See there are 4 main words you should understand for a better clarity: 1. Justified - Think IV0 (Intrinsic Value) 2. Actual - Think P0 (Actual Price/Market Cap) 3. Trailing - Think E0 (Earnings over the last 12 months) 4. Leading - Think E1 (Earnings in the next 12 months) Now you can think of all tRead more
See there are 4 main words you should understand for a better clarity:
1. Justified – Think IV0 (Intrinsic Value)
2. Actual – Think P0 (Actual Price/Market Cap)
3. Trailing – Think E0 (Earnings over the last 12 months)
4. Leading – Think E1 (Earnings in the next 12 months)
Now you can think of all the combinations say Justified trailing P/E ratio= IVo/E0. You can calculate IV0 as D1/(Re – g) and divide it by E0 to get the ratio. You can also calculate Justified trailing P/E ratio directly using GGM :
Similarly you can think about the other formulas. If you understand it this way then you would never have to learn any formula. The purpose of using these formulas is for relative valuation i.e. if we have Justified trailing P/E, we can multiply it with E0 and get IV0.
Next coming to the concept of PVGO i.e. Present Value of Growth Opportunities:
Think as in this way:
Step 1: Value of a stock in case there is no dividend growth (i.e. Everything is retained i.e. D1=E1) = E1/Re
Step 2: Price of a stock = P0 (This considers growth)
If we write it in terms of P/E ratio, we get, (i.e. Dividing both sides by E1)
P0/E1 = PVGO/E1 + 1/Re
Note: PVGO essentially helps investors determine the value that the market is assigning to the company’s future growth opportunities beyond its current assets. It’s a useful tool for evaluating whether a stock is overvalued or undervalued based on its growth potential.
Hope this helps! Do let me know if you have any other query. Thanks.
Hi, To get CFO, we deduct the working capital investment. Whereas, in EBITDA, we do not take the working capital changes into consideration. Therefore, EBITDA overestimates CFO when the working capital is increasing. Hope this helps!
Hi,
To get CFO, we deduct the working capital investment. Whereas, in EBITDA, we do not take the working capital changes into consideration. Therefore, EBITDA overestimates CFO when the working capital is increasing. Hope this helps!
But we have to select the Option which conflicts the code and standards. So the answer is Option C, which means we have to disclose personal investment policies to the clients.
But we have to select the Option which conflicts the code and standards. So the answer is Option C, which means we have to disclose personal investment policies to the clients.
Ohh okay! Got it! So we can think of this in two different ways - One as per the solution given by the institute and the other reason which you have given. Thank you! Understood!
Ohh okay! Got it! So we can think of this in two different ways – One as per the solution given by the institute and the other reason which you have given. Thank you! Understood!
In the statement, if you read carefully, it is saying that earnings (ie in Income Statement) would be benefitted as a result of increase in interest rates. It is not talking about whether Asset value will increase or decrease. Hope this helps!
In the statement, if you read carefully, it is saying that earnings (ie in Income Statement) would be benefitted as a result of increase in interest rates. It is not talking about whether Asset value will increase or decrease. Hope this helps!
In this case, Carrying Value of the financial asset = 76 million, while recoverable amount is only 70 million. Therefore, we can say that the Goodwill amount is of 6 million, but the actual goodwill amount in the books is carried at 2 million. Therefore, it means goodwill has been impaired by 6 - 2Read more
In this case, Carrying Value of the financial asset = 76 million, while recoverable amount is only 70 million. Therefore, we can say that the Goodwill amount is of 6 million, but the actual goodwill amount in the books is carried at 2 million. Therefore, it means goodwill has been impaired by 6 – 2 = 4 million. Hope this helps!
First stage of DDM
Can you please share the screenshot of the question? I guess you missed it. Thanks
Can you please share the screenshot of the question? I guess you missed it. Thanks
See lessjustified trailing and leading pe ratio
See there are 4 main words you should understand for a better clarity: 1. Justified - Think IV0 (Intrinsic Value) 2. Actual - Think P0 (Actual Price/Market Cap) 3. Trailing - Think E0 (Earnings over the last 12 months) 4. Leading - Think E1 (Earnings in the next 12 months) Now you can think of all tRead more
See there are 4 main words you should understand for a better clarity:
1. Justified – Think IV0 (Intrinsic Value)
2. Actual – Think P0 (Actual Price/Market Cap)
3. Trailing – Think E0 (Earnings over the last 12 months)
4. Leading – Think E1 (Earnings in the next 12 months)
Now you can think of all the combinations say Justified trailing P/E ratio= IVo/E0. You can calculate IV0 as D1/(Re – g) and divide it by E0 to get the ratio. You can also calculate Justified trailing P/E ratio directly using GGM :
IV0 = D1(Re – g)
implies IV0 = [E0 * (1+g) * Dividend Payout ratio] / (Re – g)
implies IV0/E0 = [(1+g) * Dividend Payout ratio] / (Re – g)
Similarly you can think about the other formulas. If you understand it this way then you would never have to learn any formula. The purpose of using these formulas is for relative valuation i.e. if we have Justified trailing P/E, we can multiply it with E0 and get IV0.
Next coming to the concept of PVGO i.e. Present Value of Growth Opportunities:
Think as in this way:
Step 1: Value of a stock in case there is no dividend growth (i.e. Everything is retained i.e. D1=E1) = E1/Re
Step 2: Price of a stock = P0 (This considers growth)
Step 3: PVGO = Step 2 – Step 1
= P0 – E1/Re
Therefore, P0 = PVGO + E1/Re
If we write it in terms of P/E ratio, we get, (i.e. Dividing both sides by E1)
P0/E1 = PVGO/E1 + 1/Re
Note: PVGO essentially helps investors determine the value that the market is assigning to the company’s future growth opportunities beyond its current assets. It’s a useful tool for evaluating whether a stock is overvalued or undervalued based on its growth potential.
Hope this helps! Do let me know if you have any other query. Thanks.
See lesssir please explain this
Hi, To get CFO, we deduct the working capital investment. Whereas, in EBITDA, we do not take the working capital changes into consideration. Therefore, EBITDA overestimates CFO when the working capital is increasing. Hope this helps!
Hi,
To get CFO, we deduct the working capital investment. Whereas, in EBITDA, we do not take the working capital changes into consideration. Therefore, EBITDA overestimates CFO when the working capital is increasing. Hope this helps!
See lessEthics – Standards
Q3
Q3
See lessCredit Analysis Models
Got it! Thank you!
Got it! Thank you!
See lessCurrency Exchange Rates
Thank you! Understood!
Thank you! Understood!
See lessEthics – Standards of practice handbook
But we have to select the Option which conflicts the code and standards. So the answer is Option C, which means we have to disclose personal investment policies to the clients.
But we have to select the Option which conflicts the code and standards. So the answer is Option C, which means we have to disclose personal investment policies to the clients.
See lessEconomics and Investment Markets
Ohh okay! Got it! So we can think of this in two different ways - One as per the solution given by the institute and the other reason which you have given. Thank you! Understood!
Ohh okay! Got it! So we can think of this in two different ways – One as per the solution given by the institute and the other reason which you have given. Thank you! Understood!
See lessAnalysis of Financial Institutions (CAMELS model)
In the statement, if you read carefully, it is saying that earnings (ie in Income Statement) would be benefitted as a result of increase in interest rates. It is not talking about whether Asset value will increase or decrease. Hope this helps!
In the statement, if you read carefully, it is saying that earnings (ie in Income Statement) would be benefitted as a result of increase in interest rates. It is not talking about whether Asset value will increase or decrease. Hope this helps!
See lessGoodwill impairment amount
In this case, Carrying Value of the financial asset = 76 million, while recoverable amount is only 70 million. Therefore, we can say that the Goodwill amount is of 6 million, but the actual goodwill amount in the books is carried at 2 million. Therefore, it means goodwill has been impaired by 6 - 2Read more
In this case, Carrying Value of the financial asset = 76 million, while recoverable amount is only 70 million. Therefore, we can say that the Goodwill amount is of 6 million, but the actual goodwill amount in the books is carried at 2 million. Therefore, it means goodwill has been impaired by 6 – 2 = 4 million. Hope this helps!
See less