What is the Market Cap to GDP Ratio? The Market Cap to GDP Ratio (also known as the Buffett Indicator) is a measure of the total value of all publicly-traded stocks in a country, divided by that country’s Gross Domestic Product (GDP). It used as a broad way of assessing whether the country’s stock market…
Prevent Burnout and Improve Workplace Wellness by Practicing Mindfulness There is no doubt—the financial services sector is risking a youth brain drain. And it is only getting worse. With constantly changing markets, new product offerings, and economic uncertainty, the demand for higher productivity without sustainable development comes at a cost. As the pandemic blurs the…
What is a Confidential Information Memorandum (CIM)? A Confidential Information Memorandum (CIM) is a document used in mergers and acquisitions to convey important information about a business that’s for sale including its operations, financial statements, management team, and other data to a prospective buyer. This guide will break down all the various sections that are included in most CIMs…
What is Adjusted Present Value (APV)? Adjusted Present Value (APV) is used for the valuation of projects and companies. It takes the net present value (NPV), plus the present value of debt financing costs, which include interest tax shields, costs of debt issuance, costs of financial distress, financial subsidies, etc. So why do we use Adjusted Present…
Download CFI’s Income Statement Template Please download CFI’s free income statement template to develop your own profit and loss statement for a business or to analyze another company. After you have downloaded the Excel file, you can enter your own numbers in cells with blue font color which will auto-populate an annual or monthly statement…
What are Valuation Multiples? Valuation multiples are financial measurement tools that evaluate one financial metric as a ratio of another, in order to make different companies more comparable. Multiples are the proportion of one financial metric (i.e. Share Price) to another financial metric (i.e. Earnings per Share). It is an easy way to compute a company’s…
What is Present Value of Growth Opportunities? Present Value of Growth Opportunities (PVGO) is a concept that gives analysts a different approach to equity valuation. Considering that valuation in stock markets is a combination of fundamentals and expectations, we can break down the value of a stock to the sum of (1) its value assuming…
What is Comparable Company Analysis? Comparable company analysis (or “comps” for short) is a valuation methodology that looks at ratios of similar public companies and uses them to derive the value of another business. Comps is a relative form of valuation, unlike a discounted cash flow (DCF) analysis, which is an intrinsic form of valuation….
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….
