Corporate Finance   PIYOOSH BAJORIA
Time Value of Money - Compounding             PIYOOSH BAJORIA
Time Value of Money - Discounting             PIYOOSH BAJORIA
Time Value of Money - Annuity           PIYOOSH BAJORIA
Bond Valuation – Yield to Maturity   Yield to Maturity (YTM) refers to the    expected rate of return a bondholder will r...
Bond Valuation – YTM Formula           PIYOOSH BAJORIA
Ratio Analysis – Liquidity Ratios   Current Ratio – Indicates the short term liquidity    position of the firm   Formula...
Ratio Analysis – Liquidity Ratios   Quick Ratio – More stringent indicator of short    term liquidity of the firm   Form...
Ratio Analysis – Turnover Ratios   Accounts Receivable Turnover Ratio – Indicates    how many times receivables are gener...
Ratio Analysis – Turnover Ratios   Average Collection Period – Indicates the    number of days it takes to collect the ac...
Ratio Analysis – Turnover Ratios   Inventory Turnover Ratio – Indicates the    efficiency of the firm in managing invento...
Ratio Analysis – Turnover Ratios   Asset Turnover Ratio – Indicates the efficiency    of the firm in using the assets for...
Ratio Analysis – Profitability Ratios   Gross Profit Margin – Indicates the relation    between production and selling pr...
Ratio Analysis – Profitability Ratios   Operating Profit Margin – Indicates the    efficiency of the firm in managing its...
Ratio Analysis – Profitability Ratios   Net Profit Margin – Indicates the efficiency of    the firm in managing its produ...
Ratio Analysis – Leverage Ratios   Debt-Equity Ratio – Is a measure of the capital    structure of the firm and indicates...
Ratio Analysis – Leverage Ratios   Debt/Assets Ratio – Indicates the percentage of    assets of the firm financed by debt...
Ratio Analysis – Coverage Ratios   Interest Coverage Ratio – Indicates the ability of    the firm to service its interest...
Ratio Analysis – Coverage Ratios   Debt Service Coverage Ratio – Indicates the ability of    the firm to meet its total o...
Ratio Analysis – Dividend Ratios   Dividend Pay-out Ratio – Is the percentage of    the after tax profits which a firm pa...
Ratio Analysis – Return on Assets   Return on Assets (ROA) – Is the indicator of    the earning ability of the firm on a ...
Ratio Analysis – Return on Equity   Return on Equity – Is the indicator of the    earning ability of the firm on the shar...
Ratio Analysis – Per Shares   EPS = Net Profit/No of outstanding shares   DPS = Total Dividend/No of outstanding shares...
Ratio Analysis – Valuation Ratios   P/E Ratio – Is the indicator of how many times    the market is willing to pay with r...
Ratio Analysis – Valuation Ratios   Price/Book Ratio – Is the indicator of how    many times the market is willing to pay...
DuPont Chart   PIYOOSH BAJORIA
Extended DuPont Chart       PIYOOSH BAJORIA
Risk and Return   Systematic Risk – Non-diversifiable Risk       Inflation       Interest Rate Risk       Political Ri...
Beta   Beta measures the relative risk associated with any    given stock or portfolio in relation to the market    portf...
Beta (cont.)   A beta co-efficient of more than “1.00” indicates    above average risk. Such stock are also called    agg...
CAPM and SML   Ri = Rf + β (Rm – Rf)                       PIYOOSH BAJORIA
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Corporate finance ibs

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Corporate finance ibs

  1. 1. Corporate Finance PIYOOSH BAJORIA
  2. 2. Time Value of Money - Compounding PIYOOSH BAJORIA
  3. 3. Time Value of Money - Discounting PIYOOSH BAJORIA
  4. 4. Time Value of Money - Annuity PIYOOSH BAJORIA
  5. 5. Bond Valuation – Yield to Maturity Yield to Maturity (YTM) refers to the expected rate of return a bondholder will receive if they hold a bond all the way until maturity while reinvesting all coupon payments at the bond yield. Another way of putting it is that the yield to maturity is the rate of return that makes the present value (PV) of the cash flow generated by the bond equal to the price. PIYOOSH BAJORIA
  6. 6. Bond Valuation – YTM Formula PIYOOSH BAJORIA
  7. 7. Ratio Analysis – Liquidity Ratios Current Ratio – Indicates the short term liquidity position of the firm Formula: Current Assets/Current Liabilities PIYOOSH BAJORIA
  8. 8. Ratio Analysis – Liquidity Ratios Quick Ratio – More stringent indicator of short term liquidity of the firm Formula:(Current Assets – Inventories)/Current Liabilties PIYOOSH BAJORIA
  9. 9. Ratio Analysis – Turnover Ratios Accounts Receivable Turnover Ratio – Indicates how many times receivables are generated and collected during the year Formula:Net Credit Sales/Average Accounts Receivable PIYOOSH BAJORIA
  10. 10. Ratio Analysis – Turnover Ratios Average Collection Period – Indicates the number of days it takes to collect the accounts receivable Formula:360/Average Accounts Receivable PIYOOSH BAJORIA
  11. 11. Ratio Analysis – Turnover Ratios Inventory Turnover Ratio – Indicates the efficiency of the firm in managing inventories Formula:Cost of Goods Sold/Average Inventory PIYOOSH BAJORIA
  12. 12. Ratio Analysis – Turnover Ratios Asset Turnover Ratio – Indicates the efficiency of the firm in using the assets for generating a volume of sales. Formula:Sales/Average Assets PIYOOSH BAJORIA
  13. 13. Ratio Analysis – Profitability Ratios Gross Profit Margin – Indicates the relation between production and selling price. It is also a measure of the efficiency of the production process of the firm. Formula:Gross Profit/Net Sales PIYOOSH BAJORIA
  14. 14. Ratio Analysis – Profitability Ratios Operating Profit Margin – Indicates the efficiency of the firm in managing its production costs as well as the overheads. Formula:Operating Profit/Net Sales PIYOOSH BAJORIA
  15. 15. Ratio Analysis – Profitability Ratios Net Profit Margin – Indicates the efficiency of the firm in managing its production expenses, overheads, financing costs and taxes. Formula:Net Profit/Net Sales PIYOOSH BAJORIA
  16. 16. Ratio Analysis – Leverage Ratios Debt-Equity Ratio – Is a measure of the capital structure of the firm and indicates the amount of debt raised for every rupee of equity. Formula:Debt/Equity PIYOOSH BAJORIA
  17. 17. Ratio Analysis – Leverage Ratios Debt/Assets Ratio – Indicates the percentage of assets of the firm financed by debt. Formula:Debt/Assets PIYOOSH BAJORIA
  18. 18. Ratio Analysis – Coverage Ratios Interest Coverage Ratio – Indicates the ability of the firm to service its interest obligations. Formula:EBIT/Interest Expense PIYOOSH BAJORIA
  19. 19. Ratio Analysis – Coverage Ratios Debt Service Coverage Ratio – Indicates the ability of the firm to meet its total obligations. Formula:(PAT + Depreciation + Non-cash Charges + Interest)/ (Interest + Repayment of term loan) PIYOOSH BAJORIA
  20. 20. Ratio Analysis – Dividend Ratios Dividend Pay-out Ratio – Is the percentage of the after tax profits which a firm pays out as dividend to its shareholders. Formula:Total Dividend Paid/PAT PIYOOSH BAJORIA
  21. 21. Ratio Analysis – Return on Assets Return on Assets (ROA) – Is the indicator of the earning ability of the firm on a given asset base. Formula:Net Profit/Assets PIYOOSH BAJORIA
  22. 22. Ratio Analysis – Return on Equity Return on Equity – Is the indicator of the earning ability of the firm on the shareholders funds. Formula:Net Income/Average Equity PIYOOSH BAJORIA
  23. 23. Ratio Analysis – Per Shares EPS = Net Profit/No of outstanding shares DPS = Total Dividend/No of outstanding shares BVPS = Total Equity/No of outstanding shares PIYOOSH BAJORIA
  24. 24. Ratio Analysis – Valuation Ratios P/E Ratio – Is the indicator of how many times the market is willing to pay with respect to the earnings Formula:Market Price per share/EPS PIYOOSH BAJORIA
  25. 25. Ratio Analysis – Valuation Ratios Price/Book Ratio – Is the indicator of how many times the market is willing to pay with respect to the intrinsic value of the firm Formula:Market Price per share/BVPS PIYOOSH BAJORIA
  26. 26. DuPont Chart PIYOOSH BAJORIA
  27. 27. Extended DuPont Chart PIYOOSH BAJORIA
  28. 28. Risk and Return Systematic Risk – Non-diversifiable Risk  Inflation  Interest Rate Risk  Political Risk  Natural Calamities  Scams  International Events Unsystematic Risk – Diversifiable Risk  Business Risk  Financial Risk  Default or Insolvency Risk PIYOOSH BAJORIA
  29. 29. Beta Beta measures the relative risk associated with any given stock or portfolio in relation to the market portfolio. The market portfolio represents the most diversified portfolio of risky assets an investor could buy as it includes all the risky assets. Beta = Non- diversifiable risk of an asset/ Risk of market portfolio The beta co-efficient is a measure of non-diversifiable or systematic risk PIYOOSH BAJORIA
  30. 30. Beta (cont.) A beta co-efficient of more than “1.00” indicates above average risk. Such stock are also called aggressive stocks. A beta co-efficient of less than “1.00” indicates below average risk. Such stocks are also called defensive stocks. PIYOOSH BAJORIA
  31. 31. CAPM and SML Ri = Rf + β (Rm – Rf) PIYOOSH BAJORIA

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