinct business models or catering to specific market segments in an industry). The analysis will likely involve identifying the industry’s life-cycle, usually placing the industry somewhere…
Company’s Cost of Equity
[vsw id=”dzzqUd0SqtQ” source=”youtube” width=”611″ height=”344″ autoplay=”no”] Required rates of return describe the reward investors expect from taking on a given level of risk. Cost of Equity The cost of equity is the minimum return a company must offer to attract…
Dividends, Stock Splits, and Share Repurchases
According to the dividend discount model (DDM), the value of an investment should be equal to the present value of the expected future benefits. For common shares, these benefits come in the form of dividends and the expected capital gain…
Dividend Payment Chronology
Dividend chronology describes the timeline for a series of events that take place after a company decides to pay dividends to its shareholders. Included in this chronology are the declaration date, ex-dividend date, record date, and payment date in that…
Key Differences Between US GAAP and IFRS
There are many similarities with respect to income tax accounting under IFRS and US GAAP. There are, however, also many notable differences. For example, although both IFRS and US GAAP require a provision for deferred taxes, there are differences in…
Measurement of Current and Deferred Tax Items
Current taxes payable or recoverable are determined using the relevant tax rates at the balance sheet date. Deferred taxes, however, are measured at the tax rate that is expected to be applicable when the asset is realized or the liability…
Valuation Allowance for Deferred Tax Assets
US GAAP recognizes a deferred tax asset in full but reduces it by a valuation allowance if it is very likely that some or the entire deferred tax asset will not be realized. Valuation Allowance Deferred tax assets should be…
