This page lists recent articles related to corporate finance on this website.
Most people may agree with this statement and believe higher growth is always good. However, this is not always true! Are higher revenue growth rates always good – as in does higher revenue growth always lead to higher valuation?
This page addresses if a company with high growth rates have low valuations and why?
Most people may agree with this statement and believe higher growth is always good. However, this is not always true! Are higher revenue growth rates always good- as in does higher revenue growth always lead to higher valuation?
Excess returns can be viewed in many ways. In a DCF valuation context, excess returns are returns above the cost of capital. This article explores when a firm can earn excess returns. This page also discusses the conditions required to maintain excess returns?
Why is this important in your DCF context? This is important in a DCF context as you have to make assumptions about growth and returns in your valuation model.
The reinvestment rate measures how much a firm is plowing back to generate future growth. So clearly the reinvestment rate matters for growth. How does the reinvestment rate correlate with growth and therefore with the value of a business? We explore how the reinvestment rate impacts the value of a business in DCF valuation in this article.
How does the reinvestment rate impact the value of a business in DCF valuation?
We know that When are the sustainable growth rates and operating income growth rates are NOT always equal. There are specific conditions when are the sustainable growth rates and operating income growth rates can be equal.
This webpage discusses when are the sustainable growth rates and operating income growth rates will be equal.
Sustainable growth is the growth a company can grow at given its profitability and reinvestment decisions without taking on additional debt. The equation for sustainable growth = Retention ratio* Return on Equity. And since the retention ratio is equal to 1- Payout ratio, sustainable growth is also = (1- Payout ratio) * Return on Equity. We understand what the sustainable growth rate is and its formula.
Can I use the sustainable growth rate as my company’s revenue growth rate in the DCF valuation model?
Sustainable growth is the growth a company can grow at given its profitability and reinvestment decisions without taking on additional debt. The equation for sustainable growth = Retention ratio* Return on Equity. And since the retention ratio is equal to 1- Payout ratio, sustainable growth is also = (1- Payout ratio) * Return on Equity. We understand what the sustainable growth rate is and its formula. Can I use the sustainable growth rate as my company’s operating income growth rate in the DCF valuation model?
If not, how do you estimate operating income growth rates?
Sustainable growth is the growth a company can grow at given its profitability and reinvestment decisions without taking on additional debt. The equation for sustainable growth = Retention ratio* Return on Equity. And since the retention ratio is equal to 1- Payout ratio, sustainable growth is also = (1- Payout ratio) * Return on Equity.
We may understand what the sustainable growth rate is and its formula.
The question we address on this page is if a company can grow at the sustainable growth rate? Is that the growth rate you should use in my DCF valuation?
Sustainable growth is the growth a company can grow at given its profitability and reinvestment decisions without taking on additional debt. The equation for sustainable growth = Retention ratio* Return on Equity. And since the retention ratio is equal to 1- Payout ratio, sustainable growth is also = (1- Payout ratio) * Return on Equity.
We may understand what the sustainable growth rate is and its formula. The question we address on this page is how does the equation of sustainable growth rate feature in a DCF valuation?
Current assets are cash and other assets used in the operations of a business that are expected to be converted into cash within a 12 month period. Examples of current assets include accounts receivable, inventories, etc. Cash and cash equivalents that are required for the smooth functioning of the business is considered part of current assets.
In this post we discuss if you should consider cash and cash equivalents as part of current assets when computing working capital?