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Learn/Accounting and valuation for the buy side
LearnAccounting and valuation for the buy side

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B Basic

  • Reading the statements as an owner9m
  • Earnings quality and cash conversionPro10m
  • Returns on capitalPro10m

A Advanced

  • Choosing the right multiplePro11m
  • Normalized earnings through a cyclePro10m
  • Reverse DCF: what the price impliesPro11m
  • Capital allocation and per share valuePro12m
  • FlashcardsPro0/20
  • Basic quizPro80% passes
  • Advanced quizPro80% passes
  • Terms

Accounting and valuation for the buy side

0
of 7 lessons
0
of 20 cards
FlashcardsStart the first lesson

How a long-only analyst reads a company's accounts as a part owner: whether the earnings are real cash, what return the business earns on its capital, which multiple fits it, what the price already assumes, and whether management grows value per share.

BBasic3 lessons

  1. 1Reading the statements as an ownerA banker reads the statements to build a model. An investor who will hold the stock for five years reads them to answer one question: how much cash does this business hand its owners, and how reliably?9 min
  2. 2Earnings quality and cash conversionProTwo companies can report the same earnings and be worth very different amounts. Earnings quality is how much of the reported number is repeatable cash that belongs to shareholders.10 min
  3. 3Returns on capitalProLong-term investors care less about how fast a company grows than about what it earns on the money it puts in. ROIC, ROE, and the return on new capital decide whether growth makes owners richer.10 min
  4. QBasic quizPro10 questions, 80% passes

AAdvanced4 lessons

  1. 4Choosing the right multipleProEvery multiple is a shortcut for a DCF, and each one hides an assumption. The skill is matching the multiple to the business and fixing the numerator and denominator so they describe the same claim.11 min
  2. 5Normalized earnings through a cycleProA cyclical company's earnings this year say little about its value. Long-only investors price these businesses on what they earn across a full cycle, which often means buying when the P/E looks highest.10 min
  3. 6Reverse DCF: what the price impliesProInstead of forecasting cash flows to get a value, start from the price and solve for the growth and returns it requires. Then decide whether the business can beat that bar.11 min
  4. 7Capital allocation and per share valueProOver a long hold, what management does with free cash flow matters as much as how much it generates. Reinvestment, acquisitions, dividends, and buybacks each help or hurt owners depending on price and return.12 min
  5. QAdvanced quizPro10 questions, 80% passes