BU111 Chapter Notes - Chapter 5: Operating Cash Flow, Capital Structure, Net Present Value
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BU111 Full Course Notes
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Document Summary
Relative: value of the company based on similar companies in the industry, public comparables and precedent transactions. Intrinsic: npv of cash flows, value of company based on its financial ratios. Equity value: reflects what is distributable to equity holders, equity value is the numerator when the denominator comes after interest payments, equity value=share price* number of shares outstanding. Enterprise value: reflects what is distributable to all shareholders, equity value is the numerator when the denominator comes before interest payments, enterprise value=equity value cash + debt + minority interests. E=earnings per share (eps) or net income. Price an investor is willing to pay for every dollar of earnings. Ebitda=earnings before interest, taxes, depreciation, and amortization. Ebitda is an approximation of operating cash flow, therefore: ev/ebitda is an approximation of how valuable a company is relative to operating cash flow. Forward multiple: denominator is specified metric projected, typically 1-2 years in future.
