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Residual Income Valuation
Residual income valuation (RIV; also, residual income ''model'' and residual income ''method'', RIM) is an approach to equity valuation that formally accounts for the cost of equity capital. Here, "residual" means in excess of any opportunity costs measured relative to the book value of shareholders' equity; residual income (RI) is then the income generated by a firm after accounting for the true cost of capital. The approach is largely analogous to the EVA/ MVA based approach, with similar logic and advantages. Residual Income valuation has its origins in Edwards & Bell (1961), Peasnell (1982), and Ohlson (1995). Concept The underlying idea is that investors require a rate of return from their resources – i.e. equity – under the control of the firm's management, compensating them for their opportunity cost and accounting for the level of risk resulting. This rate of return is the cost of equity, and a formal equity cost must be subtracted from net income. Consequently, to ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Equity Valuation
In financial markets, stock valuation is the method of calculating theoretical values of companies and their stocks. The main use of these methods is to predict future market prices, or more generally, potential market prices, and thus to profit from price movement – stocks that are judged '' undervalued'' (with respect to their theoretical value) are bought, while stocks that are judged ''overvalued'' are sold, in the expectation that undervalued stocks will overall rise in value, while overvalued stocks will generally decrease in value. In the view of fundamental analysis, stock valuation based on fundamentals aims to give an estimate of the intrinsic value of a stock, based on predictions of the future cash flows and profitability of the business. Fundamental analysis may be replaced or augmented by market criteria – what the market will pay for the stock, disregarding intrinsic value. These can be combined as "predictions of future cash flows/profits (fundamental)", togethe ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Book Value
In accounting, book value is the value of an asset according to its balance sheet account balance. For assets, the value is based on the original cost of the asset less any depreciation, amortization or impairment costs made against the asset. Traditionally, a company's book value is its minus intangible assets and liabilities. However, in practice, depending on the source of the calculation, book value may variably include goodwill, intangible assets, or both.Graham and Dodd's ''Security Analysis'', Fifth Edition, pp 318 – 319 The value inherent in its workforce, part of the intellectual capital of a company, is always ignored. When intangible assets and goodwill are explicitly excluded, the metric is often specified to be ''tangible book value''. In the United Kingdom, the term net asset value may refer to the book value of a company. Asset book value An asset's initial book value is its actual cash value or its acquisition cost. Cash assets are recorded or "booked" at ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Contemporary Accounting Research
''Contemporary Accounting Research'' is a peer-reviewed academic journal covering research on all aspects of accounting's role within organizations, markets, or society. The journal publishes articles in all areas of accounting, (including audit, financial, information systems, and tax), using relevant methods (including analytical, archival, case study, empirical, experimental, or field); based on economics, finance, history, psychology, sociology, or any cognate disciplines. ''Contemporary Accounting Research'' is published by Wiley on behalf of the Canadian Academic Accounting Association. The editor-in-chief is Alan Webb (University of Waterloo). The journal is listed as one of the 45 journals used by the ''Financial Times'' to compile its business-school research ranks. According to the ''Journal Citation Reports'', the journal has a 2019 impact factor The impact factor (IF) or journal impact factor (JIF) of an academic journal is a scientometric index calculated by Cla ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
University Of California Press
The University of California Press, otherwise known as UC Press, is a publishing house associated with the University of California that engages in academic publishing. It was founded in 1893 to publish scholarly and scientific works by faculty of the University of California, established 25 years earlier in 1868, and has been officially headquartered at the university's flagship campus in Berkeley, California, since its inception. As the non-profit publishing arm of the University of California system, the UC Press is fully subsidized by the university and the State of California. A third of its authors are faculty members of the university. The press publishes over 250 new books and almost four dozen multi-issue journals annually, in the humanities, social sciences, and natural sciences, and maintains approximately 4,000 book titles in print. It is also the digital publisher of Collabra and Luminos open access (OA) initiatives. The University of California Press publishes ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Valuation (finance)
In finance, valuation is the process of determining the present value (PV) of an asset. In a business context, it is often the hypothetical price that a third party would pay for a given asset. Valuations can be done on assets (for example, investments in marketable securities such as companies' shares and related rights, business enterprises, or intangible assets such as patents, data and trademarks) or on liabilities (e.g., bonds issued by a company). Valuations are needed for many reasons such as investment analysis, capital budgeting, merger and acquisition transactions, financial reporting, taxable events to determine the proper tax liability. Valuation overview Common terms for the value of an asset or liability are market value, fair value, and intrinsic value. The meanings of these terms differ. For instance, when an analyst believes a stock's intrinsic value is greater (or less) than its market price, an analyst makes a "buy" (or "sell") recommendation. Moreove ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Enterprise Value
Enterprise value (EV), total enterprise value (TEV), or firm value (FV) is an economic measure reflecting the market value of a business (i.e. as distinct from market price). It is a sum of claims by all claimants: creditors (secured and unsecured) and shareholders (preferred and common). Enterprise value is one of the fundamental metrics used in business valuation, financial analysis, accounting, portfolio analysis, and risk analysis. Enterprise value is more comprehensive than market capitalization, which only reflects common equity. Importantly, EV reflects the opportunistic nature of business and may change substantially over time because of both external and internal conditions. Therefore, financial analysts often use a comfortable range of EV in their calculations. EV equation For detailed information on the valuation process see Valuation (finance). : Enterprise value = :: common equity at market value (this line item is also known as "market cap") :: + debt at market v ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
NOPAT
In corporate finance, net operating profit after tax (NOPAT) is a company's after-tax operating profit for all investors, including shareholders and debt holders.Moneyterms.co.ukNOPAT/ref> NOPAT is used by analysts and investors as a precise and accurate measurement of profitability to compare a company's financial results across its history and against competitors. When calculating NOPAT, one removes Interest Expense and the effects of other non-operating activities (non-recurring gains and losses) from Net Income to arrive at a value that approximates the value of a firm's annual earnings. NOPAT is precisely calculated as: NOPAT = (Net Income - after-tax Non-operating Gains + after-tax Non-operating Losses + after-tax Interest Expense) NOPAT doesn’t include one-time losses and other non-recurring charges because they don’t represent the true, ongoing profitability of the business. For example, a company may incur acquisition costs that would not be expected to occur in t ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Stern Stewart & Co
The stern is the back or aft-most part of a ship or boat, technically defined as the area built up over the sternpost, extending upwards from the counter rail to the taffrail. The stern lies opposite the bow, the foremost part of a ship. Originally, the term only referred to the aft port section of the ship, but eventually came to refer to the entire back of a vessel. The stern end of a ship is indicated with a white navigation light at night. Sterns on European and American wooden sailing ships began with two principal forms: the ''square'' or ''transom'' stern and the ''elliptical'', ''fantail'', or ''merchant'' stern, and were developed in that order. The hull sections of a sailing ship located before the stern were composed of a series of U-shaped rib-like frames set in a sloped or "cant" arrangement, with the last frame before the stern being called the ''fashion timber(s)'' or ''fashion piece(s)'', so called for "fashioning" the after part of the ship. This frame is de ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Weighted Average Cost Of Capital
The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. The WACC is commonly referred to as the firm's cost of capital. Importantly, it is dictated by the external market and not by management. The WACC represents the minimum return that a company must earn on an existing asset base to satisfy its creditors, owners, and other providers of capital, or they will invest elsewhere.Fernandes, Nuno. 2014, Finance for Executives: A Practical Guide for Managers, p. 32. Companies raise money from a number of sources: common stock, preferred stock and related rights, straight debt, convertible debt, exchangeable debt, employee stock options, pension liabilities, executive stock options, governmental subsidies, and so on. Different securities, which represent different sources of finance, are expected to generate different returns. The WACC is calculated taking into account the relative weights o ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Dividend Discount Model
In finance and investing, the dividend discount model (DDM) is a method of valuing the price of a company's stock based on the fact that its stock is worth the sum of all of its future dividend payments, discounted back to their present value. In other words, DDM is used to value stocks based on the net present value of the future dividends. The constant-growth form of the DDM is sometimes referred to as the Gordon growth model (GGM), after Myron J. Gordon of the Massachusetts Institute of Technology, the University of Rochester, and the University of Toronto, who published it along with Eli Shapiro in 1956 and made reference to it in 1959. Their work borrowed heavily from the theoretical and mathematical ideas found in John Burr Williams 1938 book "The Theory of Investment Value," which put forth the dividend discount model 18 years before Gordon and Shapiro. When dividends are assumed to grow at a constant rate, the variables are: P is the current stock price. g is the constant gr ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Terminal Value (finance)
In finance, the terminal value (also known as “continuing value” or “horizon value” or "TV") of a security is the present value ''at a future point in time'' of all future cash flows when we expect stable growth rate forever. It is most often used in multi-stage discounted cash flow analysis, and allows for the limitation of cash flow projections to a several-year period; see Forecast period (finance). Forecasting results beyond such a period is impractical and exposes such projections to a variety of risks limiting their validity, primarily the great uncertainty involved in predicting industry and macroeconomic conditions beyond a few years. Thus, the terminal value allows for the inclusion of the value of future cash flows occurring beyond a several-year projection period while satisfactorily mitigating many of the problems of valuing such cash flows. The terminal value is calculated in accordance with a stream of projected future free cash flows in discounted cash flow ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
