Posts by: WST Expert 1
Re: Accounting for vested but unexercised stock options...and then again when they are exercised
You are correct in your summary of major accounting entries for stock options. If a company issues stock options amounting to a value of $100 (as in your example), let's say that Net Income goes down by $100 (ignoring taxes for simplicity). Therefore, CFO is also decreased by $100. Since these optio... Read More
You are correct in your summary of major accounting entries for stock options. If a company issues stock options amounting to a value of $100 (as in your example), let's say that Net Income goes down by $100 (ignoring taxes for simplicity). Therefore, CFO is also decreased by $100. Since these optio... Read More
Re: Stock Options Tables in 10ks do not seem to be itemized like they are in the course
Yes, that is a good observation. Recently, in the past few years companies have been reducing their level of disclosures such that they just give a total sets of options as opposed to breaking it out individually. Some companies, however, such as Goodyear, even up to a year or two ago continue to br... Read More
Yes, that is a good observation. Recently, in the past few years companies have been reducing their level of disclosures such that they just give a total sets of options as opposed to breaking it out individually. Some companies, however, such as Goodyear, even up to a year or two ago continue to br... Read More
Re: Adv LBO Model
To calculate the amount of cumulative debt paid down, simply calculate each projected year end debt balance less the pro forma ending debt balance (right after the LBO). Alternately, for % paid down, just calculate a percent change off the pro forma ending debt balance. Make sure to anchor the PF de... Read More
To calculate the amount of cumulative debt paid down, simply calculate each projected year end debt balance less the pro forma ending debt balance (right after the LBO). Alternately, for % paid down, just calculate a percent change off the pro forma ending debt balance. Make sure to anchor the PF de... Read More
Re: Diluted Shares Outstanding Excel Equation
If the value of the equation to the right of the "0" is negative, that means the options are not in-the-money. This can be quickly confirmed by observing that the exercise price is above the share price. Hence, when dividing, it yields a number greater than zero, so when you do 1-that number, it pro... Read More
If the value of the equation to the right of the "0" is negative, that means the options are not in-the-money. This can be quickly confirmed by observing that the exercise price is above the share price. Hence, when dividing, it yields a number greater than zero, so when you do 1-that number, it pro... Read More
Re: Calculating Free Cash Flow for a business unit
Without any additional information, we would suggest you allocate it similar to your allocation for depreciation and CapEx. If those relative percent distributions the same (they should be since CapEx and depreciation are tied together), then you can guesstimate using same % for working capital. Of ... Read More
Without any additional information, we would suggest you allocate it similar to your allocation for depreciation and CapEx. If those relative percent distributions the same (they should be since CapEx and depreciation are tied together), then you can guesstimate using same % for working capital. Of ... Read More
Re: Risk Free Rate (what to use)
This is covered extensively in our Finance 101 video. As we are sure you can understand, it would be too cumbersome to explain our entire course's section on this topic in this forum, which is meant for specific questions that are not covered in our courses or for clarifications above and beyond wha... Read More
This is covered extensively in our Finance 101 video. As we are sure you can understand, it would be too cumbersome to explain our entire course's section on this topic in this forum, which is meant for specific questions that are not covered in our courses or for clarifications above and beyond wha... Read More
Re: Calculating Free Cash Flow for a business unit
Unfortunately, you are stuck. At minimum, you would need a barebones set of individual Income Statements and you could at least guesstimate an allocation of Depreciation, CapEx etc (based on pro-rata revenue split assuming that's relevant/appropriate). Without EBIT figures by division, you don't hav... Read More
Unfortunately, you are stuck. At minimum, you would need a barebones set of individual Income Statements and you could at least guesstimate an allocation of Depreciation, CapEx etc (based on pro-rata revenue split assuming that's relevant/appropriate). Without EBIT figures by division, you don't hav... Read More
Re: Minimum Cash Balance
None that immediately come to mind. Usually you have excess cash that you use to fund the deal. Think the Dell LBO as perfect example.
None that immediately come to mind. Usually you have excess cash that you use to fund the deal. Think the Dell LBO as perfect example.
Re: Minimum Cash Balance
Yes you are correct - but it's just math. If you have $25 of cash and set minimum cash to say, $40, then you have a negative source of cash of $15, which means a use of funds - you need to raise more debt or equity (using funds to fund the minimum cash balance required). However, mechanically on the... Read More
Yes you are correct - but it's just math. If you have $25 of cash and set minimum cash to say, $40, then you have a negative source of cash of $15, which means a use of funds - you need to raise more debt or equity (using funds to fund the minimum cash balance required). However, mechanically on the... Read More
Don't forget that NI does not directly impact the balance sheet; it flows through Retained Earnings. Thus, we would re-write/clarify as follows: 1) NI -100 which also means RE -100 on Liability side 2) Cash -100 on Asset side => double-entry balanced at this point However, since stock opti... Don't forget that NI does not directly impact the balance sheet; it flows through Retained Earnings.
Thus, we would re-write/clarify as follows:
1) NI -100 which also means RE -100 on Liability side
2) Cash -100 on Asset side
=> double-entry balanced at this point
However, since stock options are usually not paid in cash, the cash gets added back on the CF Statement:
1) In CFO section, SBC (Stock Based Compensation) +100 (thus CFO +100, thus cash +100 on BS Asset side)
2) offsetting entry is Treasury Stock on BS Liability side +100 (issuance of previously repurchased shares to account for the fractional share equivalent of the options)
=> double-entry balanced at this point
Thus, the actual entries (since cash doesn't go down and then up) would be:
1) NI -100 which also means RE -100 on Liability side
2) SBC (Stock Based Compensation) +100 => Treasury Stock on BS Liability side +100
3) No change to cash balance
=> double-entry balanced at this point Read More