Company Analysis: Past and Present Flashcards
What is a “company research report”?
A document that presents an analyst’s investment recommendation on an issuer and its securities, supported by financial modeling, industry overviews, and competitive analysis, valuation scenarios, ESG considerations, and investment risks.
What are “Drivers” ?
Causative factors that explain the level of changes in an output variable.
What is “Cannibalization” ?
A transfer of sales or market share from one product to another product owned by the same company.
It tends to occur when the two products are actual or perceived substitutes.
What is a “Low Cost Producer”?
A firm with lower production costs than its industry competitors.
What is “Commoditization” ?
A process by which competing products become less differentiated over time and become interchangeable “commodities”.
What is a “Market Size”?
Total sales for a good or service, which can be calculated on a global or more regional basis.
What is market share?
A company’s or product’s revenue expressed as a percentage of its market size.
What is contribution margin?
A profitability measure using variable costs: unit price - unit variable cost.
What is “Degree of Operating Leverage” ?
The ratio of percentage change in operating income to percentage change in sales over a period.
It is the measure of how sensitive operating income is to changes in sales, driven by the fixed and variable cost composition of operating expenses.
What are “economies of scale” ?
A decline in cost / unit as output grows. This generally results from having fixed costs in the cost structure that are spread over more units of output.
What is “Economies of Scope”?
A decline in costs / unit as the number of product or business lines increases, generally resulting from having shared costs between product lines.
What is “degree of financial leverage”?
The ratio of percentage change in net income to percentage change in operating income over a period.
It is a measure of how sensitive net income is to changes in operating income, driven by a firm’s use of debt in its capital structure.
