Valuation and Discounting
Models
🙂Valuation. 🙂
Some Basic Terminologies to be known before
Face value / Par value refers to the nominal value assigned to a financial
instrument, at the time of issuance. It's the value stated on the face of the
instrument.
Bonds : the amount that the issuer agrees to repay to the bondholder at
maturity.
Stocks : a nominal amount assigned to the stock when it's issued, although it's
not as commonly used or relevant as it once was.
Market Value refers to the price at which stock is trading in the market.
Book value refers to the TOTAL EQUITY value present in the book(balance
Sheet).
Here, total equity is the sum of equity share capital and other equities.
💡 Total Equity in Balance Sheet = Net worth of company = Equity share
capital + Other equities = Book Value.
Previously, Other equities was called as reserves and surplus.
Valuation and Discounting Models 1
, [ Market Capitalization = No of Shares * Market price per share ]
Multiples refer to financial metrics that are used to compare the value of a
company's stock to some measure of its performance or financial position.
These metrics are called multiples because they involve dividing the stock
price by a specific financial metric.
Example: P/E ratio, P/B ratio, etc.
Usually, Cash is a Financial Asset/ Non-Operating Asset (Since the one which
is used in day-to-day tasks is almost negligible hence in overall view cash is
long term usage and hence treated as a asset for long-term).
Minority/Non-Controllable Interest: It is the percentage of stake of outsiders in
the subsidiary.
Example: A has 85% of company B. Asset of A = 100 & Asset of B = 100.
Then total asset of A = 100 + 100 = 200 (But not full 200 instead only 85% of
B’s asset so remaining 15% is the minority/non-controllable interest that A has
for its subsidiary).
Subsidiary means the child and here A is parent and B is its subsidiary/child
company.
Depreciation is a OPERATING Expense (although a NON-CASH Expense).
SG&A, or Selling, General, and Administrative expenses, refers to the costs
incurred by a company to support its sales, marketing, general operations, and
administrative functions.
Valuation and Discounting Models 2
Models
🙂Valuation. 🙂
Some Basic Terminologies to be known before
Face value / Par value refers to the nominal value assigned to a financial
instrument, at the time of issuance. It's the value stated on the face of the
instrument.
Bonds : the amount that the issuer agrees to repay to the bondholder at
maturity.
Stocks : a nominal amount assigned to the stock when it's issued, although it's
not as commonly used or relevant as it once was.
Market Value refers to the price at which stock is trading in the market.
Book value refers to the TOTAL EQUITY value present in the book(balance
Sheet).
Here, total equity is the sum of equity share capital and other equities.
💡 Total Equity in Balance Sheet = Net worth of company = Equity share
capital + Other equities = Book Value.
Previously, Other equities was called as reserves and surplus.
Valuation and Discounting Models 1
, [ Market Capitalization = No of Shares * Market price per share ]
Multiples refer to financial metrics that are used to compare the value of a
company's stock to some measure of its performance or financial position.
These metrics are called multiples because they involve dividing the stock
price by a specific financial metric.
Example: P/E ratio, P/B ratio, etc.
Usually, Cash is a Financial Asset/ Non-Operating Asset (Since the one which
is used in day-to-day tasks is almost negligible hence in overall view cash is
long term usage and hence treated as a asset for long-term).
Minority/Non-Controllable Interest: It is the percentage of stake of outsiders in
the subsidiary.
Example: A has 85% of company B. Asset of A = 100 & Asset of B = 100.
Then total asset of A = 100 + 100 = 200 (But not full 200 instead only 85% of
B’s asset so remaining 15% is the minority/non-controllable interest that A has
for its subsidiary).
Subsidiary means the child and here A is parent and B is its subsidiary/child
company.
Depreciation is a OPERATING Expense (although a NON-CASH Expense).
SG&A, or Selling, General, and Administrative expenses, refers to the costs
incurred by a company to support its sales, marketing, general operations, and
administrative functions.
Valuation and Discounting Models 2
