Porter’s Five Forces In Action: Sample Analysis of Coca-Cola

Since its introduction in 1979, Michael Porter’s Five Forces has become the de facto framework for industry analysis. The five forces measure the competitiveness of the market deriving its attractiveness. The analyst uses conclusions derived from the analysis to determine the company’s risk from in its industry (current or potential). The five forces are (1) Threat […]

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The Difference Between Market Value of Invested Capital (MVIC) and Enterprise Value (EV)

Throughout your finance career, you’ll develop a preference for the term market value of invested capital (MVIC) or enterprise value (EV) in reference to total firm value. What is the difference between market value of invested capital and enterprise value? Let’s start with similarities. 1. They are both measures of total firm value, that is they both […]

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What is the Enterprise Value (EV)?

Enterprise Value (like MVIC) is one measure of total firm value. It is the sum of the market value of all claims against a company’s assets, including claims by equity holders and debt holders. It is a value that is “capital structure independent,” which just means that a change in the company’s capital structure would […]

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What is the Market Value of Invested Capital (MVIC)?

The Invested Capital (IC) of a company is one measure of total firm value (like Enterprise Value). It represents the value of the core operations of the business. Alternatively, IC can also be defined as the combination of shareholder’s equity and interest-bearing debt. Whereas invested capital typically refers to the book value of invested capital, […]

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The Truth About Enterprise Value, Part 1: Cash

This entry is part one in a two part series on Enterprise Value Enterprise Value is widely used in the finance world as being the standard for total firm value. It is the market value of the whole company that includes the assets owned by all shareholders, debt and equity. The widely used formula is: […]

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Apples to Apples, the Most Important Rule in Finance

A new analyst may hear the term “Apples to Apples” used a lot in their first finance job. What does it mean? It’s really not that difficult, it just means that you should compare two things that are similar, or you should apply the correct multiple to the correct financial metric.  The following is an […]

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Depreciation Methods- Straight Line, Double Declining, Units of Production

The concept of depreciation is involved when dealing with decreasing values of long term fixed assets over its useful life. Three key numbers of a long term fixed asset are original cost of the asset, expected salvage value (residual value) and estimated useful life. The portion of value being used up during each accounting period […]

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Introduction to the Securities Markets: Primary and Secondary Markets

A Securities market is an exchange where sale and purchase transactions of securities are conducted on the base of demand and supply. A well-functioning securities market should be able to provide timely and accurate information on the past transactions, liquidity, low transaction costs (internal efficiency) and securities prices that rapidly adjusted to all available information […]

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Inventory Accounting – LIFO and FIFO

Inventory is considered current assets because it is merchandise that are usually sold within a year or within an operating cycle. It is the most valuable current asset for retailers and should be closely monitored. Too much inventory can cause cash flow problems and unnecessary expenses like storage expenses and obsolete items. On the balance […]

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Problems with the Corporate Structure

Corporations have much more complex structures than other forms of organization and therefore problems come along the way. One key difference between corporations and other forms of organization is separation of control and ownership. The agency problem, also known as the “principal-agent problem”, is a conflict of interest when someone (the principal) hires another (the […]

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