What is Normalized EPS? Normalized EPS refers to adjustments made to the income statement to reflect cycles of the economy, as well as adjustments that include removing unusual or one-time expenses that do not reflect the usual operations of the company. Normalized EPS is intended to present an accurate picture of the company’s actual financial…
What are Fully Diluted Shares? Fully diluted shares outstanding is the total number of shares a company would theoretically have if all dilutive securities were exercised and converted into shares. Dilutive securities include options, warrants, convertible debt, and anything else that can be converted into shares. For a financial analyst, it is important to have…
Debt Capacity Model Template This Debt Capacity Model Template will help you assess the debt capacity based on various credit metrics and current earnings. Here is a screenshot of the debt capacity model template: Download CFI’s Free Debt Capacity Model Template Click the button below to download our free Debt Capacity Model template! What is…
What is Standard Deviation? From a statistics standpoint, the standard deviation of a dataset is a measure of the magnitude of deviations between the values of the observations contained in the dataset. From a financial standpoint, the standard deviation can help investors quantify how risky an investment is and determine their minimum required return on the…
Basic Statistics Concepts for Finance A solid understanding of statistics is crucially important in helping us better understand finance. Moreover, statistics concepts can help investors monitor the performance of their investment portfolios, make better investment decisions, and understand market trends. Arithmetic Mean The mean return on investment of a portfolio is an arithmetic average of…
What is Multiple Expansion? Multiple expansion is a form of arbitrage that employs the purchase of a security at a lower valuation multiple and selling a security at a higher valuation multiple. Generally, companies with lower valuation multiples are smaller and with higher investment risk compared to companies with higher valuation multiples. In addition, the…
Financial Projection Template Our financial projection template will help you forecast future revenues and expenses by building up from payroll schedules, operating expenses schedules, and sales forecast to the three financial statements. Below is a screenshot of the financial projection template: Download the Free Financial Projection Template Click the button below to download our free…
Ethical vs. Legal Standards in Finance: What’s the Difference? Ethical vs. legal standards: what’s the difference? Making decisions that are both ethical and respectful of laws is something that investment professionals around the world are constantly mindful of. Such decisions stem from knowledge of the legal system, having the interests of all parties at heart…
What is the Q Ratio? The Q Ratio, or Tobin’s Q Ratio, is a ratio between a physical asset’s market value and its replacement value. The ratio was developed by James Tobin, a Nobel laureate in economics. Tobin suggested a hypothesis that the combined market value of all companies on the stock market should be…
What is Free Cash Flow to Equity (FCFE)? Free cash flow to equity (FCFE) is the amount of cash a business generates that is available to be potentially distributed to shareholders. It is calculated as Cash from Operations less Capital Expenditures plus net debt issued. This guide will provide a detailed explanation of why it’s…
