Author: John

Generally Accepted Accounting Principles

What are Generally Accepted Accounting Principles? Generally Accepted Accounting Principles (GAAP) represent a set of accounting standards, rules, and principles issued by the Financial Accounting Standard Board (FASB). GAAP is one of the two prevalent accounting standards used throughout the world, the other being IFRS. While IFRS has a worldwide …

P/E to Growth Ratio (PEG)

The price-to-earnings ratio is among the most prominent metrics that investors use when making investment decisions. It is straightforward to calculate and also provides a tool for investors to compare various stocks. Another reason why investors prefer the P/E ratio is that they can use it in other useful ratios. …

What is a Forward Price-To-Earnings (P/E) Ratio

The Price-To-Earnings ratio is an essential ratio for investors and measures a stock’s price in relation to the underlying company’s earnings. Other names for it are price or earnings multiple. P/E ratios are a critical comparison tool used by investors to evaluate various investments. There are different types of P/E …

International Financial Reporting Standards

Businesses and companies follow various accounting standards to prepare and present their financial statements. These standards regulate how companies account for transactions. Some countries may have their specific standards. However, most of these companies use variations of international standards already developed by standardized bodies. When it comes to international accounting …

Enterprise Value to Sales Ratio

What is Enterprise Value to Sales Ratio? Enterprise Value to Sales Ratio (EV/Sales) is a financial metric that investors use to measure a company’s total value in relation to its sales. The first part of the ratio is the Enterprise Value. A company’s enterprise value is the sum of its …

Free Cash Flow to Equity

What is Free Cash Flow to Equity? Free Cash Flow to Equity (FCFE) represents the cash available to a company’s shareholders or investors. These are the cash flows that come after deducting all the expenses, reinvestment, and debt expenses from a company’s total cash inflows. FCFE is a crucial metric …

Free Cash Flow Valuation Model

What is Free Cash Flow? Free Cash Flow (FCF) represents any cash that a company or business has left after paying for its operational needs and maintaining capital assets. Operating expenses include items, such as rent, salaries, and wages, taxes, etc., that companies pay to continue their activities. Similarly, capital …

Free Cash Flow to the Firm (FCFF), the Unlevered Free Cash Flow Formula

What is Free Cash Flow to the Firm? Free Cash Flow to the Firm (FCFF) represents any cash remaining after deducting a company’s depreciation, taxes, working capital, and other investment costs from its revenues. This amount shows any cash flow available for companies to distribute to their financiers, whether debtholders, …

Why Deflation Is Bad?

Most economies experience inflation regularly. Inflation represents a specific currency’s purchasing power. A high increase in inflation can result in damage to most economies. Some economies may also experience negative inflation, also known as deflation. While, theoretically, it can be a good thing, it also has some drawbacks. What is …