Investing

Question 1

Large v small cap

1. Meaning
2. Definition
3. Risk

Answer 1

Question 2

FCFE meaning

Answer 2

Fresh cash flow to equity

Question 3

Present value formula

Answer 3

Question 4

Break even v margin of safety

Answer 4

Question 5

Margin of s example 5 variables

Answer 5

Question 6

Variables for intrinsic per share

Answer 6

Question 7

Contribution margin example

Answer 7

Question 8

Fixed v variable expenses

Answer 8

Question 9

Contribution v gross profit margin
Cont good and bad

Answer 9

Closest to 100 good less than 0 bad

Question 10

FCFE Definition

Answer 10

Question 11

Working capital
1. How to calculate

Answer 11

Question 12

Amortization

Answer 12

Question 13

Valuation Multiple Example
1. Types of financial data (5)

Answer 13

Question 14

EBITDA variables (5)

Answer 14

Question 15

EBITDA meaning

Answer 15

Question 16

Synthetic Leases

Allows a co to

Answer 16

Question 17

Other income expense

Answer 17

Question 18

Contribution margin

Answer 18

Question 19

Contribution margin use

Answer 19

Question 20

Calculating gross margins

Answer 20

Question 21

EBITDA problem

Answer 21

Can hide future liabilities in DA, if large equipment and plant purchases will have to be repeated in the future for example

SEC bars EBITDA per share, requires EBITDA reconciliation with net earnings

Amortization used to obscure software dev costs

One of the most common criticisms of EBITDA is that it assumes profitability is a function of sales and operations alone—almost as if the company’s assets and debt financing were a gift. To quote Buffett again, “Does management think the tooth fairy pays for capital expenditures?”

Question 22

EBITDA History

Answer 22

During the 1980s, the investors and lenders involved in leveraged buyouts (LBOs) found EBITDA useful in estimating whether the targeted companies had the profitability to service the debt that was expected to be incurred in the acquisition. Since a buyout would likely entail a change in the capital structure and tax liabilities, it made sense to exclude the interest and tax expense from earnings. As non-cash costs, depreciation and amortization expense would not affect the company’s ability to service that debt, at least in the near term.