Series 86 flashcards
Series 86 · Build recall with a focused review session.
32 cards. Read the term and the definition here. The deck at the top of this page is optional.
- Primary research
- Data collected directly from original sources such as company filings, management interviews, or proprietary surveys for the analyst's specific question.
- Secondary research
- Data previously gathered and published by others, including industry reports, news articles, and third-party databases.
- Form 10-K
- Annual SEC filing containing audited financial statements, business description, risk factors, and management discussion of operations.
- Form 10-Q
- Quarterly SEC filing with unaudited financial statements and updates; required for most reporting companies after their first fiscal year.
- Form 8-K
- SEC filing used to disclose material corporate events promptly, such as acquisitions, executive changes, or bankruptcy.
- Regulation FD
- SEC rule barring selective disclosure of material nonpublic information to analysts or investors unless broadly and promptly publicized.
- Form 4
- SEC filing reporting changes in insider ownership, generally due within two business days of the transaction.
- Form 13F
- Quarterly SEC filing by institutional investment managers disclosing certain equity holdings and their market values.
- Survivorship bias
- Distortion from excluding failed or delisted companies from a dataset, which can overstate historical returns and understate risk.
- Look-ahead bias
- Using information in a backtest or forecast that was not actually available at the decision date, producing overstated accuracy.
- Selection bias
- Error when the sample is not representative of the target population because inclusion is related to the outcome.
- DuPont analysis
- ROE decomposition: net profit margin times asset turnover times equity multiplier, separating profitability, efficiency, and leverage.
- Free cash flow to firm
- FCFF equals EBIT times one minus tax rate, plus depreciation and amortization, minus capex, minus change in net working capital.
- Free cash flow to equity
- FCFE equals FCFF minus after-tax interest expense plus net borrowing, representing cash available to common shareholders.
- Weighted average cost of capital
- WACC equals equity weight times cost of equity plus debt weight times after-tax cost of debt, using market values.
- Capital asset pricing model
- Expected return equals risk-free rate plus beta times the market risk premium; beta measures systematic risk.
- Enterprise value
- Market capitalization plus debt, preferred stock, and minority interest, minus cash and short-term investments on the balance sheet.
- Gordon growth terminal value
- Terminal value equals next period free cash flow divided by WACC minus perpetual growth rate.
- Residual income
- Net income minus an equity charge equal to cost of equity times beginning book value of equity.
- Economic value added
- NOPAT minus WACC times invested capital; positive EVA indicates returns above the cost of capital.
- Sustainable growth rate
- ROE times retention ratio, or ROE times one minus dividend payout ratio, assuming constant margins and leverage.
- Treasury stock method
- Diluted share count adds net shares from exercised options, computed as proceeds assumed to repurchase shares at average price.
- Revenue build forecast
- Project revenue by volume times price or by segment, tying assumptions to market size, share, and pricing trends.
- Operating leverage
- The sensitivity of operating income to revenue changes caused by fixed costs; higher fixed costs increase profit volatility.
- Capex to depreciation ratio
- A ratio above one implies capacity expansion; near one suggests maintenance-level reinvestment in steady state.
- Working capital cash impact
- Increases in receivables and inventory use cash, while increases in payables and accrued liabilities provide cash.
- Discounted cash flow
- Valuation summing present values of forecast free cash flows and terminal value, discounted at the appropriate cost of capital.
- Exit multiple method
- Terminal value equals terminal EBITDA or EBIT times a selected multiple, checked against implied perpetual growth.
- Comparable company analysis
- Valuation using trading multiples of similar public firms, typically enterprise value to EBITDA or price to earnings.
- Precedent transaction analysis
- Valuation using multiples paid in completed acquisitions, which often include control premiums and synergy assumptions.
- Implied share price
- Enterprise value minus net debt and preferred stock, divided by diluted shares outstanding, gives value per share.
- Scenario analysis
- Valuation under alternative sets of correlated assumptions, such as base, upside, and downside cases, with probability weights.