Comprehensive Guide to Financial Statement Analysis / Ratio Analysis

This is the most comprehensive guide to Ratio Analysis / Financial Statement Analysis This expert-written guide goes beyond the usual gibberish and explore practical Financial Statement Analysis as used by Investment Bankers and Equity Research Analysts. Here I have taken Colgate case study and calculated Ratios in excel from scratch. Please note that this Ratio Analysis guide is over 9000…

Nuts & Bolts of FCFE – Free Cash Flow to Equity

FCFE or Free Cash Flow to Equity model is one of the Discounted Cash Flow approaches (along with FCFF) to calculate the Fair Price of the Stock. FCFE measure how much “cash” a firm can return to its shareholders and is calculated after taking care of the taxes, capital expenditure and debt cash flows. In addition, FCFE model…

Sensitivity Analysis in Excel with Finance Examples

Sensitivity analysis helps us study the uncertainty in the output of the model with the changes in the input variables. It primarily does stress testing of our modeled assumptions and leads to value added insights. In the context of DCF valuation, Sensitivity Analysis in excel is especially useful in finance for modeling share price or valuation sensitivity to assumptions like…

Dividend Discount Model – Complete Beginner’s Guide

Dividend Discount Model – It is a way of valuing a company based on the theory that a stock is worth the discounted sum of all of its future dividend payments. In other words, it is used to evaluate stocks based on the net present value of the future dividends. Financial theory states that the value of a stock is the worth…

Treasury Stock Method – Complete Beginner’s Guide!

Employee Stock Options are complex call options granted by the companies as a part of the remuneration package. When stock options are exercised in large quantitites, it can have a significant impact on the total number of outstanding shares thereby diluting the EPS and negatively affecting the valuations of the firm. To comply with GAAP, the dilutive impact of…

Price to Book Value Ratio | Complete Guide

Price to Book Value Ratio is one of the most important ratios used for Relative Valuations. It is usually used along with other valuation tools like PE Ratio, PCF, EV/EBITDA etc. It is most applicable for identifying stock opportunities in Financial companies especially Banks. In this article, we discuss the nuts and bolts of Price to Book Value.…

Sum of the Parts – SOTP Valuation Complete Beginner’s Guide

SOTP or Sum of Parts Valuations technique is one of the most efficient technique to value a conglomerate with unrelated business segments. In this article, we look at what SOTP means and how it is used to value a conglomerate with practical examples. What is Sum of Parts or SOTP? Sum of Parts Simplified – Case Study…

Asset Backed Securities (RMBS, CMBS, CDOs)

Asset Backed Securities – Post the global financial crisis of 2008, there was a huge buzz about some sophisticated financial  securities known as CDOs, CMBS, & RMBS and how they played a big role in the build-up of the crisis. These securities are known as Asset backed Securities (ABS), an umbrella term used to refer…

Top 10 Best Excel Books

Top 10 Best Excel Books – In this age of internet, people rarely rely on books to find out the answers or learn a new skill or two. They have an internet connection and their best friend “Google” and every answer they need, they would get within a few seconds of wait. Sounds fascinating, isn’t…

CIPM vs FRM – Which to Choose For a Good Professional Future

CIPM vs FRM – Which to Choose For a Good Professional Future? – In this comparative we discuss the two certifications – CIPM and FRM. CIPM exam (offered by CFA Institute) mainly comprises of investment performance measurement and its attributes. On the other side is Financial Risk Manager (FRM) is offered by GARP, is all about Risk management. This article…

A Complete guide on Net operating Loss

Since our childhood we have been taught that the objective of financial management is to create value for the shareholders.  The definition of this value is different for different people. For some financial analyst, the benchmark is increase in Earnings per share (EPS) while others crave for increase in Market price per share (MPS).…

Top Stock Trading Books  – Stock Trading is often confused with investing and those barely acquainted with the stock market can have a hard time differentiating between them. In simple terms, investing is all about putting your money in stocks, bonds and other securities and just waiting for them to grow before one would think…

Credit Rating Process | A Complete Beginner’s Guide

Credit Rating Process – There are only two ways in which any company would fund its business – equity or debt. The equity portion of the capital structure could be derived broadly from three sources: Promoters investing in the business, Company’s internal cash flows accruing over the years to equity, or IPO (Initial Public Offering)/FPO (Follow-on-public offering) for…

Non-Recurring Items in Financial Statements

Non-Recurring Items – Financial statements are the report card of a company’s performance. They form the backbone upon which business acumen is based. For the outside world, these statements are a window through which one can interpret the health & wealth of a company. Let us look at the Income statement of Colgate below. In the…

Finance vs Marketing – Which is Better?

Finance vs Marketing – Which is Better? – Finance and Marketing, they are two domains of study that every business needs. Ask any business man and he will tell you that their primary departments are Finance and Marketing. In simple terms, marketing department takes responsibility for generating the revenue and finance department is responsible for transporting these…

FRM Salary

Financial Risk Manager (FRM) exam is a globally acknowledged designation awarded by Global Association of Risk Professionals (GARP) which equips professionals with financial risk assessment and risk management skills. The primary focus of FRM is on helping professionals become acquainted with the principles of managing market risk, credit risk and liquidity risk along with non-market…

CFA Level 2 Exam Weights, Study Plan, Tips, Pass Rates, Fees

CFA Level 2 Exam Weights, Study Plan, Tips, Pass Rates, Fees – If you’re looking at CFA level 2 exam prep tips, it can be assumed that you have already completed your CFA Level 1 course. First of all, congratulations and good luck for CFA Level 2! Now, let’s look at CFA Level 2 and attempt…