Comparable Companies Analysis

Question 1

Measures the dividend payment that a company’s shareholders receive for each share owned

Answer 1

Dividend Yield

Question 2

the amount of debt used to finance assets *the company’s overall debt level”

Answer 2

Leverage

Question 3

Ability to make interest payments

Answer 3

Coverage

Question 4

what are the primary independent credit rating agencies that provide formal assessments of a company’s credit profile?

Answer 4

Moody’s Investors Services (Moody’s)
Standard & Poor’s (S&P)
Fitch ratings (Fitch)

Question 5

What are the five steps in the ‘Summary of Comparable Companies Analysis’?

Answer 5

1. ) Select the Universe of Comparable Companies
2. ) Locate the Necessary Financial Information
3. ) Spread Key Statistics, Ratios, and Trading Multiples
4. ) Benchmark the Comparable Companies
5. ) Determine Valuation

Question 6

When is an option considered “in-the-money”?

Answer 6

When the underlying company’s share price surpasses the option’s exercise price

Question 7

What is a security typically issued in conjunction with a debt instrument that entitles the purchaser fo that instrument to buy shares of the issuer’s common stock at a set price during a given time period?

Answer 7

A warrant

Question 8

Why are in-the-money options and warrants important for valuation?

Answer 8

In-the-money- options and warrants have an exercise price lower than the current market price or the underlying company’s stock.

Question 9

When considering a company’s income statement, why is SG&A important?

Answer 9

It is a major non-production cost presented

Question 10

What is a credit rating

Answer 10

an assessment by an independent rating agency of a company’s ability and willingness to make full and timely payments of amounts due on its debt obligations