Corporate Issuance Flashcards
What should you start with for financial modelling?
What is IFRS/GAAP disclosure requirements for segments?
How are segments usually disclosed by?
Describe the top-down approach of growth to GDP?
Describe the top-down approach of market share? What would bottum up and Hybrid be?
How should costs usually be modelled and how would it differ by TD or BU?
Describe economies of scale cost analysis for GM and OM?
What are the main cost drivers when forecasting COGS?
Explain cost-pass through vs Hedging?
Passing through means companies can adjust prices with cost, while hedging is when companies have inputs with variable prices may want to lock prices in.
How is SG&A usually modelled?
How are non-operating costs usually modelled?
Explain how statutory tax, effective tax and cash tax differ?
Cash and effective tax example?
How are dividends, minority interest, Share count and unusual costs modelled?
Working capital accounts modelling, top down vs bottom up?
How are non-current asset and capex modelled?
How is capital structure modelled and the difference between scenario and sensitivity analysis ?
Describe the steps that lead to a sales-based prop forma model and what drives each of cashflows (O,I,F)?
Explain the bias of Overconfidence and Illusion of control, how it manifests and how to mitigate?
Explain conservatism, Representativeness and Confirmation bias and to mitigate each?
What is porters 5 force model?
What are the main effects on cost projections of inflation?
Describe the effect of technology change on costs?
Describe how Investment strategy, cyclicality, company-specific and analysts employers preference influence choice of investment horizon?
What are the types of cash and non-cash dividends and what are regular cash dividends?
What is a DRIP and how would a company benefit from one?
What are the shareholder pros and cons of DRIPS?
What is an extra special dividend?
What are special dividends for?
What is a liquidating dividend and when is it used?
What is a stock dividend?
What are the advantages of stock dividends?
What are the effects on capital structure of stock vs cash dividend? What is a stock split? What is a reverse stock split?
Reverse Stock Splits/
increases the share price and reduces the # of
outstanding shares
- no affect on MV. or sh. total cost basis
Explain the dividend irrelevance theory?
Explain the dividend preference theory?
Explain the tax effect theory?
Describe dividend signals from increasing/decreasing dividends?
Agency costs: what is jensons FCF theory and if a company is highly leveraged a high payout policy can lead to what?
How does investment opportunities, expected volatility of future earnings and financial flexibility affect dividend policy?
How do tax considerations affect dividend policy?
How do floatation costs and contractual and legal restrictions affect dividend policy?
How does the double taxation and div impuation system work??
Explain a split rate tax system where tax on dividend different to retained earnings?
Explain stable and constant ratio dividend policies
What is a share repurchase and what are the two classifications?
What are the methods of share repurchase?
How do repurchases affect BS and IS depending on if it is with debt or cash?
Explain the effect on book value of share buy backs when Mp > Bp and when Mp<Bp?
Explain cash dividend vs repurchase with regard to tax advantages, share price support, added managerial flexibility and offsetting dilution from employee stock options
What is the catering theory of dividends and recent dividend trends?
What is the DPR, the DCR, what should these ratios be for mature companies, what would DCR<1 signal ?
What is the FCFE coverage ratio and what does >1 and =1 mean?
What are unstustainable policies in terms of DPR, DCR, FCFE C ratio?
What is a dispersed and concentrated ownership structure?
Describe structures of dispersed ownership and voting power and concentrated ownership and voting power?
Describe the reverse^^?
Describe the types of shareholders that have impact on corporate governance, banks, families and state owned enterprises?
State-owned enterprises (SOES) - tend to have lower
scrutiny of mgmt. (implicit/explicit gov’t. guarantee)
may pursue social/ public policy considerations at
the expense or maximizing shareholder value
Institutional shareholders, Group companies, PE firms, foreign investors, managers and board directors
Describe how director independence, board structures and special voting arrangements impact corporate governance?
4/ Corporate Governance Codes/Laws/Listing Requirements
- many countries require adoption of governance codes
- comply or explain
5/ Stewardship Codes - voluntary codes - encourage investors to
exercise their legal rights and increase their level
of engagement
- for some countries, institutional investors must
“comply or explain’
What are the different areas of board policies/practices?
How is executive remuneration set?
How are ESG-related risks identified?
How are ESG-realted factors analysed?
What is SASB, green bonds and green washing?
What is the equation for WACC and its components?
What are the top-down vs bottum-up cost of capital factors? Explain how capital availability affects?
Explain how market conditions can affect cost of capital?
Explain how legal/regulatory restrictions and tax jurisdiction affect cost of capital? Explain how revenue, earnings and cashflow volatility affect COC?
Explain how asset nature, financial strength and security features affect cost of capital
Explain the method of estimating cost of debt for publicly traded and non-traded debt?
Explain the method of estimating cost of debt for bank debt and leases?
What are the international considerations in estimating cost of debt? What is the historical approach of estimating ERP?
Under the historical approach explain the decisions of time period, selection of mean type and selection of RF proxy and limitations of historical approach?
What is the forward looking ERP approach and what are the survey based methods and dividend discount method?
Forward-looking/* ERP is about those inputs
Timated using current info and expectations
consistent with the notion that the ERP depends
strictlv on future expectations
What is the macroeconomic modelling method of estimating ERP and what are the limitations of each forward looking method?
What is required for a DDM and a bond yield plus risk premium approach? What are pros and cons of BYPRM approach?
What is CAPM and the Fama-french 4 factor model?
What will estimating a private company cost of capital include and how is illiquidity included?
What is the expanded CAPM and the qualitative and quantitative factors? What is the build-up approach?
What are the international considerations for emerging market countries? What is the damodaran country risk premium?
Explain the international CAPM model?
What are the types of restructuring?
Explain the motivations and top down drivers behind each type of restructuring type?
What are the motivations behind investment actions and describe an equity investment?
Explain the action of a joint venture and acquisition?
What are the motivations behind divestment?
What is a conglomerate discount, what is the difference of sale vs spin-off
What are the motivations of restructuring: Proactive and reactive?
What is cost restructuring, outsourcing and offshoring?
b) offshoring - relocating operations to another country
usually low labour-cost locations
Explain balance sheet restructuring and reorganisation.
Explain the initial evaluation for a restrucuring
timing: timing between announcement and completion of transaction
approvals may be required as well (shareholders, creditors,
Explain leveraged buyouts?
Preliminary valuation methods: Comparable company analysis
Pros and cons of comparable company analysis?
Explain comparable transaction analysis and its pros and cons?
Explain premium paid analysis
Explain the process behind putting together pro-forma statements for combined company
Describe vertical horizontal ownership
Describe horizontal and dispersed ownership
