Fundamental Analysis & Valuation
6 terms
Financial Leverage
Fundamental Analysis & Valuation
ratio (x, times)
The use of borrowed money to increase the return on shareholders' capital, and the risk that comes with it.
Equity Multiplier = Total Assets / Shareholders' Equity; Degree of Financial Leverage = Percentage Change in Net Profit / Percentage Change in Operating Profit
Forward Price-to-Earnings
Fundamental Analysis & Valuation
ratio (x, times)
The price-to-earnings ratio computed using forecast earnings for a future period rather than reported ones.
Forward P/E = Current Market Price / Estimated Earnings per Share for the Forecast Period
Free Cash Flow to Equity
Fundamental Analysis & Valuation
₹ crore
The cash available to shareholders after operating costs, capital expenditure, debt interest and net debt movements.
FCFE = Free Cash Flow to Firm - Interest x (1 - Tax Rate) + Net New Borrowing
Free Cash Flow to Firm
Fundamental Analysis & Valuation
₹ crore
The cash generated by operations available to all capital providers, before any payments to lenders or shareholders.
FCFF = EBIT x (1 - Tax Rate) + Depreciation and Amortisation - Capital Expenditure - Increase in Working Capital
Free Cash Flow Yield
Fundamental Analysis & Valuation
%
Free cash flow expressed as a percentage of market capitalisation or enterprise value.
Free Cash Flow Yield = Free Cash Flow / Market Capitalisation x 100
Fundamental Analysis
Fundamental Analysis & Valuation
qualitative
The study of a company's financial statements, industry and economics in order to estimate what its shares are worth.
Test: the conclusion rests on the issuer's business economics rather than on the behaviour of its price