Balance Sheet Taxes and Pensions As a financial analyst, it’s important to gain a solid understanding of how taxes and pensions are accounted for on a company’s balance sheet. This guide will walk you through how to account for pensions and taxes as an analyst would in investment banking, private equity, or equity research. Considerations...
Introduction to Financial Risk In investing, financial risk is the variability of the actual return generated by an investment relative to what the investor expected. As an example, financial risk is represented by a stock that is expected to return 5% but instead only returns 2%. Only risk-free assets give returns perfectly equal to expected...
Cost of Debt and WACC The cost of debt is the return that a company provides to its debtholders and creditors. When debtholders invest in a company, they are entering an agreement wherein they are paid periodically or on a fixed schedule. Bond agreements or indentures set up the schedule, the maturity date, call options...
Adjustments to Comps – Special Situations A target company or comparable often faces special situations. In such cases, adjustments need to be made to certain metrics and/or the equity or enterprise value. Adjustments to comps are often required for a variety of different reasons. Major adjustments are necessary if there are major inconsistencies, as enumerated below....
Why use Comparable Trading Multiples (Comps)? Analyzing comparable trading multiples (Comps) involves analyzing companies with similar operating, financial, and ownership profiles to provide a useful understanding of: Operating and financial statistics about an industry group (growth rates, margin trends, capital spending requirements, etc.). It is especially helpful in making assumptions for a discounted cash flow analysis....
