Why is Minority Interest added to Enterprise Value? When a company owns more than 50% (but less than 100%) of a subsidiary, the company records all 100% of the subsidiary’s revenue, costs, and other income statement items, even though the company doesn’t own 100% of the subsidiary. Therefore, when you look at a company’s EV/EBITDA…
What is the Crossover Rate? Crossover Rate is the rate of return (alternatively called the weighted average cost of capital) at which the Net Present Values (NPV) of two projects are equal. It represents the rate of return at which the net present value profile of one project intersects the net present value profile of…
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…
