http://valuationacademy.com Valuation Academy — Bridging the Gap Between College and Career- Excel Financial Modeling Training — Page 2

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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Accrual Vs. Cash Basis Accounting

The key difference between the two primary accounting methods, cash-base and accrual accounting, is timing. With cash-based accounting, transactions are recorded when cash actually changes hands. With accrual accounting, transactions are recorded when they occur, regardless of when the cash is actually received or paid. Most of the time, both methods are approved accounting methods [...]

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Introduction to Derivatives

Long vs. Short Being “Long” something means you own it. Being “Short” something means you have created an obligation that you have sold to someone else. If I am long 100 shares of AAPL, that means that I possess 100 shares of AAPL. If I am short 100 shares of AAPL, that means that my [...]

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Accounting Standards and Financial Statement Basics

Valuation advisors use financial statements of a firm to assess its financial performance, therefore standardization of accounting practices is necessary. Accounting standards provides guidelines on how to prepare and present income and expenses, assets, owners’ equity and liabilities for a firm and makes the financial statements comparable to one another. There are two primary standard-setting [...]

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Types of Value- Fair Market Value, Intrinsic Value, Liquidation Value, Investment Value

To understand and differentiate types of value is important as valuations are needed in many ways for many reasons. Fair Market Value is the most probable price which a company or an asset would bring in a competitive and open market (in a fair sale). It is an estimate of the market value that an [...]

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Advantages and Disadvantages of Business Organization Types

It is important to understand the different types of business organizations types such as a sole proprietorship, partnership, and corporation. A business’s organizational structure influences issues, legal issues, financial concerns, and personal concerns. A Sole Proprietorship is a business with one owner who operates the business on his or her own or employ employees. It [...]

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