What are Corporate Finance Ratios? Corporate Finance Ratios are quantitative measures that are used to assess businesses. These ratios are used by financial analysts, equity research analysts, investors, and asset managers to evaluate the overall financial health of businesses, with the end goal of making better investment decisions. Corporate Finance Ratios are also heavily used…
What is Cash Management? Cash management, also known as treasury management, is the process that involves collecting and managing cash flows from the operating, investing, and financing activities of a company. In business, it is a key aspect of an organization’s financial stability. Cash management is important for both companies and individuals, as it is…
What is a Barrier Option? A barrier option is a type of derivative option contract, the payoff of which depends on the value of the underlying asset. In other words, the payoff only comes into effect if the asset underlying the barrier option’s reached or exceeded a predetermined price specified in the option contract. A…
What is a Targeted Auction? A targeted auction, also referred to as a controlled auction, is a type of auction that involves a small group of qualified buyers that compete for the acquisition of a company. The number of buyers is typically limited to about three (3) to ten (10), and only includes buyers that…
What is Schedule A? Schedule A is an income tax form that is used in the United States to declare itemized deductions. It is attached to Form 1040 for taxpayers who pay annual income taxes. Taxpayers can choose to claim either a standard tax return deduction or itemize their qualifying deductions line by line. Either…
What is Founders Stock? Founders stock refers to the equity that is given to the early founders of an organization. This type of stock differs in a few important ways from common stock sold in the secondary market. Key differences are (1) that founders stock can only be issued at face value, and (2) it…
How to Calculate FCFE from EBIT? Free Cash Flow to Equity (FCFE) is the amount of cash generated by a company that can be potentially distributed to its shareholders. FCFE is a crucial metric in one of the methods in the Discounted Cash Flow (DCF) valuation model. Using the FCFE, an analyst can determine the…
What is a Syndicated Loan? A syndicated loan is offered by a group of lenders who work together to provide credit to a large borrower. The borrower can be a corporation, an individual project, or a government. Each lender in the syndicate contributes part of the loan amount, and they all share in the lending…
What is Seller’s Discretionary Earnings? Seller’s discretionary earnings is a cash-flow based measure of business earnings in an owner-operated business. It comprises the profit before tax and interest of a business before the owner’s benefits, non-cash expenses, extraordinary one-time investments, and other non-related business incomes and expenses. This metric is used to measure the value…
What is a Cross Guarantee? A cross guarantee refers to an arrangement between two or more related companies to provide a guarantee to each other’s obligations. Such a guarantee is commonly made among companies trading under the same group or between a parent company and its subsidiaries. A cross guarantee protects the company that incurred…
