An Introduction to Corporate Finance: Capital Investment

Making capital investment decision requires the combination of various factors.  A firm realizes that its main goal in investing in a project is to maximize its shareholders value.  Before making the ultimate decision to invest a firm needs to analyze the potential long-term growth and evaluate whether it is a project worth pursuing.  Most of […]

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An Introduction to Corporate Finance

Corporate finance is the area of finance in which business enterprises make monetary decisions.  Businesses and corporations utilize various tools and analyses with the primary goal of maximizing shareholder’s value.  Financial decisions made are contingent on short-term and long-term effects.  One of the primary variables of corporate finance is investing.  With the goal of growing […]

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How do Equity Research Analysts use financial models?

Equity research analysts are tasked with providing an unbiased view of stocks, bonds, and other financial instruments. Sell-side analysts are typically employed by an investment bank and will usually cover one industry in depth. The analyst then makes specific recommendations to its clients and issues his reports publicly. Buy-side analysts on the other hand are […]

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How do Credit Analysts use financial models?

Credit Analysts focuses on the ability of a company to service its current or prospective debt. If the company already has debt on its books, the analyst will use financial models to determine if the company has the required cash flow to maintain its payments. If the company fails such metrics, than it may be […]

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What does an Investment Banker do?

Let’s start by clarifying the term “Investment Banking.” An Investment Bank is a financial institution that performs three core activities: Investment Banking, Sales and Trading, and Research. When we refer to Investment Bankers throughout this guide we are referring to the Investment Banking function (also called “corporate finance”) of the Investment Bank. Investment Bankers are […]

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What does a Valuation Advisor do?

Valuation advisors play a critical role in three functions: corporate transactions, accounting and tax. Typical tasks performed by valuation advisors include: Corporate Transactions Fairness Opinions- This is a detailed evaluation as to whether a transaction (merger, acquisition, buy back, spin-off or going private) is fair. Whereas management of a company is usually the driver behind […]

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The DuPont Framework

The DuPont framework  (also known as the DuPont equation, DuPont Model or the DuPont method) is an equation that allows the company’s stakeholders to understand the return on equity (net income/equity) through multiplying three parts. Return on equity is vital because it is an important measure of a firm’s performance and potential growth. This system provides a structure where […]

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What is Par Value?

Par value, also known as face value or stated value, refers to the minimum amount of money at which a security can be issued or redeemed. The purpose for having par value for stock is to have an amount to account for the purchases and sales of stock on financial statements. Par value is ultimately […]

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What is financial modeling and who uses financial models?

What is Financial Modeling? The term “Financial Modeling” encompasses anything related to finance on excel. A financial model is a living and breathing calculation with multiple historical financial values, mixed with prospective inputs to get you to any answer the analyst is seeking. Using excel you could create a financial budget, forecast a project cost, […]

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What is a non-recurring item?

A non-recurring item is a gain or loss found on a company’s income statement that is not expected to occur regularly. Examples of non-recurring items are litigation fees, write-offs of bad debt or worthless assets, employee-separation costs, and repair costs for damage caused by natural disasters. Analysts seeking to measure the sustainable profitability of a […]

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