Series 86 key terms

Original data gathered directly from sources such as company interviews, surveys, store visits, or customer conversations, used to form independent conclusions rather than relying on published reports.

Information compiled and published by others, including filings, industry reports, news, and broker research, used as a starting point and cross-check for original analysis.

Conversations with distributors, retailers, suppliers, or customers to verify demand, inventory, and pricing trends observed in a company's reported results.

Non-traditional datasets such as credit card transactions, satellite imagery, web traffic, or app downloads used to track business activity before it appears in financial statements.

A service that connects investors with former executives, engineers, or industry specialists for paid consultations to gain operational insight, subject to compliance rules against material nonpublic information.

Annual filing containing audited financial statements, business description, risk factors, and management discussion, providing the most complete periodic disclosure about a public company.

Quarterly filing with unaudited financial statements and updates on operations, used to track interim performance between annual reports.

Current report filed when material events occur, such as acquisitions, executive departures, or earnings releases, giving timely disclosure outside the regular reporting cycle.

Management's Discussion and Analysis: a narrative section explaining results, liquidity, capital resources, and known trends, often revealing drivers that raw financial statements do not.

A filing sent to shareholders before a vote that discloses executive compensation, board composition, related-party transactions, and incentive structures useful for governance analysis.

A company-reported metric adjusted from GAAP figures, such as adjusted EBITDA, which can clarify recurring performance but requires reconciliation and scrutiny for aggressive add-backs.

Hypothetical statements that show results as if a transaction had occurred, useful for assessing combined performance but often excluding real costs.

Recording revenue when earned and expenses when incurred, regardless of cash timing, which better matches economic activity but requires judgment and estimation.

The accounting rules determining when and how much revenue a company records, including timing, gross versus net treatment, and performance obligations.

Current assets minus current liabilities, measuring short-term liquidity and the cash tied up in inventory and receivables net of payables.

Cash generated after capital expenditures, representing funds available for debt repayment, dividends, buybacks, or reinvestment; a key input in valuation.

Earnings before interest, taxes, depreciation, and amortization, a rough proxy for operating cash earnings that ignores capital structure and capital intensity.

Net income divided by shares outstanding after including dilutive securities such as options and convertibles, showing worst-case per-share earnings.

Decomposing return on equity into margin, asset turnover, and leverage to identify the drivers of profitability and risk.

Return on invested capital: after-tax operating profit divided by debt plus equity less cash, measuring how efficiently a company turns capital into returns.

An integrated financial model linking the income statement, balance sheet, and cash flow statement so that changes in assumptions flow consistently through all three.

An approach that starts with macroeconomic and industry trends, then narrows to sectors and individual companies, aligning company views with the broader environment.

An approach that begins with individual company fundamentals, such as products and management, and builds up to sector and market conclusions.

A framework assessing supplier power, buyer power, threat of new entrants, threat of substitutes, and rivalry to judge industry profitability.

The stages an industry passes through-emerging, growth, mature, and declining-each with different growth, margin, and competitive characteristics.

Weighted average cost of capital: the blended after-tax cost of debt and equity, used as the discount rate for enterprise cash flows in valuation.

Capital Asset Pricing Model: estimates required equity return as the risk-free rate plus beta times the equity risk premium.

A measure of a stock's sensitivity to market movements; above one implies greater volatility than the market, below one implies less.

The extra return investors demand for holding equities instead of risk-free assets, a key input in cost of equity estimates.

The estimated value of all cash flows beyond an explicit forecast period, often calculated with a perpetuity growth rate or exit multiple.

Discounted cash flow: valuing an asset by projecting future cash flows and discounting them to present value using an appropriate rate.

Valuing a company by applying multiples such as EV/EBITDA from similar public firms, reflecting current market pricing.

Valuing a company using multiples paid in past acquisitions of similar businesses, often including a control premium.

Valuing a diversified company by separately valuing each business segment and adding the results, sometimes adjusting for conglomerate discount.

Testing how valuation or forecasts change when one or two key assumptions vary, revealing which inputs matter most.

Evaluating outcomes under distinct, internally consistent sets of assumptions, such as base, bull, and bear cases, to frame uncertainty.

A technique that runs many random trials across input distributions to produce a range of possible outcomes and probabilities.

Building projections from operational drivers such as units, price, and headcount rather than extrapolating historical totals.

Predictable within-year patterns in demand or revenue, requiring adjustments when comparing quarterly results or annualizing data.

Sensitivity of a business to the economic cycle, causing revenue and earnings to swing with booms and recessions.