Equity: Concepts & Basic Tools Flashcards
Asset-Based Valuation Models
Valuation based on estimates of the market value of a company’s assets
Bonus issue of shares
A type of dividend in which a company distributes additional share of it common stock to shareholders instead of cash
Book Value
Excess of assets over liabilities
Buy back
A transaction in which a company buys back its own shares unlike stock dividends and stock splits, share repurchases use corporate cash
Carrying Value
Book Value
Declaration Date
The day that the corporation issues a statement declaring a specific dividend
Discounted Cash Flow models
Valuation model that estimates the intrinsic value of a security as the present value of the future benefits expected to be received from the security
Dividend
A distribution paid to shareholders based on the numbers of shares owned
Dividend discount model
DDM a present value model that estimates the intrinsic value of an equity share based on the present value of its expected future dividends
Enterprise Value
A measure of a company’s total market value from which the value of cash and short-term investments have been subtracted
Ex-dividend date
The first date that share trades without (ie “ex”) the dividend.
Extra Dividend
A dividend paid by a company that does not pay dividends on a regular schedule, or a dividend that supplements regular cash dividends with an extra payment
Free Cash Flow to Equity Models
Valuation models based on discounting expected future free cash flow to equity
Fundamental Value
The underlying or true value of an asset based on an analysis of its qualitative and quantitative characteristics
Holder of Record Date
The date that a shareholder listed on the corporations books will be deemed to have ownership of the shares for purposes of receiving an upcoming dividend
Intrinsic Value
The value obtained if an option is exercised based on current conditions
Law of One Price
The condition in a financial market in which two equivalent financial instruments or combinations of financial instruments can sell for only one price. Equivalent to the principle that no arbitrate opportunities are possible
Market Multiple Models
Valuation models based on share price multiples or enterprise value multiples
Multiplier models
Valuation models based on share price multiples or enterprise value multiples
Payable Date
The day that the company actually mails out ( or electronically transfers) a dividend payment
Payment date
The day that the company actually mails out (or electronically transfers) a dividend payment.
Preferred Stock
A type of equity interest which ranks above common shares with respect to the payment of dividends and the distribution of the company’s net assets upon liquidation. They have characteristics of both debt and equity securities.
Present Value Models
Valuation Models that estimate the intrinsic value of a security as the present value of the future benefits expected to be received from the security.
Price multiple
A ratio that compares the share price with some sort of monetary flow or value to allow evaluation of the relative worth of a company’s stock
Reverse stock split
A reduction in the number of shares outstanding with a corresponding increasing in share price, but no change to the company’s underlying fundamentals
Share repurchase
A transaction in which a company buys back its own shares. Unlike stock dividends and stock splits, share repurchases use corporate cash
Special Dividend
A dividend paid by a company that does not pay dividends on a regular schedule, or a dividend that supplements regular cash dividends with an extra payments
Stock Dividend
A type of dividend in which a company distributes additional shares of its common stock to shareholders instead of cash
Stock Split
An increase in the number of shares outstanding with a consequent decrease in share price but no change to the company’s underlying fundamentals
Terminal stock value
The expected value of a share at the of the investment horizon- in effect, the expected selling price
Terminal Value
The expected value of a share at the
