What is Pairs Trading? Pairs trading is a strategic trading option that is used to generate profits regardless of market direction. Traders utilizing the pairs strategy determine two securities that: Share similar characteristics and have a high positive correlation Are trading at a price that is contradictory to their historical trading prices One of the…
What is Lifetime Value Calculation? Lifetime Value Calculation is the process by which a business measures the value of a customer to the business through the customer’s full lifespan. Customer Lifetime Value or LTV is one of the metrics used to measure the growth of a company. By comparing the LTV of a…
What is the Debt Free Cash Free Valuation Method? Debt Free Cash Free (DFCF) Valuation method values a business under the assumption that the business has no debt (debt free) and no excess cash (cash free). In some sense, the debt free cash free valuation method ignores the target company’s financial components (debt and cash…
What is Employee Retention? Employee retention refers to the efforts on the part of an employer aimed at creating an environment that supports the needs of current employees so that they can continue to be part of an organization. Most employee retention programs and policies are aimed at addressing different employee needs to enhance their…
What is Free Cash Flow Yield? Free cash flow yield is important for any business, large or small, because it acts as a good metric for cash flow in comparison to the company’s size. Cash flow is always an important metric for a company, as it shows – primarily to investors – its operating performance….
What is Sum Of The Parts (SOTP) Valuation? Sum Of The Parts (SOTP) valuation is an approach to valuing a firm by separately assessing the value of each business segment or subsidiary and adding them up to get the total value of the firm. It can be used in conjunction with various valuation techniques such…
What are Relative Valuation Models? Relative valuation models are used to value companies by comparing them to other businesses based on certain metrics such as EV/Revenue, EV/EBITDA, and P/E ratios. The logic is that if similar companies are worth 10x earnings, then the company that’s being valued should also be worth 10x its earnings. This…
Dividend Payout Ratio Template This Dividend Payout Ratio Template will show you how to calculate the dividend payout ratio using the formula: DPR = Total dividends / Net income. Here is a preview of the template: Download the Free Template What is Dividend Payout Ratio (DPR)? The Dividend Payout Ratio (DPR) is the amount of…
Acid Test Ratio Template This Acid Test Ratio Template will show you how to calculate the acid test ratio the formula: (Current Assets – Inventory) / Current Liabilities. Here is a preview of the template: Download the Free Template What is the Acid-Test Ratio? The Acid-Test Ratio, also known as the quick ratio, is a…
