When evaluating terminal value, should I use the perpetuity growth model or the exit approach?

June 30, 2024 No Comments

A: In discounted cash flow (DCF) analysis, neither the perpetuity growth model nor the exit multiple approach is likely to render a perfectly accurate estimate of terminal value. The choice of which method of calculating terminal value to use depends partly on whether an investor

When is a call option considered to be “in the money”?

June 30, 2024 No Comments

A: A call option gives the buyer or holder the right, but not the obligation, to buy the underlying security at a predetermined strike price on or before the expiration date. “In the money” describes the moneyness of an option. Moneyness describes the relationship of

When is accrual accounting more useful than cash accounting?

June 30, 2024 No Comments

A: The accrual accounting method is more useful than the cash accounting method when a person or company is trying to understand the performance of a business over a specified time period. Under the accrual accounting method, all revenue and expenses are matched together. All

When is an expense ratio considered high and when is it considered low?

June 30, 2024 No Comments

A: A number of factors determine when an expense ratio is relatively high or low, but a good, low expense ratio is generally considered to be around 0.5-0.75% for an actively managed portfolio, while an expense ratio greater than 1.5% is considered on the high

When is it better to use unlevered beta than levered beta?

June 30, 2024 No Comments

A: It is better to use an unlevered beta over a levered beta when a company or investor wishes to measure a publicly traded security’s performance in relation to market movements without the effects of that company’s debt factor. A publicly traded security’s levered beta

When must a company announce earnings?

June 30, 2024 No Comments

A: The Securities & Exchange Commission (SEC) requires companies to file earnings reports no later than 45 days after the end of their first three quarters, and their quarterly and annual reports 90 days after their fiscal year end. Companies file quarterly earnings reports on

When should I use depreciation expense instead of accumulated depreciation?

June 30, 2024 No Comments

A: The most basic difference between depreciation expense and accumulated depreciation lies in the fact that one appears as an expense on the income statement, and the other is a contra asset reported on the balance sheet. Both pertain to the “wearing out” of equipment,

When should I use seasonally adjusted data from the consumer price index (CPI)?

June 30, 2024 No Comments

A: The Consumer Price Index (CPI) is the most widely used metric for consumer inflation changes over time and utilizes data based on consumer buying habits from a broad sample set of the population. Published each month by the Bureau of Labor Statistics (BLS), the

Where can I find fiscal year data for publicly traded corporations?

June 30, 2024 No Comments

A: Publicly traded corporations are required by law to publish their fiscal-year data to the public. The Securities and Exchange Commission, or SEC, regulates the securities markets, including securities exchanges, mutual funds and public company financial reporting. The SEC has established the Electronic Data Gathering

What value metrics are best for analyzing companies in the metals and mining sector?

June 30, 2024 No Comments

A: Discounted cash flow (DCF) analysis is often applied to companies in the mining business because accurate evaluation of a company’s worth depends heavily on projected future earnings. In the mining industry, profit is determined more by revenues than by costs. The operational costs of

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