Market Value vs. Book Value of Equity Securities
The book value of a company’s equity reflects the historical operating and financing decisions of its management. The market value of the company’s equity reflects these decisions as well as investors’ collective assessment and expectations about the company’s future cash…
Industry Analysis
[vsw id=”labqtlwTF_c” source=”youtube” width=”611″ height=”344″ autoplay=”no”] Effective industry analysis helps to provide a framework for company analysis. Uses of Industry Analysis Understanding a company’s business and business environment: a critical step in stock valuation and credit analysis Identifying active equity…
Industry Classification Systems
Industry classification attempts to place companies into groups based on commonalities. There are three major approaches to industry classification. Current Industry Classification Systems Commercial Industry Classification Systems Practice industry classification questions with our free trial. Description of Representative Sectors Basic…
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…
