What is Shareholder Value Added (SVA) and how is it used in value investing?

July 9, 2024 No Comments

A: A: Shareholder value added (SVA) is a performance metric that results from subtracting a corporation’s cost of capital from its net operating profit after tax. Some value investors use SVA as a tool to judge the corporation’s profitability and management efficacy. This line of

What is the accounting treatment for unusual or infrequent items for IFRS and U.S. GAAP?

July 9, 2024 No Comments

A: There are significant differences in the ways generally accepted accounting principles, or GAAP, and the international financial reporting standards, or IFRS, treat income or expense items that are irregular. Investors should understand these items and how they are reported. Unusual or Infrequent Items Some

What is an IPO lock-up period and how long is it?

July 9, 2024 No Comments

A: An initial public offering (IPO) lock-up period is a contractual restriction that prevents insiders who are holding a company’s stock, before it goes public, from selling the stock for a period usually lasting 90 to 180 days after the company goes public. Insiders include

What is a “non linear” exposure in Value at Risk (VaR)?

July 9, 2024 No Comments

A: The value at risk (VaR) is a statistical risk management technique that determines the amount of financial risk associated with a portfolio. There are generally two types of risk exposures in a portfolio: linear or nonlinear. A portfolio that contains a significant amount of

What is backtesting in Value at Risk (VaR)?

July 9, 2024 No Comments

A: The value at risk is a statistical risk management technique that monitors and quantifies the risk level associated with an investment portfolio. The value at risk measures the maximum amount of loss over a specified time horizon with a given confidence level. Backtesting measures

What is a back door listing?

July 9, 2024 No Comments

A: A back door listing, sometimes referred to as a reverse takeover, reverse merger, or reverse initial public offering (IPO), occurs when a privately held company that may not qualify for the public offering process purchases a publicly traded company. By undertaking a back door

What is capital structure theory?

July 9, 2024 No Comments

A: In financial management, capital structure theory refers to a systematic approach to financing business activities through a combination of equities and liabilities. Competing capital structure theories explore the relationship between debt financing, equity financing and the market value of the firm. Traditional Approach According

What is a bad interest coverage ratio?

July 9, 2024 No Comments

The interest coverage ratio is one of several debt ratios that market analysts utilize. The formula allows investors or analysts to determine how comfortably interest on all its outstanding debt can be paid by a company. The ratio is calculated by using the interest expenses

What is a combined loan to value ratio?

July 9, 2024 No Comments

A: The combined loan to value (CLTV) ratio is a calculation used by mortgage and lending professionals to determine the total percentage of a homeowner’s property that is encumbered by liens. The CLTV ratio is determined by adding the balances of all outstanding loans and

What is a good interest coverage ratio?

July 9, 2024 No Comments

The interest coverage ratio is a measurement of a company’s ability to handle its outstanding debt. It is one of a number of debt ratios that can be used to evaluate a company’s financial condition. A good interest coverage ratio is considered important by both

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