Single Period Model – Discounted Cash Flow Model
Single Period Model, one of the discounted cash flow models, is an income valuation approach that aims to find the fair value of a stock/firm using single projected cash …
Investment Decisions
Tobin’s Q / Q Ratio
Tobin’s Q ratio is a popular method of estimating a stock’s fair value and can be practically used by market participants to make informed decisions. It is also known …
Replacement Value Method of Equity Valuation
Replacement value method takes into account ‘the amount required to replace the existing company’ as the valuation of a company. In other words, if one is to create a …
Liquidation Value Method of Equity Valuation
Liquidation value method of equity valuation is one of the techniques under Balance Sheet based methods of valuation which assumes that value of the company under this method will …
Portfolio Management
For understanding portfolio management (PM), it is important to understand the term ‘portfolio’, meaning of PM, who is a portfolio manager, what does PM service involve, classification of PM …
Capital Rationing – Its Assumptions, Advantages and Disadvantages
Capital rationing is a common practice in most of the companies as they have more profitable projects available for investment as compared to the capital available. In theory, there …
Types of Capital Rationing – Hard and Soft
Capital rationing is the strategy of picking up the most profitable projects to invest the available funds. Hard capital rationing and soft capital rationing are two different types of …
Rule of 72
‘Rule of 72’ is a user-friendly mathematical rule used to quickly estimate the ‘rate of interest’ required to double your money given the ‘number of years’ of investment and …
Present and Future Value
The value of money can be expressed as the present value (discounted) or future value (compounded). A $100 invested in bank @ 10% interest rate for 1 year becomes …
Time Value of Money
The term ‘Time Value of Money (TVM)’ implies that there is a connection between ‘time’ and ‘value of money’. This concept can be explained by a simple question – …