Part III-9 Integrating ESG Beyond DCF

Question 1

The value of a company is equal to XX

Answer 1

the present value of future cash flows

Question 2

How is ROIC calculated?

Answer 2

NOPAT divided by total invested capital

Question 3

What is NOPAT?

Answer 3

Net operating profit after tax

Question 4

What is included in total invested capital?

Answer 4

Net working capital (NWC) + Property, plant & equipment (PP&E) + intangible assets

Question 5

How is net working capital calculated?

Answer 5

Current assets - current liabilities

Question 6

Which 2 questions can determine a company’s competitive advantage?

Answer 6

Does ROIC exceed cost of capital?

Is a company’s ROIC higher than its peers?

Question 7

Competitive advantage is typically defined in two ways

Answer 7

Consumer advantage

Production advantage

Question 8

A XX exists where customers habitually use a product or face high costs of searching for and switching to a new product

Answer 8

consumer advantage

Question 9

A XX exists where a company spends less to deliver its goods or services than its competitors, either due to advantageous access to inputs or to proprietary technology that cannot be easily imitated

Answer 9

production advantage

Question 10

What is the DuPont equation?

Answer 10

the ratio of NOPAT to Sales, or operating profit margin, measures profit per unit

Question 11

What is the measure of the profit a company is able to generate above the rate of return required by providers of capital in monetary terms

Answer 11

economic value added (EVA)

Question 12

T/F - EVA measures a company’s value after all costs have been accounted for and all investors have received their fair returns -

Answer 12

True

Question 13

T/F - EVA helps corporate managers and investors alike attribute returns to specific decisions about how a company is deploying capital and managing resources

Answer 13

True

Question 14

What is the process of analyzing various reasonable future scenarios to understand possible outcomes ?

Answer 14

Scenario analysis

Question 15

Effective scenario analysis helps companies and investors do what?

Answer 15

Anticipate outcomes rather than simply react to events

Question 16

A user may develop two types of scenarios

Answer 16

Exploratory and Normative

Question 17

XX are used to describe a set of possible future states and test a range of options within the context of those future states

Answer 17

exploratory scenarios

Question 18

XX are used to plan for a specific performance target or preferred future outcome

Answer 18

normative scenarios

Question 19

T/F - a user can benefit from defining the scope of analysis by identifying a specific problem or developing a single question that analysis will help to answer

Answer 19

True