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Equity Research > Jefferies > Flashcards

Jefferies Flashcards

1
Q

Return on Invested Capital

A

NOPAT/Invested Capital

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2
Q

Enterprise Value

A

Enterprise Value is the value of a company’s core business operations to ALL of the investors in the company.

Simple Formula: EQ Value+Debt+Pref Stock+Non Controlling Interest-Cash

However during my studies at John Hopkins, we used a diferent formula in excel

(PV of Operations) +
*PV of FCF +
*PV of Continuing Value

(Non-Operating Assets)
* Excess Cash and Marketable Securites+
Illiquided Invested and unsolidated subsidaries

=Enterprise Value

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3
Q

What are the three major financial statements?

A
  1. Income Statement
  2. Balance Sheet
  3. Cash Flow Statement
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4
Q

Common-Size Statements

A

Common-size statements allow analysts to compare a company’s performance with that of other firms to evaluate performance

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5
Q

Vertical Common-Size Income Statement

A

Expresses all income statement items as a percentage of revenues

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6
Q

Vertical Common-Size Balance Sheets

A

Express all balance sheet items as a percentage of Total Assets

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7
Q

Cross-sectional analysis

A

Known as relative analysis, compares a specific metric for one company with the same metric towards another company

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8
Q

Horizontial Common-Size

A

Horizontal common-size financial statements are often used to determine a trend with a company.

Dollar values are divided by their base year values

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9
Q

Activity Ratios

A

Measures how productive a company is using its assets and how efficiently it performs its everyday operations

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10
Q

Liquidity Ratios

A

Measures the comapny ability to meet its short-term cash requirements

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11
Q

Solvency Ratios

A

Measure a company ability to meet long-term debt obligation

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12
Q

Profitability Ratios

A

Measures a companies ability to generate and adequate return on invested capital

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13
Q

Valuation

A

Measures the quantity of an asset or flow (earnings) associate with ownership of a specific claim

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14
Q

Inventory Turnover Ratio

A

COGS/Avg. Inv

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15
Q

Days of Inventory on Hand

A

365/Inventory Turnover

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16
Q

Receivables Turnover

A

(Sales/Revenue)/Avg. Accounts Receivable

17
Q

Days of Sales Outstanding

A

365/Receivables Turnover

18
Q

Payable Turnover

A

Purchases/Avg. Trade Payables

Purchases= EI+COGS-Opening Inventory

19
Q

Number Days of Payable

A

365/Payable Turnover

20
Q

Working Capital Turnover

A

Revenue/Avg. Working Capital

21
Q

Fixed Asset Turnover

A

Revenue/Avg. Fixed Assets

22
Q

Total Asset Turnover

A

Revenue/ Avg. Total Assets

23
Q

WACC

A

Average Cost of Capital required by investors

rdwd(1-T)+wprp+were

24
Q

Terminal Value

A

Terminal Value is the estimated value of a company beyond the final year of the explicit forecast period in a DCF model

Perpetuity Approach
Applies a constant growth rate onto the forecasted cash flows of a company

(Final YR FCF)*(1+Terminal Growth Rate)/WACC-Terminal Growth Rate

or

Exit Multiple Approach

Final Year EBITDA*Exit Multiple

25
Q

Current Ratio

A

Current Assets/Current Liabilities

26
Q

Quick Ratio

A

Cash+ST Marketable Securities+Receivables/Current Liabilities

27
Q

Cash Conversion Cycle

A

Days of Inventory on Hand+Days of Sales Outstanding- Number of Days Payable

28
Q

Cash Ratio

A

Cash+ ST Marketable Securities/ Current Liabilities

29
Q

NOPAT

A

Net Operating Profit After Taxes

Operating Profit (EBIT)*(1-Tax Rate)

30
Q

Listing Liquidity Ratio

A
  1. Current Ratio
  2. Quick Ratio
  3. Cash Ratio
  4. Defensive Interval Ratio
31
Q

Defensive Interval Ratio

A

Cash+ St Marketable Sec+Receivables/ Daily Cash Expenditures

This ratio measures how long the company can continue to meet its daily expense requirements from its existing liquid assets without obtaining additional financing.

32
Q

List of Solvency Ratios

A
  1. Debt-to-Assets
  2. Debt-to-Capital
  3. Debt-to-Equity
  4. Financial Leverage
  5. Debt-to-EBITDA

Coverage Ratios
1. Interest Coverage
2. Fixed Charged Coverage

33
Q

EBITDA

A

Earnings, Before Interest, Taxes, Depreciation and Amortization

EBIT(Operating Income)+ Depreciation & Amortization

EBITDA is used to determine the total earning potential of a company. Its also used as a comparable tool to compare companies of different sizes and capital structures.

34
Q

List of Profitability Ratios

A
  1. Gross Profit Margin (Gross Profit/Revenue)
    A high gross profit margin can be a reflection of high product prices (reflected in high revenues) and low product costs (reflected in low COGS)
  2. Operating Profit Margin (Operating Profit/Revenue)
    An operating profit margin that is increasing at a higher rate thatn the gross profit margin indicates that the company has successfully controlled operating costs.
  3. Pretax Margin
    (EBT/Revenue)
  4. Net Profit Margin
    ( Net Profit/ Revenue)

Net Profit Margin shows how much profit a company makes for every dollar it generates in revenue

  1. Return on Assets (ROA)
    (Net Income/Avg. Total Assets)
    The higher the ROA, the greater the income generated by the company given its assets
  2. Return on Equity (ROE)
    (Net Income/Avg. Total Equity)
    This ratio measures the rate of return earned by a company on its equity capital. Equity capital includes (minority equity, pref equity, and common equity).
35
Q

Dow Dupont ROE Decomposition

A

1 way= Net Income/ Avg. SE

2 way= ROALeverage
(Net Income/Avg. Total Assets)(Avg. Total Assets/Average SE)

3 way= Net Profit Margin* Asset Turnover*Financial Leverage

5 way= (Net Income/EBT)Tax Burden Interest Burden* EBIT Margin* Asset Turnover* Financial Leverage

36
Q

Valuation Ratios

A
  1. Price to Earnings
  2. Price to Cash Flow
  3. Price to Sales
  4. Price to Book Value

(1. Price per share/Earnings Per Share)

37
Q

Key Elements of Value Creation

A

Increasing ROIC, & Increasing CashFlow and Revenue Growth,

38
Q
A

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