Young Analysts

Finance Bootcamp
Day 1
History of Money
The Five Horsemen

of the Ecocalypse
Interest

The cost of borrowing money.

Why do you think interest exists?

Interest- Simple Interest

Simple interest = principal X interest rate X time

$100,000, 4%, 30 years

Interest - Compound Interest

Compound interest = = P [(1 + i)n – 1]

Where: P = principal, i = annual interest rate, n = number of compounding periods

Same question: $100,000, 4%, 30 years

Inflation

Cost of Living
Why do we invest?
Time Value of Money
Risk and Return

$100 or 50% chance at $100

$100 or 50% chance at $200

$100 or 1% chance at $1,000,000

The Value of Choice

Having the ability to choose comes at a

premium
Financial Instruments
Bonds, T-Bills, T-Notes,
Calculating the Value of A Bond

A 9% $100,000 bond dated January 1, 2023 and having interest payment dates
of June 30 and December 31 of each year
Simpler Example

For the sake of convenience, let's assume that the bond that will only last one
year and that the market has a flat 8% rate of interest.
Stocks
Types of Stocks

Ordinary vs Voting Stocks

Common vs Prefered Stocks

Growth vs Value Stocks

Income Stocks and Dividends

Blue-Chip, Cyclical and Non-Cyclical, Defensive, IPO, Penny, ESG

Measuring Returns

Nominal Return

Real Return

Return on Assets

Return on Equity

Yield vs Return
Options and The Story of Thales the Milesian
Options
Futures
Futures
Young Analysts Finance
Bootcamp
Day 2
Intro to Financial Statements

Financial statements are written records that convey the business activities and the
financial performance of a company. Financial statements are often audited by
government agencies, accountants, firms, etc. to ensure accuracy and for tax, financing,
or investing purposes. The three main types of financial statements are

● Income Statement
● Balance Sheet
● Cash Flow Statement
Income Statement
Comparing Income Statements

TechOne Alpha Systems

● Revenue growth: 12.6% ● Revenue growth: 16.2%

● Gross profit margin: 74% ● Gross profit margin: 67%
● Net profit margin: 35% ● Net profit margin: 35%
● Net income growth: 18.6% ● Net income growth: 19.6%
Balance Sheet

A balance sheet is a financial statement that contains details of a company's

assets or liabilities at a specific point in time.
Useful Balance Sheet Metrics

Current Ratio: Working Capital:

Current Ratio = Current Assets ÷ Working Capital = Current Assets -
Current Liabilities Current Liabilities

Debt/Equity:
Quick Ratio: Debt-to-Equity Ratio = Total
Quick Ratio = (Current Assets - Liabilities ÷ Shareholders' Equity
Inventories) ÷ Current Liabilities
Cash-Flow Statement

The cash flow statement (CFS), is a financial statement that summarizes the
movement of cash and cash equivalents (CCE) that come in and go out of a
company.
Young Analysts Finance
Bootcamp
Day 3
Fundamental Analysis

Fundamental analysis (FA) measures a security's intrinsic value by examining

related economic and financial factors.

Intrinsic value is the value of an investment based on the issuing company's

financial situation and current market and economic conditions.ss

Market value is the current price of a company's stock.

Fundamental Analysis

Fundamental analysts study anything that can affect the security's value, from
macroeconomic factors such as the state of the economy and industry
conditions to microeconomic factors like the effectiveness of the company's
management.

The end goal is to determine a number that an investor can compare with a
security's current price to see whether the security is undervalued or
overvalued by other investors.
Fundamental Analysis

Analysts typically study, in order:

● The overall state of the economy

● The strength of the specific industry
● The financial performance of the company issuing the stock
Example: Pricing a Company’s Bond

Prevailing interest rates and the overall state of the economy

Overall bond market

Credit ratings

Financial statements (Debt to Equity Ratio)

Intrinsic Value
Quantitative and Qualitative Fundamental
Analysis
Quantitative: information that can be shown using numbers, figures, ratios, or
formulas
● Financial Statements

Qualitative: rather than a quantity of something, it is its quality, standard, or nature

● The qualitative fundamentals are less tangible. They might include the quality of a company's key
executives, brand-name recognition, patents, and proprietary technology.
Quantitative Fundamentals

The Balance Sheet

The Income Statement

Statement of Cash Flows

Qualitative Fundamentals

The Business Model

Competitive Advantage

Management

Corporate Governance

Industry
DIY: AAPL

The Macroeconomy

The Industry

The Company
Young Analysts Finance
Bootcamp
Day 4 & 5
Valuation

Valuation is the process of determining the worth of an

asset or company.
The Capital Asset Pricing Model (CAPM)

Expected return on an asset based

on the risk free returns in the
macro-whole (usually,
countrywide)
CAPM Sample Question

Shares of Sara Co have a Beta of 1.4

Risk premium is 9% and the risk free rate is 3%

What is Sara Co’s cost of equity?

Key Methods: Discounted Cash Flow Analysis

DCF analysis determines the value of an investment today, based on

projections of how much money that investment will generate in the future.
WACC

Weighted average cost of capital (WACC) represents a firm's average after-tax

cost of capital from all sources, including common stock, preferred stock,
bonds, and other forms of debt.

WACC is the average rate that a company expects to pay to finance its assets.
Cash Flow Calculate the Net Present Value (NPV)

Year Cash Flow NPV is how much an investment is worth throughout its
0 -$11 million lifetime, discounted to today's value.

1 $1 million

2 $1 million

3 $4 million

4 $4 million

5 $6 million
Internal Rate of Return (IRR)

The internal rate of return (IRR) is the annual rate of growth that an
investment is expected to generate.

IRR is a discount rate that makes the net present value (NPV) of all cash flows
equal to zero in a discounted cash flow analysis.
Ramazotti SA has $1 million allocated for capital expenditures. Which of the following
projects should the company accept to stay within the $1 million budget? How much does
the budget limit cost the company in terms of forgone NPV? The opportunity cost of capital
for each project is 11 %.
Earnings before interest and taxes (EBIT)

EBIT = Revenue − COGS − Operating Expenses

Or
EBIT = Net Income + Interest + Taxes
where:
COGS = Cost of goods sold
DEPRECIATION

Straight Line

Declining Balance

Double Declining Balance

Sum-of-the-Years-Digits

Units of Production
EBITDA

EBITDA = Net Income + Taxes + Interest Expense +

Depreciation & Amortization
and
EBITDA = Operating Income + Depreciation & Amortization
FCFF
Terminal Growth Rate

The constant rate that a company is expected to grow at

forever.
Price to Earnings Ratio
Price to Book Ratio
Comparable Company Analysis (CCA)
Can you compare:

Apple Huawei
Bank of America Norinchukin
McDonalds 7/11
Benchmarking
The Apple Example