How Do Dilutive Securities Impact Share Prices? Dilution can be caused due to a number of dilutive securities such as stock options, restricted and performance stock units, preferred stock, warrants, and convertible debt. Dilution may cause the share price to decline because it reduces the company’s earnings per share (EPS). The extent of the decline…
What are Real Options? Real options are a right but not an obligation to make a business decision. The concept of a real option is crucial to the success of a business as the ability to choose the right business opportunity bears a significant effect on the company’s profitability and growth. A real option allows…
What is a Tear Sheet? In the world of finance, a tear sheet provides a one-page summary of the company with information such as Market Price, 52-week High and Low, Market Capitalization, Enterprise Value, Analyst Recommendation, Revenue, EBITDA, Valuation, Workforce Size, Share Price Movement, etc. Tear sheets are also known as “Fact Sheets” and help…
What are Trading Multiples? Trading Multiples are a type of financial metrics used in the valuation of a company. When valuing a company, everyone relies on the most popular method of valuation, i.e. Discounted Cash Flow (DCF), but it becomes imperative for buyers and bankers to look how the market perceives a particular stock in…
What are Transaction Multiples? Transaction Multiples are a type of financial metrics used to value a company. In an M&A deal, the valuation of a particular company is done by various methods, including discounted cash flow and multiples. Among the different methods, Transaction Multiples play a very different role, as they make the buyer aware…
What is the Price/Earnings to Growth (PEG) Ratio? The PEG ratio is a company’s Price/Earnings ratio divided by its earnings growth rate over a period of time (typically the next 1-3 years). The PEG ratio adjusts the traditional P/E ratio by taking into account the growth rate in earnings per share that are expected in…
Term Sheet Overview A term sheet is a written document the parties exchange containing the important terms and conditions of the deal. The document summarizes the main points of the deal agreements and sorts out the differences before actually executing the legal agreements and starting off with the time-consuming due diligence. The term sheet is…
What is Net Identifiable Assets? Net Identifiable Assets (NIA) consists of the assets acquired from a company whose value can be measured at a given point of time and its future benefit to the company is recognizable. NIA is used for Purchase Price Allocation (PPA) and the calculation of Goodwill in Mergers and Acquisitions (M&A)….
What is Startup Valuation All About? Like any industry, internet companies have unique startup valuation metrics that analysts look at to value companies. In this guide, we will cover the most important e-commerce valuation metrics you should know. To learn more about how to build a financial model to value an e-commerce company, please check out…
