What is the Market Approach to Valuation? The market approach is a valuation method used to determine the appraisal value of a business, intangible asset, business ownership interest, or security by considering the market prices of comparable assets or businesses that have been sold recently or those that are still available. Price-related indicators like sales,…
What is Capitalization Rate (Cap Rate)? Capitalization rate (or Cap Rate for short) is commonly used in real estate and refers to the rate of return on a property based on the net operating income (NOI) that the property generates. In other words, the capitalization rate is a return metric that is used to determine…
Finance Test This Finance Test is designed to help you assess your knowledge of important finance concepts, terminology definitions, and frequently used calculations. We strongly encourage any students who are planning or are beginning their FMVA certification program to take this test to determine whether you will need to take the prerequisite finance courses including Reading…
About CFI’s Excel Test The Corporate Finance Institute (CFI) Excel Test consists of 20 free practice questions designed to help you assess your knowledge of basic Excel functions and formulas. Whether you’re preparing for a job interview, planning to start the FMVA® certification, or simply want to test your skills, this Excel assessment offers a…
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…
