The Capital Asset Pricing Model (CAPM) is a model that investors use to determine the rate of return of an investment. The model describes the relationship between the expected return of an investment and its risks. Furthermore, CAPM is one of the most commonly used models in finance for pricing …

The dividend yield is a financial ratio that represents the annual dividends paid to shareholders against a stock in relation to its current market price. In simpler words, the dividend yield measures a company’s dividends as a percentage of its stocks’ current market price. The dividend yield is a useful …

The Arbitrage Pricing Theory (APT) is a model that describes the relationship between the expected returns from an asset and its risks. Often used as an alternative to the Capital Asset Pricing Model (CAPM), APT is a multi-factor model for investments that explains the risk-return relationship using various independent factors …

The Dividend Discount Model (DDM) is a model used to predict the value of a company’s stock. The model bases its calculations on the theory that the value of a stock is equal to all its future dividends discounted to their present value. Investors and shareholders use DDM to evaluate …

Introduction The Enterprise Value to EBITDA ratio, also known as the EBITDA multiple, is a ratio used to measure the value of a company. Usually, the reason for calculating the EV/EBITDA ratio is to use it as a comparison tool between different companies. It can also be helpful in other …

Introduction Comparative Company Analysis (CCA) is a process used to compare two similar companies, operating in the same industry. It is a valuation methodology that allows users to evaluate the ratios of similar public companies and use those ratios to derive the value of another company. CCA assists users in …

Introduction The Discounted Cash Flow (DCF) model is a method that investors use to estimate the value of an investment based on future cash flows. The DCF model uses the forecasted cash flows of investment to determine its value today. However, this tool isn’t only for investors. Business owners and …

Introduction When it comes to the shares of companies, there are two commonly available types in the market. These include common shares and preferred shares. While they both give shareholders certain rights, there are some differences between them. Therefore, it is crucial to understand the differences between them. What are …