What is the Working Capital Formula? The working capital formula is: Working Capital = Current Assets – Current Liabilities The working capital formula tells us the short-term liquid assets available after short-term liabilities have been paid off. It is a measure of a company’s short-term liquidity and is important for performing financial analysis, financial modeling,…
What is the Treasury Stock Method? The treasury stock method is a way for companies to calculate how many additional shares may be generated from outstanding in-the-money warrants and options. The new additional shares are then used in calculating the company’s diluted earnings per share (EPS). The treasury stock method implies that the money obtained…
What is Current Debt? Current debt includes the formal borrowings of a company outside of accounts payable. This appears on the balance sheet as an obligation that must be paid off within a year’s time. Thus, current debt is classified as a current liability. This is not to be confused with the current portion of…
What are the Main Types of SEC Filings? If you are a serious investor or finance professional, knowing and being able to interpret the various types of SEC filings will help you in making informed investment decisions. Publicly traded companies are required by the law to disclose relevant information concerning their business and corporate structure….
What are SEC Filings? SEC filings are financial statements, periodic reports, and other formal documents that public companies, broker-dealers, and insiders are required to submit to the U.S. Securities and Exchange Commission (SEC). The SEC was created in the 1930s with an aim to curb stock manipulation and fraud that was taking place among companies….
What is an Exchange Ratio? In mergers and acquisitions (M&A), the exchange ratio measures the number of shares the acquiring company has to issue for each individual share of the target firm. For M&A deals that include shares as part of the consideration (compensation) for the deal, the share exchange ratio is an important metric….
What is a Free Cash Flow? Free cash flow (FCF) measures a company’s financial performance. It shows the cash that a company can produce after deducting the purchase of assets such as property, equipment, and other major investments from its operating cash flow. In other words, FCF measures a company’s ability to produce what investors…
What is a Tax-Free Reorganization? A corporation may undergo restructuring or reorganization for various strategic reasons, whether for increased operational efficiency or for cutting costs. That reorganization may be conducted to increase profits. A tax-free reorganization is often implemented to find efficiencies within the law that allow for reduced tax. These types of reorganizations can…
What is an Investment Banking Pitch Book? An investment banking pitch book is a PowerPoint presentation designed to win new business. The “pitch” is typically an explanation of why the bank in question is best suited to lead the transaction and why they should be engaged by the client. There are various types of pitches,…
