Finschool By 5paisa

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Company Action That Affect Equity

Study Slides Videos 12.1 Introduction   Companies undertake major changes as they grow, evolve, mature, or merge with another company. Some of these changes result in changes to the number of common shares outstanding—the number of common shares currently held by shareholders. Various corporate actions can affect equity outstanding: Selling shares to the public for … Read more

Asset Based Valuation

Study Slides Videos 11.1 Introduction   The asset-based valuation approach estimates the value of common stock by calculating the difference between the value of a company’s total assets and its outstanding liabilities. In other words, the asset-based valuation approach estimates the value of common equity by calculating a company’s net asset value. The asset-based valuation … Read more

Relative Valuation

Study Slides Videos 10.1 What is Relative valuation?   While discounted cash flow analysis forms the foundation of valuation it is, undoubtedly, a challenging and time-consuming process involving many highly subjective assumptions. Small adjustments to the long-run growth prospects of a company or the required return on equity can result in large changes in the … Read more

Free Cashflow

Study Slides Videos 9.1 Introduction   Discounted cashflow (DCF) valuation views the intrinsic value of a security as the present value of its expected future cash flows. When applied to dividends, the DCF model is the discounted dividend approach or dividend discount model (DDM). DCF analysis can also be used to value a company and … Read more

Dividend Discount Model

Study Slides Videos 8.1 Introduction   Since projections of dividends cannot be made through infinity, several versions of the dividend/cashflow discount model have been developed based upon different assumptions about future growth. Lets begin with the simplest – a model designed to value stock in a stable-growth firm that pays out what it can afford … Read more

Valuation of Common Shares

Study Slides Videos 7.1 Introduction   One of the most important question to a common equity investor is: given what is known from the company’s financial disclosures, how much should he be willing to pay to participate in the revenues of the company as a shareholder? What is the “correct†price for a share of … Read more

Risk & Return of Equity & Debt Securities

Study Slides Videos 6.1 Risk & Return of the Securities There are significant risk and return differences between debt and equity securities because of differences in cash flow, voting rights, and priority of claims. Table below shows the three main types of securities and their typical cash flow and voting rights: The return potential for … Read more

Stock Market: Advance Module

Stock Market

Study Slides Videos 1.1 Common Stock Common stock (also known as common shares, ordinary shares, or voting shares) is the main type of equity security issued by companies. A common share represents an ownership interest in a company. Common shares have an infinite life; in other words, they are issued without maturity dates. Common stock … Read more

Depositary Receipts

Study Slides Videos 5.1 Introduction   A depositary receipt is a security representing an economic interest in a foreign company that trades like a common share on a domestic stock exchange. For investors buying shares of foreign companies, the transaction costs associated with purchasing depositary receipts are significantly lower than the costs of directly purchasing … Read more

Warrants

Study Slides Videos 4.1 Introduction   A warrant is an equity-like security that entitles the holder to buy a pre-specified amount of common stock of the issuing company at a pre-specified per share price (called the exercise price or strike price) prior to a pre-specified expiration date. A company may issue warrants to investors to … Read more