How to Value a Company

VALUATION
analytical process -> worth of an asset/company

FUNDAMENTAL ANALYSIS
goal -> real market value
over/under valued

Qualitative (non-numerical)
- bussiness model
not as strigthforward as it seems
about how it makes money
- competitive advantages
- management
staffs's records
- corporate governance

*customer base, market share among firms, industry-wide growrth,

competition, regulation, bussiness cycle*

Quantitative (numbers,financial statements)

*annual report
-balance sheet
-assets : bussiness owns -> cash, inventory, machinery,
buildings
-financing to acquire assets from liabilities + equity
-liabilities : debts, wages, dividends
-equity : owner's money, retained earnings

*assets = liabilities + shareholders equity*

-income statement
-revenues or sales per period
-expenses and costs of operating
-expenses from revenue to achive net income or profit

*net income : revenue - expenses

-statement of cash flow (CFS)
-Cash From Investing : for assets
-Cash From Financing : issuing or borrowing funds
-Operating Cash Flow : day-to-day bussiness

VALUATION ANALYSIS
PV : present value

*manufacture company - DCF model

*real estate company - net operating income & capitalization rate

EV/EBITDA : enterprise value to earning before interest, taxes,

depreciation and amortization
P/B : price to book ratio
NAV : net asset value

-Working Capital Ratio

ability to pay liabilities (state of asset & liabilities)
= assets : liabilities
-Quick Ratio (acid test)
wellness to cover liabilities w/ cash and liquid items
= assets - inventories : liabilities
-Earning per Share (EPS)
net income per stock share
-Price-Earning (P/E) ratio
= share price : EPS
-Debt-Equity (D/E) ratio
= debts : equity
-Return on Equity (ROE)
= net earning - dividends : equity