Ashish sir class notes

• relative value of money depends on where and when you are

spending that money.
• Equity market is a place where stocks and shares of companies are traded.

• The main purpose of equity valuation is to estimate the value of a firm or its security.

• Value of share depends on future dividend

• Value of share is equal to present value of all potential future cashflows

• What is Free Cash Flow to Equity (FCFE)? Free cash flow to

equity (FCFE) is the amount of cash a business generates that is
available to be potentially distributed to shareholders.
• Free cash flow to equity is a measure of how much cash is available to
the equity shareholders of a company after all expenses, reinvestment,
and debt are paid. FCFE is a measure of equity capital usage.
• A capital expenditure (“CapEx” for short) is the payment with
either cash or credit to purchase long-term physical or fixed
assets used in a business's operations.
• Once a company goes public and its shares start trading on a stock exchange, its share
price is determined by supply and demand in the market. If there is a high demand for its
shares, the price will increase.
• What is the model of dividend growth?
• The dividend growth model is a way of valuing a company's stock without
considering the effects of market conditions.
• The required rate of return (RRR) is the minimum return an
investor will accept for owning a company's stock, as
compensation for a given level of risk associated with holding the
stock. The RRR is also used in corporate finance to analyze the
profitability of potential investment projects.
•

• Risk – chances of deviation of actual outcomes from

expected outcomes
• Relative valuation models are used to value companies by
comparing them to other businesses based on certain metrics
such as EV/Revenue, EV/EBITDA, and P/E ratios. The logic is
that if similar companies are worth 10x earnings, then the
company that's being valued should also be worth 10x its
earnings.
• The level of risk in a portfolio is often measured using standard
deviation, which is calculated as the square root of the variance.
If data points are far away from the mean, then the variance is
high, and the overall level of risk in the portfolio is high as well.
• Portfolio management is the selection, prioritisation and control of an organisation's
programmes and projects, in line with its strategic objectives and capacity to deliver. The
goal is to balance the implementation of change initiatives and the maintenance of
business-as-usual, while optimising return on investment.

• Variance is the difference between planned and actual numbers (both expenses and
revenue)

• Portfolio return refers to the gain or loss realized by an

investment portfolio containing several types of investments.
• Variance= (actual return – expected return)^2/n n= no of
observations
• The Holding Period Return (HPR) is the total return on an asset or investment
portfolio over the period for which the asset or portfolio has been held.
• The risk-free rate of return is the interest rate an investor can
expect to earn on an investment that carries zero risk