LM 5: Company Analysis: Past & Present Flashcards
What are the 3 parts to a company analysis?
- Company analysis: past and present
- industry and competitive analysis
- Company analysis: forecasting
What 8 factors should an analyst consider when initiating coverage of a company? FRCIFVER
- front matter
- recommendation
- company description
- industry overview & competitive positioning
- financial analysis & modeling
- valuation
- ESG considerations
- Risks
What 3 things should be covered in the front matter when initiating coverage of a company? IAL
- issuer name
- analyst recommendation
- legally required disclosures
What 2 things should be covered in the recommendation when initiating coverage of a company? AS
- analyst recommendation
- summary of key factors supporting recommendation
What 2 things should be covered in the company description when initiating coverage of a company? DE
- discussion of issuer business model
- explanatory charts & figures
What 4 things should be covered in the industry overview & competitive position when initiating coverage of a company? ICPE
- industry size, growth, profitability
- competitive analysis such as porter 5 forces
- PESTLE analysis of external industry influences
- Evaluation of company’s position and strategy in industry
What 4 things should be covered in the financial analysis & model when initiating coverage of a company? EEFH
- evaluation of factors driving revenues, cost, profitability, and cash flows
- evaluation of company sources and uses of capital
- forecasts of key drivers and a supporting discussion
- historical and forecasted financial statements
What 2 things should be covered in the valuation when initiating coverage of a company? VD
- valuation estimate and price target.
- discussion of key inputs and scenario/sensitivity analysis
What 3 things should be covered in the ESG Considerations when initiating coverage of a company? EOE
- evaluation of ESG indicators and risks
- ownership structure and management composition
- executive compensation
Whats 1 thing should be covered in the risks when initiating coverage of a company? E
- evaluation of material risks and discussion of their potential impact
What 5 factors should an analyst consider when following up coverage of a company after the initial coverage? FRAVR
- front matter
- recommendation
- analysis of new information
- valuation
- risks
What are the 5 elements of a company’s business model? PCSPS
- product or service (what does firm sell?)
- customer (who do they sell to?)
- sales channels (how do they acquire and deliver product?)
- price (payment terms and how much they charge?)
- suppliers and partners (who do they buy/rely upon?)
What are the 4 sources of information analysts can draw from to determine company business model? IPPP
- issuer sources
- public third party sources
- proprietary third party sources
- proprietary primary research
What are 2 examples of issuer sources? RE
- regulatory filings
- earnings call / investor presentation
What are 2 examples of public third party sources? EN
- economic indications
- news publications (general/ industry specific news publications)
What are 2 examples of proprietary third-party sources? RA
- reports prepared by equity or credit rating agency
- analysis from industry focused consultancies
What are 2 examples of proprietary primary research? SI
- surveys, studies commissioned by analyst
- industry experts
What are 3 ways to organize and classify operating costs, describe them? BNF
- behavior with output (fixed or variable)
- nature (what cost has been incurred eg. raw materials, rent, compensation)
- function (costs purpose eg. COGS, R&D, depreciation/amortization)
How does IFRS and US GAAP require issuer to group operating costs?
by either nature or function
What is the difference between depreciation and amortization?
depreciation is for tangible assets and amortization is for intangible assets
What happens with depreciation/ amortization on the statement of cash flows?
they get added back to net income when calculating CFO
Which cash flow activity statement does IFRS require you to report income taxes and interest payments?
income taxes: operating
interest payments: operating or financing
Which cash flow activity statement does US GAAP require you to report income taxes and interest payments?
income taxes: operating
interest payments: operating
What is the formula for operating profit?
operating profit = [ Q * (P - VC)] - FC
Q = units company sells
P = price per unit
VC = variable costs
FC = fixed costs
