Big4WallStreet Finance Blog
Valuation Pitfalls
discount rates growth pitfall valuation
The difficulty of a valuation does not focus on how to find and apply any of the chosen methods, but rather on the ability to predict the future. In practice what is valued is the business model, the company strategy, the attraction of its products, its prospects and its risks.
Below we outline a series of pitfalls common among analysts and investors related to the valuation of a company.
Weighted Average Cost of Capital
Capital Asset Pricing Model capital structure CAPM Cost of Debt Cost of equity country risk premium CRP Leverage WACC Weighted average cost of capital
Valuation Methods: The Valuation Process
discounted cash flows fair value free cash flows to equity free cash flows to the firm going concern value intrinsic value investment value valuation
The Valuation Process Definitions of value Several value definitions serve as the foundation for the variety of valuation models available to the comparison of equity valuation methods, such as intrinsic value, going-concern value, liquidation value, and fair value. Intrinsic Value The intrinsic value of any asset is the value of the asset given a hypothetically complete understanding of the asset’s investment characteristics. The intrinsic value suggests that an asset’s market price is the best available estimate of its intrinsic value. Going-Concern Value and Liquidation Value In estimating value, a going- concern assumption is the assumption that the company will continue...
Why? Financial & Management Accounting
#financial accounting #financial management #financial modeling #management accounting
Financial accounting statements are prepared for the benefit of those outside the company.
WHY?
Are you profitable?
Do you collect your “net profit”?
What are you worth?
Do you collect your “net worth”?
Cost Volume Profit Analysis / Break Even Analysis (Part 2)
