Forum Search: capital markets
Re: Cash Circular
As an addendum, I have checked all formulas, all signs, and all working capital accounts. Basically, I have checked everything I can check, yet assets still exceed liabilities by an amount equal to interest income.
As an addendum, I have checked all formulas, all signs, and all working capital accounts. Basically, I have checked everything I can check, yet assets still exceed liabilities by an amount equal to interest income.
Please clarify if any value is gained by buying back stock-1
Full Question: It has been said that holding cash isn't necessarily bad for a company. My belief is that the company can repurchase shares, therefore increasing their debt/equity ratios. Higher debt = higher tax shield so the value of the company is greater. Now, theory says, that's not true becaus... Read More
Full Question: It has been said that holding cash isn't necessarily bad for a company. My belief is that the company can repurchase shares, therefore increasing their debt/equity ratios. Higher debt = higher tax shield so the value of the company is greater. Now, theory says, that's not true becaus... Read More
Free Cash Flow to Firm vs. Free Cash Flow to Equity
Full Question: When calculating free cash flow to equity, we adjust the capex+working capital+depreciation numbers so that it represents only the equity portion. That makes sense because the equity shouldn't be responsible for all the cash outflows of the firm. However, when I think about the physi... Read More
Full Question: When calculating free cash flow to equity, we adjust the capex+working capital+depreciation numbers so that it represents only the equity portion. That makes sense because the equity shouldn't be responsible for all the cash outflows of the firm. However, when I think about the physi... Read More
Maintenance capex vs capital expenditures revisited
Full Question:
Should capital expenditures that are not purely maintenance capex be reflected in the cash flows as an outflow of cash as long earnings from that investment are reflected in the EBIT?
Full Question:
Should capital expenditures that are not purely maintenance capex be reflected in the cash flows as an outflow of cash as long earnings from that investment are reflected in the EBIT?
How to value a company if we do or don't invest?
Full Question: We are using DCF to value an existing equity investment. The company is planning a capital increase two years down the road. We may or may not participate in the capital increase. My question is how should value our existing equity investment under these two scenarios (whether we ... Read More
Full Question: We are using DCF to value an existing equity investment. The company is planning a capital increase two years down the road. We may or may not participate in the capital increase. My question is how should value our existing equity investment under these two scenarios (whether we ... Read More
How do convertible bonds affect total capitalization?
Full Question:
Assume we convert all the in-the-money convertible bonds. Would this effect a firm's total capitalizaiton? If, no, then do we simply move the amount of CB from debt to stockholder's equity? Thanks.
Full Question:
Assume we convert all the in-the-money convertible bonds. Would this effect a firm's total capitalizaiton? If, no, then do we simply move the amount of CB from debt to stockholder's equity? Thanks.
Mechanics of FCFF calculation
Full Question: I have just started to learn how to calculate FCFF and have an obvious “newbie” question - Can the FCFF be calculated for the current quarter, or past year, without estimating forward? Simply put, is it logical and/or accepted industry practice to look at the current, or past FCF... Read More
Full Question: I have just started to learn how to calculate FCFF and have an obvious “newbie” question - Can the FCFF be calculated for the current quarter, or past year, without estimating forward? Simply put, is it logical and/or accepted industry practice to look at the current, or past FCF... Read More
Stock-Based Comp adjustment
Full Question: So the short answer to the question is actually that when companies account for stock-based comp. it is a non-cash charge that should be added back in the CFO area. However, because stock-based comp. must be accounted for by the company as a potential benefit (b/c upon exercise the c... Read More
Full Question: So the short answer to the question is actually that when companies account for stock-based comp. it is a non-cash charge that should be added back in the CFO area. However, because stock-based comp. must be accounted for by the company as a potential benefit (b/c upon exercise the c... Read More
How to calculate CAPM for emerging markets?
Full Question: Let’s say you’re valuing a company via DCF and so you need to figure out the target company’s cost of equity via CAPM. You’ve selected your comps, almost all of whom are US-based. But you’ve also got a british comp in there, who is a great comp. let’s further assume that ... Read More
Full Question: Let’s say you’re valuing a company via DCF and so you need to figure out the target company’s cost of equity via CAPM. You’ve selected your comps, almost all of whom are US-based. But you’ve also got a british comp in there, who is a great comp. let’s further assume that ... Read More
Several observations: 1) you have it set to average balance, so of course there will be circular references. Don't forget the entire explanation at the end of the WMT course about 1 for Beginning and 2 for Average. the GREAT news is that once you flip the switch to 1 for Beginning Balance, the circ... Several observations:
1) you have it set to average balance, so of course there will be circular references. Don't forget the entire explanation at the end of the WMT course about 1 for Beginning and 2 for Average. the GREAT news is that once you flip the switch to 1 for Beginning Balance, the circs are gone. If you need a refresher on Circular Reference due to average balance or Excel iterations to have Excel help you calculate, please log back into your online account and look for Exhibits course at the bottom of your course list. If you expired out, you can re-sign up for the Exhibits for free. Just go to our website at http://www.wallst-training.com and in the upper right, click on ORDER NOW and just check out at the bottom of the page with just Overview of FM and Exhibits selected (zero cost).
2) your historical balance sheet doesn't balance, most likely because you got lazy and didn't input all significant digits in your balance sheet line items. Please abide by all best practices communicated in our courses, including don't round. Since your 2013 BS doesn't balance, it is guaranteed that your future won't balance. It makes it much harder to audit since it's off due to multiple reasons.
3) please watch out for formatting. you have non-aligned numbers and random bolding on your BS and blue/black (ie Sales on IS) aren't correct. In addition, some of your numbers have zero decimals and others have one decimal and you have random $ where they shouldn't be (ie CFO)
4) For your actual problem of not balancing, here's what we did:
a) Liabilities in 2013 actual are too low by 0.075 so we hard coded that into cell H43 since we need to start clean with a balanced last actual BS. In reality, you will find the reason you don't balance historically and fix it instead of a random cell like we did.
b) Increased number of decimals on our check row so we can see more significant digits.
c) Start going down the BS to see which items change and see if such a change is reflected on CF Statement. Right away we notice the following line items that change but aren't reflected on CF statement:
- LT Investments (row 18)
- A/R, LT (row 19)
- Other Assets (row 21)
d) By inserting these into Working Capital items on CFO in CF Statement, we notice that our check gets closer to zero as we do one at a time.
And then suddenly - VOILA! Magically, you are balanced. Remember the Number ONE reason you don't balance is that you have items on the BS that aren't reflected on CF Statement. Hopefully this is a good reminder to be extremely diligent and super attention to detail when building models.
An addition note: technically, your GW & Intangibles amortization expense from the IS should deduct the GW & Intangibles line and not PPE row. PPE would thus take just Depreciation portion (not including the Amortization, else you double count).
And.. another balanced model. Changing the world by saving lives... WST. Read More