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A company's earnings before interest, taxes, depreciation, and amortization (commonly abbreviated EBITDA, [1] pronounced / ˈ iː b ɪ t d ɑː,-b ə-, ˈ ɛ-/ [2]) is a measure of a company's profitability of the operating business only, thus before any effects of indebtedness, state-mandated payments, and costs required to maintain its asset base.
Financial manager often uses the Theory of capital structure to determine the ratio between equity and debt which should be used in a financing round for a company. The basis of the theory is that debt capital used beyond the point of minimum weighted average cost of capital will cause devaluation and unnecessary leverage for the company.
In financial accounting, operating cash flow (OCF), cash flow provided by operations, cash flow from operating activities (CFO) or free cash flow from operations (FCFO), refers to the amount of cash a company generates from the revenues it brings in, excluding costs associated with long-term investment on capital items or investment in securities. [1]
Ke is the risk-adjusted, theoretical rate of return on a Company's invested excess capital obtained through external investments. Among other things, the value of Ke and the Cost of Debt (COD) [ 6 ] enables management to arbitrate different forms of short and long term financing for various types of expenditures.
In little more than a decade, M&A deals in China increased by a factor of 20, from 69 in 2000 to more than 1,300 in 2013. In 2014, Europe registered its highest levels of M&A deal activity since the financial crisis. Driven by U.S. and Asian acquirers, inbound M&A, at $320.6 billion, reached record highs by both deal value and deal count since ...
The net cash flow to total invested capital is the generally accepted choice. Total cash flow approach (TCF) [ clarification needed ] This distinction illustrates that the Discounted Cash Flow method can be used to determine the value of various business ownership interests.
To calculate the firm's weighted cost of capital, we must first calculate the costs of the individual financing sources: Cost of Debt, Cost of Preference Capital, and Cost of Equity Cap. Calculation of WACC is an iterative procedure which requires estimation of the fair market value of equity capital [ citation needed ] if the company is not ...
This is in contrast to the more typical approach of discounting free cash flow to the Firm where EBITDA less capital expenditures and working capital is discounted at the weighted average cost of capital, which incorporates the cost of debt. For a multiple based valuation, similarly, price to earnings is preferred to EV/EBITDA. Here, there are ...