What is Common Size Analysis? Common Size analysis is an accounting method used to measure each line item on the financial statements as a percentage of a base or common figure. For example, Revenue is often used as the base figure on the income statement. This means that all the line items such as cost… Continue reading
All three financial statements are connected although they appear and are represented independently. Investors need to understand how to link the income statement, balance sheet and cash flow statement together. By understanding the transactions and how one change flows through to other statements investors can gain greater insights into a company’s business model. With this… Continue reading
A Cash Flow Statement is the last of the three financial statements that records all the incoming and outgoing cash of the business. It connects the income statement and the balance sheet by showing how cash has flowed throughout the business. The Cash Flow Statement unlike the other statements is a record of the actual… Continue reading
A Balance Sheet is one of the fundamental financial statements of a company, also known as the “Statement of Financial Position”. It is comparable to the “Net Worth” of the business and represents a snapshot of the assets, liabilities, and shareholder’s equity at a particular point in time. The Balance Sheet is the most critical… Continue reading
Multiples Valuation Analysis is a relative valuation method using financial ratios such as the P/E ratio or the EV/EBITDA ratio. This approach values a company based on specific operating metrics, such as earnings or cash flow. It is also referred to as the market-based approach, as it suggests that similar companies should have comparable valuations… Continue reading
In this article, we will be using a powerful formula to determine the expected returns of an investment. I use this formula in combination with my preferred valuation method the reverse DCF model. TABLE OF CONTENTS: Although the formula is easy to apply to past data, it can be quite challenging to create a forward-looking… Continue reading
* When I first started investing, I just didn’t understand the concept behind the Multiple and how it contributed to returns (or losses) for a stock. This is not about the investing strategy you adopt such as buying undervalued companies based on P/E or buying growth companies based on P/S. This is just a simple… Continue reading
Stock valuation is the process of determining the intrinsic value of a business. This involves analysing the financial statements and understanding the business model, assets, liabilities, revenue, and other key quantitative and qualitative metrics. By doing so, we can assess whether an asset represents a viable investment opportunity or not. The underlying factor of stock… Continue reading
The Shareholder Yield Explained. The Shareholder Yield is a metric that measures how a company rewards its shareholders through three ways. Issuing dividends, conducting share buybacks, or reducing the company’s debt. This formula helps in evaluating how effectively a company distributes its resources, which ultimately benefits its shareholders. When analysing distributions, shareholders usually focus on… Continue reading
Terminal Value (TV) is a significant metric used by investors and finance professionals to determine the long-term value of a company. The Terminal Growth Rate is the estimated pace at which a company is expected to grow beyond the forecast period. TABLE OF CONTENTS: The Terminal Value explained. In valuation theory, a company’s value equals… Continue reading
