The Market Approach to Valuing Businesses (Second Edition)
|
|
- Myles Kelley
- 6 years ago
- Views:
Transcription
1 BV: Case Analysis Completed Transaction & Guideline Public Comparable MARKET APPROACH The Market Approach to Valuing Businesses (Second Edition) Shannon P. Pratt This material is reproduced from The Market Approach to Valuing Businesses (Second Edition) by Shannon P. Pratt with permission of John Wiley & Sons, Inc by National Association of Certified Valuators and Analysts (NACVA). All rights reserved. Market Chapters 1 Used by Institute of Business Appraisers with permission of NACVA for limited purpose of collaborative training v2
2 MARKET APPROACH BV: Case Analysis Completed Transaction & Guideline Public Comparable 2 Market Chapters by National Association of Certified Valuators and Analysts (NACVA). All rights reserved v2 Used by Institute of Business Appraisers with permission of NACVA for limited purpose of collaborative training.
3 Selecting, Weighting, and Adjusting Market Value Multiples Chapter 10 Size and Nature of Company Equity Value Multiples Invested Capital Multiples Availability of Data Dispersion of Market Value Multiples The Harmonic Mean as a Measure of Central Tendency Adjusting from Observed Market Value Multiples Illustrative Estimate of Value Using Mathematical Weighting Summary Many analysts tend to lean toward market value of invested capital (MVIC) multiples when valuing controlling interests and equity value multiples when valuing minority interests, although that is not always the case. As noted in Chapter 9, many analysts use only the invested capital procedure whether valuing a minority or a controlling interest. Apart from the question of control or minority value, the choice of which multiples ultimately to rely on is largely a function of two factors: 1. Size and nature of the company or industry 2. Availability and nature of comparative pricing data SIZE AND NATURE OF COMPANY Equity Value Multiples Generally speaking, when choosing among possible equity value multiples, the smaller the company, the more we choose multiples higher, rather than farther down, on the income statement. 137
4 138 The Market Approach to Valuing Businesses For many very small companies, especially service companies, price/sales gets the primary weight. It is usually the most reliable number for small companies, and the most available. Many buyers feel that for a given book of business, they already know how much they can bring down to the bottom line. Probably some of the best examples are property and casualty insurance agencies, which tend to have a high degree of customer persistence. The next most commonly used multiple for very small businesses is discretionary earnings (earnings before interest, taxes, noncash charges, and all compensation and benefits to one owner/operator). For many very small businesses, any income number beyond this may be negative or so small as to be meaningless. As company size begins to increase, however, discretionary earnings tend to become meaningless. Although there are no precise guidelines as to the size level at which discretionary earnings becomes meaningless, most analysts would not use it for companies valued over $5 million, and some would use it only for companies valued under $1 or $2 million. Also, the number of owner/operators is important. The definition of discretionary earnings is before compensation to one owner. To the extent that there are two, three, or more owners/operators, it becomes less meaningful. As company size continues to increase, there may be positive gross cash flow, even though earnings may be meaningless or nonexistent. This is often the case because many companies are able to bonus out most of their earnings without exceeding the reasonable compensation levels of the Internal Revenue Service. With larger companies, net income tends to become a meaningful measure of earnings. Invested Capital Multiples For invested capital multiples, similar principles tend to be true. For very small companies, there often is no debt, so the equity multiples are equal to the invested capital multiples. In other words, if there is no debt, invested capital is equal to equity. Therefore, MVIC/sales is equal to price/sales, and MVIC/discretionary earnings is equal to price/discretionary earnings. Invested capital multiples are useful when the subject company is highly leveraged or when the subject company leverage differs considerably from the guideline companies leverage. There is some tendency to prefer MVIC/EBITDA to MVIC/EBIT. This is because MVIC/EBITDA eliminates the effect of different policies with respect to accounting for noncash charges, and it is almost impossible to completely eliminate these differences by financial statement adjustments. However, both measures convey information about the companies. Also, EBIT may be available when EBITDA is not. The analyst usually will consider both measures and emphasize whatever is judged to be most meaningful.
5 Selecting, Weighting, and Adjusting Market Value Multiples 139 AVAILABILITY OF DATA Availability of data can be a compelling factor in choice of multiples. For many very small companies, sales or sales and discretionary earnings are the only operating performance variables available. For industries that have tended to lose money, there may be no or only a few companies that have positive net income.the preference is to use variables for which the most guideline companies have meaningful numbers. For some companies, price to gross profit (sales less cost of goods sold) provides a meaningful valuation metric. This is often positive even when EBITDA is negative. Research in 2004 by Franz Ross found that this metric had the lowest dispersion (as measured by the coefficient of variation) in many industries. 1 As a consequence, Pratt s Stats has now added this valuation multiple to its transaction database. DISPERSION OF MARKET VALUE MULTIPLES When market value multiples among companies in an industry are tightly clustered, this suggests that these are the multiples that the market pays most attention to in pricing companies and stocks in that industry. That is, the denominator that creates the tightly clustered multiple is the financial variable that tends to drive the market value. Therefore, a tight clustering of market value multiples may suggest that those multiples tend to deserve more weight than other multiples. We measure the degree of dispersion by a statistic called the coefficient of variation (CV), which is defined as the standard deviation divided by the mean. The standard deviation is the square root of the variance, and the variance is the sum of the squares of the deviations from the average. Although the formula for standard deviation is a bit complicated, most pocket calculators are programmed to compute it simply by entering the observations and pressing STD DEV. The mean, of course, is just the sum of the values of the observations divided by the number of observations. Then the CV is just a simple division. Based on the theory that the multiples with the least dispersion should get most weight, those with the lowest coefficients of variation would be accorded the greatest weight. As a practical matter, many analysts do not go through the mechanics of computing a coefficient of variation, but simply apply the principle by eyeballing the relative dispersion and emphasizing the multiples with the tightest clustering. THE HARMONIC MEAN AS A MEASURE OF CENTRAL TENDENCY As an alternative to the mean or median, the harmonic mean can be used to give equal weight to each guideline company in summarizing ratios that have stock price or MVIC in the numerator. It is the reciprocal of the average of the
6 140 The Market Approach to Valuing Businesses reciprocals of the guideline company multiples. Consider the situation with P/E (price/earnings) multiples of 15 and 5. The reciprocal of the P/E multiple of 15 is.0667, the reciprocal of the P/E multiple of 5 is.200, the average of the two reciprocals is.1334, and the reciprocal of the average is 7.5. This P/E multiple of 7.5 is the same as the P/E of a $200 portfolio with $100 invested (for $6.67 of earnings at a P/E multiple of 15) in the first company, and $100 invested (for $20 of earnings at a P/E multiple of 15) in the second company. With the $200 invested equally in each guideline company, the total earnings are $26.67, and the P/E multiple is 7.5. Although the harmonic mean is not used frequently, probably because it is unfamiliar to most readers of valuation reports, it is conceptually a very attractive alternative measure of central tendency. ADJUSTING FROM OBSERVED MARKET VALUE MULTIPLES In Chapter 9, we left our market value tables showing means, medians, standard deviations, and coefficients of variation for each market value multiple that we considered. In the earlier sections of this chapter, we have discussed the selection of relative weighting of various market multiples. We now must come to grips with making the challenging judgment as to the value to be used for each market multiple selected. As a measure of central tendency for most statistics that we use in business valuation, we tend to prefer the median over the mean, primarily to avoid distortions from outliers. We might also use the harmonic mean to avoid distortions. However, simply applying the chosen measure of central tendency of a group of guideline company multiples more often than not fails to capture differences in characteristics between our subject company and the guideline companies as a group. This is the point at which we want to use our comparative financial analysis for guidance. Each multiple used should be accorded individual attention. It is possible that some selected multiple should be above the guideline averages, while some other selected multiple should be below guideline averages. For example, a company with an above-average return on sales usually would be accorded an above-average price/sales or MVIC/sales multiple. The same company could have a below-average return on book value, which may suggest a below-average price/book value or MVIC/book value multiple. One must keep in mind that the two factors that influence the selection of multiples of operating variables the most are the growth prospects of the subject company relative to the guideline companies and the risk of the subject company relative to the guideline companies. The analyst should review the comparative financial analysis to try to assess these relationships. Two procedures are often employed in selecting multiples to apply to the subject company relative to multiples observed from the guideline companies:
7 Selecting, Weighting, and Adjusting Market Value Multiples Select a subset of the guideline companies with financial characteristics (growth, margins, volatility, etc.) most like the subject company and select multiples close to those of the most comparable companies. 2. Assess the growth and risk characteristics relative to the guideline company group as a whole, and accordingly apply median multiples where appropriate or adjust multiples upward or downward from the medians based on the comparative analysis. One might adjust an observed multiple upward or downward by a percentage, or may go toward the upper or lower end of the range (e.g., use the upper quartile of the range). In extreme situations, a multiple outside the observed range may be selected. In any case, the analyst should provide a narrative explanation for the value of the multiple to be applied to the subject company s financial data. ILLUSTRATIVE ESTIMATE OF VALUE USING MATHEMATICAL WEIGHTING A simple table supporting a mathematically weighted estimate of value by the market approach is presented as Exhibit This exhibit derives median market multiples from Exhibit 9.10 on page 133 and the fundamentals to which the multiples are applied from Exhibits 9.1 and 9.2 on page 126. We elected to use the market value of invested capital (MVIC) procedure for this illustration because the subject company (ClearSkies) is fairly highly leveraged, at least on a book-value basis: $7,500,000 book value of debt versus $5,000,000 book value of equity. Also, we judged ClearSkies as being approximately equivalent to Exhibit 10.1 Illustrative Mathematical Weighting of Indications of Value from the Transaction Method Fundamentals Median Weighted of Value for Valuation Indication of Indication of ClearSkies a Multiple b Value Weight c Value MVIC/Sales $48,000, = $24,000, = $12,000,000 MVIC/EBITDA 5,800, = 28,362, = 8,508,600 MVIC/BVIC 12,600, = 20,286, = 4,057,200 Total weighted indications of value for MVIC $24,565,800 Less: long-term debt 7,500,000 Indicated Value of Equity by Transaction Method $17,065,800 a From Exhibit 9.2. b From Exhibit c See text for explanation.
8 142 The Market Approach to Valuing Businesses the average of the guideline companies in terms of growth prospects and risk, so we selected median multiples, although comparative analysis would tend to lend to different selection of multiples in most cases, as discussed in the previous section. We accorded 50% of the weight to MVIC/sales because that multiple had by far the lowest coefficient of variation, as shown in Exhibit We accorded 30% of the weight of MVIC/EBITDA because this metric is relied on more heavily than MVIC/EBIT and the coefficients of variation were quite close between the two measures. We accorded 20% of the weight to MVIC/book value of invested capital because we felt that the assets should be given some weight. These calculations result in the $17,065,800 estimate of the market value for ClearSkies by the transaction method, as shown in Exhibit This table is presented for illustrative purposes only, and much more analysis would be in order to make the final selection of which market multiples should be used, adjustments (if any) to the median multiples, and the relative weight to be accorded each. SUMMARY With the market approach encompassing a wide variety of market value multiples to choose from, the analyst must make a reasoned choice of which ones to use in each case. With income-related variables, the smaller the company, the more the analyst tends to rely on variables near the top of the earnings measurement spectrum, such as sales and discretionary earnings. As the company size becomes larger, the analyst tends to rely more on measures further down the income statement. For invested capital multiples, the more the accounting treatment of noncash charges varies among companies, the more the analyst tends to prefer EBITDA over EBIT, assuming that the information is available for both. The less the dispersion of observed multiples in an industry, the more the industry seems to rely on that particular multiple for pricing companies and stocks. Therefore, when using the market approach, the analyst often computes the coefficient of variation for each market value multiple, giving more weight to those multiples with the lowest coefficients of variation, or applying the general principle by eyeballing the distributions and according more weight to those that are most clustered. Finally, a value for each multiple must be selected. Here the analyst draws on the comparative financial analysis to guide the final judgment as to the appropriate value for each multiple. Notes 1. Franz Ross, Just One Thing : The Most Reliable Variable for Use in the Market Approach, Shannon Pratt s Business Valuation Update (Portland, OR: Business Valuation Resoures, 2004). Full text available at
Chapter 25 Checklist for Reviewing A Business Valuation Report
Business Valuation Review Volume 28 Number 2 Chapter 25 Checklist for Reviewing A Business Valuation Report Shannon P. Pratt, PhD, FASA CREDENTIALS OF REPORT PREPARER(S) Academic Degrees Professional Designations
More informationThe Market Approach to Valuing Businesses (Second Edition)
BV: Case Analysis Completed Transaction & Guideline Public Comparable MARKET APPROACH The Market Approach to Valuing Businesses (Second Edition) Shannon P. Pratt This material is reproduced from The Market
More informationThe Golub Capital Altman Index
The Golub Capital Altman Index Edward I. Altman Max L. Heine Professor of Finance at the NYU Stern School of Business and a consultant for Golub Capital on this project Robert Benhenni Executive Officer
More informationThe Market Approach to Valuing Businesses (Second Edition)
BV: Case Analysis Completed Transaction & Guideline Public Comparable MARKET APPROACH The Market Approach to Valuing Businesses (Second Edition) Shannon P. Pratt Reprinted with permission. For permission
More informationPage DATABASES SELECTED
Page 1 THE FOLLOWING WAS EXCERPTED FROM ONE OF MY VALUATIONS THAT DEMONSTRATES THE USE OF STATISTICAL ANALYSIS IN THE MARKET APPROACH. IF YOU WERE REFERRED HERE AFTER READING MY ARTICLE IN THE BUSINESS
More informationDavid Tenenbaum GEOG 090 UNC-CH Spring 2005
Simple Descriptive Statistics Review and Examples You will likely make use of all three measures of central tendency (mode, median, and mean), as well as some key measures of dispersion (standard deviation,
More informationMARKET-BASED VALUATION: PRICE MULTIPLES
MARKET-BASED VALUATION: PRICE MULTIPLES Introduction Price multiples are ratios of a stock s market price to some measure of value per share. A price multiple summarizes in a single number a valuation
More informationOne Explanation for the Variance in the Price/EBITDA Multiple
One Explanation for the Variance in the Price/EBITDA Multiple quickreadbuzz.com /2017/08/23/one-explanation-variance-priceebitda-multiple/ National Association of Certified Valuators and Analysts Given
More informationDescriptive Statistics
Petra Petrovics Descriptive Statistics 2 nd seminar DESCRIPTIVE STATISTICS Definition: Descriptive statistics is concerned only with collecting and describing data Methods: - statistical tables and graphs
More informationChapter 3. Numerical Descriptive Measures. Copyright 2016 Pearson Education, Ltd. Chapter 3, Slide 1
Chapter 3 Numerical Descriptive Measures Copyright 2016 Pearson Education, Ltd. Chapter 3, Slide 1 Objectives In this chapter, you learn to: Describe the properties of central tendency, variation, and
More informationRelative vs. fundamental valuation
Relative Valuation Relative vs. fundamental valuation The DCF model is a method of fundamental valuation. Value of equity is the present value of future cash flows. Ignores the current level of the stock
More informationDEFINING AND ESTIMATING THE FUTURE BENEFIT STREAM
Fundamentals, Techniques & Theory DEFINING AND ESTIMATING THE FUTURE BENEFIT STREAM CHAPTER FOUR DEFINING AND ESTIMATING THE FUTURE BENEFIT STREAM Practice Pointer Business without profit is not business
More informationChapter 3 Descriptive Statistics: Numerical Measures Part A
Slides Prepared by JOHN S. LOUCKS St. Edward s University Slide 1 Chapter 3 Descriptive Statistics: Numerical Measures Part A Measures of Location Measures of Variability Slide Measures of Location Mean
More informationVALCON Morningstar v. Duff & Phelps
VALCON 2010 Size Premia: Morningstar v. Duff & Phelps Roger J. Grabowski, ASA Duff & Phelps, LLC Co-author with Shannon Pratt of Cost of Capital: Applications and Examples, 3 rd ed. (Wiley 2008) and 4th
More information2 DESCRIPTIVE STATISTICS
Chapter 2 Descriptive Statistics 47 2 DESCRIPTIVE STATISTICS Figure 2.1 When you have large amounts of data, you will need to organize it in a way that makes sense. These ballots from an election are rolled
More informationECON 214 Elements of Statistics for Economists
ECON 214 Elements of Statistics for Economists Session 3 Presentation of Data: Numerical Summary Measures Part 2 Lecturer: Dr. Bernardin Senadza, Dept. of Economics Contact Information: bsenadza@ug.edu.gh
More informationThe Private Company Discount Based on Empirical Data
Taxation Planning and Compliance Insights The Private Company Discount Based on Empirical Data Kevin M. Zanni Valuation analysts attempt to improve the quality of valuation reports in order to provide
More informationCABARRUS COUNTY 2008 APPRAISAL MANUAL
STATISTICS AND THE APPRAISAL PROCESS PREFACE Like many of the technical aspects of appraising, such as income valuation, you have to work with and use statistics before you can really begin to understand
More informationSome Characteristics of Data
Some Characteristics of Data Not all data is the same, and depending on some characteristics of a particular dataset, there are some limitations as to what can and cannot be done with that data. Some key
More informationLecture 8 & 9 Risk & Rates of Return
Lecture 8 & 9 Risk & Rates of Return We start from the basic premise that investors LIKE return and DISLIKE risk. Therefore, people will invest in risky assets only if they expect to receive higher returns.
More informationCOPYRIGHTED MATERIAL. Investment management is the process of managing money. Other terms. Overview of Investment Management CHAPTER 1
CHAPTER 1 Overview of Investment Management Investment management is the process of managing money. Other terms commonly used to describe this process are portfolio management, asset management, and money
More informationA CLEAR UNDERSTANDING OF THE INDUSTRY
A CLEAR UNDERSTANDING OF THE INDUSTRY IS CFA INSTITUTE INVESTMENT FOUNDATIONS RIGHT FOR YOU? Investment Foundations is a certificate program designed to give you a clear understanding of the investment
More informationNACVA. National Association of Certified Valuators and Analysts
NACVA National Association of Certified Valuators and Analysts The Core Body of Knowledge for Business Valuations All rights reserved. No part of this work covered by the copyrights herein may be reproduced
More informationIPD Global Quarterly Property Fund Index
IPD Global Quarterly Property Index December 2013 ipd.com RESEARCH The IPD Global Quarterly Property Index: Performance as of 3Q 2013 Core open-end global funds produced a net fund level return of 2.8%
More informationCSC Advanced Scientific Programming, Spring Descriptive Statistics
CSC 223 - Advanced Scientific Programming, Spring 2018 Descriptive Statistics Overview Statistics is the science of collecting, organizing, analyzing, and interpreting data in order to make decisions.
More informationNumerical Measurements
El-Shorouk Academy Acad. Year : 2013 / 2014 Higher Institute for Computer & Information Technology Term : Second Year : Second Department of Computer Science Statistics & Probabilities Section # 3 umerical
More information3.1 Measures of Central Tendency
3.1 Measures of Central Tendency n Summation Notation x i or x Sum observation on the variable that appears to the right of the summation symbol. Example 1 Suppose the variable x i is used to represent
More informationLecture 18 Section Mon, Feb 16, 2009
The s the Lecture 18 Section 5.3.4 Hampden-Sydney College Mon, Feb 16, 2009 Outline The s the 1 2 3 The 4 s 5 the 6 The s the Exercise 5.12, page 333. The five-number summary for the distribution of income
More informationFund Analyst Compensation Report 2015 Edition
Fund Analyst Compensation Report 2015 Edition Contents Introduction.... 3 About SumZero.. 3 About the SumZero Compensation Database... 3 Disclaimers.. 4 Career Cash Compensation Growth.. 5 Fund Attributes
More informationLecture 18 Section Mon, Sep 29, 2008
The s the Lecture 18 Section 5.3.4 Hampden-Sydney College Mon, Sep 29, 2008 Outline The s the 1 2 3 The 4 s 5 the 6 The s the Exercise 5.12, page 333. The five-number summary for the distribution of income
More informationFAIR VALUE MEASUREMENT AND THE USE OF PRESENT VALUE TECHNIQUES
14 Financial Accounting Valuation Insights FAIR VALUE MEASUREMENT AND THE USE OF PRESENT VALUE TECHNIQUES Trey Stevens, ASA, CBA Fair value measurements are being increasingly required for financial accounting
More informationTurner Investments 1205 Westlakes Drive - Suite 100 Berwyn, Pennsylvania 19312
Turner Investments 1205 Westlakes Drive - Suite 100 Berwyn, Pennsylvania 19312 PRODUCT OVERVIEW The investment objective of the Turner Select portfolio is to outperform the Russell 1000 Growth Index over
More informationApril The Value Reversion
April 2016 The Value Reversion In the past two years, value stocks, along with cyclicals and higher-volatility equities, have underperformed broader markets while higher-momentum stocks have outperformed.
More informationBasic Procedure for Histograms
Basic Procedure for Histograms 1. Compute the range of observations (min. & max. value) 2. Choose an initial # of classes (most likely based on the range of values, try and find a number of classes that
More informationProfessionally managed allocations and the dispersion of participant portfolios
Professionally managed allocations and the dispersion of participant portfolios Vanguard research August 2013 The growing use of professionally managed allocations in defined contribution (DC) plans is
More informationChapter 8. Portfolio Selection. Learning Objectives. INVESTMENTS: Analysis and Management Second Canadian Edition
INVESTMENTS: Analysis and Management Second Canadian Edition W. Sean Cleary Charles P. Jones Chapter 8 Portfolio Selection Learning Objectives State three steps involved in building a portfolio. Apply
More informationAPPENDIX VII. Income and Asset Approaches Answers to Chapter and Appendix Review Questions
BV: Income and Asset Approaches APPENDIX APPENDIX VII Income and Asset Approaches Answers to Chapter and Appendix Review Questions 1995 2013 by National Association of Certified Valuators and Analysts
More informationAnnual risk measures and related statistics
Annual risk measures and related statistics Arno E. Weber, CIPM Applied paper No. 2017-01 August 2017 Annual risk measures and related statistics Arno E. Weber, CIPM 1,2 Applied paper No. 2017-01 August
More informationMSM Course 1 Flashcards. Associative Property. base (in numeration) Commutative Property. Distributive Property. Chapter 1 (p.
1 Chapter 1 (p. 26, 1-5) Associative Property Associative Property: The property that states that for three or more numbers, their sum or product is always the same, regardless of their grouping. 2 3 8
More informationMBEJ 1023 Dr. Mehdi Moeinaddini Dept. of Urban & Regional Planning Faculty of Built Environment
MBEJ 1023 Planning Analytical Methods Dr. Mehdi Moeinaddini Dept. of Urban & Regional Planning Faculty of Built Environment Contents What is statistics? Population and Sample Descriptive Statistics Inferential
More informationBANK OF CANADA RENEWAL OF BACKGROUND INFORMATION THE INFLATION-CONTROL TARGET. May 2001
BANK OF CANADA May RENEWAL OF THE INFLATION-CONTROL TARGET BACKGROUND INFORMATION Bank of Canada Wellington Street Ottawa, Ontario KA G9 78 ISBN: --89- Printed in Canada on recycled paper B A N K O F C
More informationDIVERSIFYING VALUE: THINKING OUTSIDE THE BOX
Legg Mason Thought Leadership DIVERSIFYING VALUE: THINKING OUTSIDE THE BOX Michael J. LaBella, CFA Portfolio Manager Smart beta can be utilized within the traditional style box framework to help investors
More informationNote on Cost of Capital
DUKE UNIVERSITY, FUQUA SCHOOL OF BUSINESS ACCOUNTG 512F: FUNDAMENTALS OF FINANCIAL ANALYSIS Note on Cost of Capital For the course, you should concentrate on the CAPM and the weighted average cost of capital.
More informationOf the tools in the technician's arsenal, the moving average is one of the most popular. It is used to
Building A Variable-Length Moving Average by George R. Arrington, Ph.D. Of the tools in the technician's arsenal, the moving average is one of the most popular. It is used to eliminate minor fluctuations
More informationSimple Descriptive Statistics
Simple Descriptive Statistics These are ways to summarize a data set quickly and accurately The most common way of describing a variable distribution is in terms of two of its properties: Central tendency
More informationDividend Growth as a Defensive Equity Strategy August 24, 2012
Dividend Growth as a Defensive Equity Strategy August 24, 2012 Introduction: The Case for Defensive Equity Strategies Most institutional investment committees meet three to four times per year to review
More informationLecture 2 Describing Data
Lecture 2 Describing Data Thais Paiva STA 111 - Summer 2013 Term II July 2, 2013 Lecture Plan 1 Types of data 2 Describing the data with plots 3 Summary statistics for central tendency and spread 4 Histograms
More informationMFS Investment Management 500 Boyleston Street Boston, Massachusetts 02116
Investment Management 500 Boyleston Street Boston, Massachusetts 02116 MANAGER'S INVESTMENT PROCESS RISK CONSIDERATIONS Bottom-up idea generation within a sector-neutral framework, managed by a team of
More informationCHAPTER 2 Describing Data: Numerical
CHAPTER Multiple-Choice Questions 1. A scatter plot can illustrate all of the following except: A) the median of each of the two variables B) the range of each of the two variables C) an indication of
More informationComparative Profile. Style Map. Managed Account Select
Comparative Profile Managed Account Select Quarterly Highlights The S&P 500 Index was virtually flat in the second quarter, gaining 0.10% as concerns about the end of the Federal Reserve s QE2 program,
More informationA Robust Quantitative Framework Can Help Plan Sponsors Manage Pension Risk Through Glide Path Design.
A Robust Quantitative Framework Can Help Plan Sponsors Manage Pension Risk Through Glide Path Design. Wesley Phoa is a portfolio manager with responsibilities for investing in LDI and other fixed income
More informationExploring The Value Line Page
Page 1 of 6 1. Value Line Ranks Timeliness The Timeliness rank is Value Line's measure of the expected price performance of a stock for the coming six to 12 months relative to our approximately 1,700 stock
More informationappstats5.notebook September 07, 2016 Chapter 5
Chapter 5 Describing Distributions Numerically Chapter 5 Objective: Students will be able to use statistics appropriate to the shape of the data distribution to compare of two or more different data sets.
More informationGUIDELINE PUBLIC COMPANY
CHAPTER FOUR GUIDELINE PUBLIC COMPANY METHOD I. OVERVIEW The Guideline Public Company Method evaluates the prices paid for publicly traded company equities as the basis to determine the value of the subject
More informationStatistics vs. statistics
Statistics vs. statistics Question: What is Statistics (with a capital S)? Definition: Statistics is the science of collecting, organizing, summarizing and interpreting data. Note: There are 2 main ways
More informationMeasuring Risk and Uncertainty Michael Langemeier, Associate Director, Center for Commercial Agriculture
February 2015 Measuring Risk and Uncertainty Michael Langemeier, Associate Director, Center for Commercial Agriculture This article is the second in a series of articles pertaining to risk and uncertainty.
More informationRisk Management, Qualtity Control & Statistics, part 2. Article by Kaan Etem August 2014
Risk Management, Qualtity Control & Statistics, part 2 Article by Kaan Etem August 2014 Risk Management, Quality Control & Statistics, part 2 BY KAAN ETEM Kaan Etem These statistical techniques, used consistently
More informationDouglas A. Terry, CPA/ABV, JD, MBA
Douglas A. Terry, CPA/ABV, JD, MBA 1 Fair Market Value Hypothetical willing buyer and seller Neither party under compulsion Both parties have relevant knowledge of facts Medical practice valuations As
More informationThe Performance of Large Private Australian Enterprises* Simon Feeny and Mark Rogers
The Performance of Large Private Australian Enterprises* Simon Feeny and Mark Rogers Melbourne Institute of Applied Economic and Social Research The University of Melbourne Melbourne Institute Working
More informationMATH SPEAK - TO BE UNDERSTOOD AND MEMORIZED
FOM 11 T9 STANDARD DEVIATION 1 MATH SPEAK - TO BE UNDERSTOOD AND MEMORIZED 1) STATISTICS = the branch of mathematics used to analyze and interpret data. 2) DATA = information, often in the form of numbers,
More informationMathematics of Time Value
CHAPTER 8A Mathematics of Time Value The general expression for computing the present value of future cash flows is as follows: PV t C t (1 rt ) t (8.1A) This expression allows for variations in cash flows
More informationThe Characteristics of Stock Market Volatility. By Daniel R Wessels. June 2006
The Characteristics of Stock Market Volatility By Daniel R Wessels June 2006 Available at: www.indexinvestor.co.za 1. Introduction Stock market volatility is synonymous with the uncertainty how macroeconomic
More informationChapter 2: Descriptive Statistics. Mean (Arithmetic Mean): Found by adding the data values and dividing the total by the number of data.
-3: Measure of Central Tendency Chapter : Descriptive Statistics The value at the center or middle of a data set. It is a tool for analyzing data. Part 1: Basic concepts of Measures of Center Ex. Data
More informationDATA SUMMARIZATION AND VISUALIZATION
APPENDIX DATA SUMMARIZATION AND VISUALIZATION PART 1 SUMMARIZATION 1: BUILDING BLOCKS OF DATA ANALYSIS 294 PART 2 PART 3 PART 4 VISUALIZATION: GRAPHS AND TABLES FOR SUMMARIZING AND ORGANIZING DATA 296
More informationAppendix A Financial Calculations
Derivatives Demystified: A Step-by-Step Guide to Forwards, Futures, Swaps and Options, Second Edition By Andrew M. Chisholm 010 John Wiley & Sons, Ltd. Appendix A Financial Calculations TIME VALUE OF MONEY
More informationBenchmarking Seller s Discretionary Earnings in a Small Business
A BVR Special Report Excerpt from Benchmarking Seller s Discretionary Earnings in a Small Business Based on data from Pratt s Stats What It s Worth Benchmarking Seller s Discretionary Earnings in a Small
More informationDispersion risk. modern portfolio theory to make money from trading equity options
feature risk management Dispersion risk Helen Hizhniakova and Tatiana Lozovaia* look at how to extend modern portfolio theory to make money from trading equity options Every trader, market maker or financial
More informationJPMorgan Fleming Asset Management
New York January 30, 2003 JPMorgan Fleming Asset Management The Dividend Discount Model The processes, tools, and algorithms described in this paper are a general representation of the process as it exists
More informationNumerical Descriptions of Data
Numerical Descriptions of Data Measures of Center Mean x = x i n Excel: = average ( ) Weighted mean x = (x i w i ) w i x = data values x i = i th data value w i = weight of the i th data value Median =
More informationPerry Kaufman. Stock Arbitrage: 3 Strategies
Perry Kaufman Stock Arbitrage: 3 Strategies Disclaimer 2 This document has been prepared for information purposes only. It shall not be construed as, and does not form part of an offer, nor invitation
More informationPOPULATION SAMPLE GROUP INDIVIDUAL ORDINAL DATA NOMINAL DATA
NUMERICAL DATA POPULATION ALPHANUMERIC DATA INDIVIDUAL ORDINAL DATA SAMPLE GROUP NOMINAL DATA Lecture 2 - Statistical indicators Minimum, maximum Mean or Average Standard deviation Median Quartiles Percentiles,
More informationHealth Information Technology and Management
Health Information Technology and Management CHAPTER 11 Health Statistics, Research, and Quality Improvement Pretest (True/False) Children s asthma care is an example of one of the core measure sets for
More informationSample Limited Scope Valuation. Acme Services, Inc. as of. December 31, Prepared By:
Sample Limited Scope Valuation Of Acme Services, Inc. as of December 31, 2009 Prepared By: February 24, 2010 John Smith Acme Services, Inc. 1234 Main Street Any Town, USA 12345 Dear John, We are pleased
More informationWHAT FINANCIAL ADVISERS NEED TO KNOW ABOUT SFAS NO. 157 FAIR VALUE MEASUREMENTS
Management Information 3 WHAT FINANCIAL ADVISERS NEED TO KNOW ABOUT SFAS NO. 157 FAIR VALUE MEASUREMENTS John C. Ramirez and Robert F. Reilly ESOP financial advisers rely on employer corporation financial
More informationChapter 6 Simple Correlation and
Contents Chapter 1 Introduction to Statistics Meaning of Statistics... 1 Definition of Statistics... 2 Importance and Scope of Statistics... 2 Application of Statistics... 3 Characteristics of Statistics...
More informationMid Cap Value Fiduciary Services EARNEST Partners, LLC
EARNEST Partners, LLC 1180 Peachtree St. - Suite 2300 Atlanta, Georgia 30309 Style: Sub-Style: Firm AUM: Firm Strategy AUM: US Mid Cap Value Traditional Value $20.1 billion $64.0 billion Year Founded:
More informationThe Relationship between Capital Structure and Profitability of the Limited Liability Companies
Acta Universitatis Bohemiae Meridionalis, Vol 18, No 2 (2015), ISSN 2336-4297 (online) The Relationship between Capital Structure and Profitability of the Limited Liability Companies Jana Steklá, Marta
More informationWhen determining but for sales in a commercial damages case,
JULY/AUGUST 2010 L I T I G A T I O N S U P P O R T Choosing a Sales Forecasting Model: A Trial and Error Process By Mark G. Filler, CPA/ABV, CBA, AM, CVA When determining but for sales in a commercial
More informationAnalytics for Health Plan Administration September 2011
Plan Management Navigator Analytics for Health Plan Administration September 2011 2010 TPA BENCHMARKS PUBLISHED The most important reminder is that when you ve seen one TPA, you can draw conclusions about
More informationMeasures of Dispersion (Range, standard deviation, standard error) Introduction
Measures of Dispersion (Range, standard deviation, standard error) Introduction We have already learnt that frequency distribution table gives a rough idea of the distribution of the variables in a sample
More informationWeek 2 Quantitative Analysis of Financial Markets Hypothesis Testing and Confidence Intervals
Week 2 Quantitative Analysis of Financial Markets Hypothesis Testing and Confidence Intervals Christopher Ting http://www.mysmu.edu/faculty/christophert/ Christopher Ting : christopherting@smu.edu.sg :
More informationMeasures of Central tendency
Elementary Statistics Measures of Central tendency By Prof. Mirza Manzoor Ahmad In statistics, a central tendency (or, more commonly, a measure of central tendency) is a central or typical value for a
More informationChapter 4 Financial Strength Analysis
Chapter 4 Financial Strength Analysis 4.1 Meaning of Financial Strength Finance is an essential requirement for every business enterprise. Various type of finance was needed by the concern for their activity
More informationDescriptive Statistics: Measures of Central Tendency and Crosstabulation. 789mct_dispersion_asmp.pdf
789mct_dispersion_asmp.pdf Michael Hallstone, Ph.D. hallston@hawaii.edu Lectures 7-9: Measures of Central Tendency, Dispersion, and Assumptions Lecture 7: Descriptive Statistics: Measures of Central Tendency
More informationR & R Study. Chapter 254. Introduction. Data Structure
Chapter 54 Introduction A repeatability and reproducibility (R & R) study (sometimes called a gauge study) is conducted to determine if a particular measurement procedure is adequate. If the measurement
More informationCommon Compensation Terms & Formulas
Common Compensation Terms & Formulas Common Compensation Terms & Formulas ERI Economic Research Institute is pleased to provide the following commonly used compensation terms and formulas for your ongoing
More informationMethodology. Our team of analysts uses technical and chartist analysis to draw an opinion and make decisions. The preferred chartist elements are:
Methodology Technical analysis is at the heart of TRADING CENTRAL's expertise. Our methodology is proven. Our chartist and quantitative approach allows us to intervene on different investment horizons.
More informationGlobal ABV Examination
Accredited in Business Valuation Global ABV Examination content specification outline Effective Aug. 1, 2018 i Valuation Principles Examination This document is nonauthoritative and is included for informational
More informationCopyright 2009 Pearson Education Canada
Operating Cash Flows: Sales $682,500 $771,750 $868,219 $972,405 $957,211 less expenses $477,750 $540,225 $607,753 $680,684 $670,048 Difference $204,750 $231,525 $260,466 $291,722 $287,163 After-tax (1
More informationINSIGHTS INTO INEFFICIENCY AND MANAGER SELECTION: A LOOK AT QUARTILE RETURNS OF TIMBERLAND FUNDS. Chung-Hong Fu, Ph.D., Managing Director
INSIGHTS INTO INEFFICIENCY AND MANAGER SELECTION: A LOOK AT QUARTILE RETURNS OF TIMBERLAND FUNDS Chung-Hong Fu, Ph.D., Managing Director Economic Research and Analysis December 2014 Executive Summary The
More informationABV Examination Content Specification Outline
ABV Examination Content Specification Outline AICPA ABV Examination Content Specification Outline 1 2017 American Institute of Certified Public Accountants. All rights reserved. AICPA and American Institute
More informationData Analysis. BCF106 Fundamentals of Cost Analysis
Data Analysis BCF106 Fundamentals of Cost Analysis June 009 Chapter 5 Data Analysis 5.0 Introduction... 3 5.1 Terminology... 3 5. Measures of Central Tendency... 5 5.3 Measures of Dispersion... 7 5.4 Frequency
More informationStock Arbitrage: 3 Strategies
Perry Kaufman Stock Arbitrage: 3 Strategies Little Rock - Fayetteville October 22, 2015 Disclaimer 2 This document has been prepared for information purposes only. It shall not be construed as, and does
More informationToday s plan: Section 4.1.4: Dispersion: Five-Number summary and Standard Deviation.
1 Today s plan: Section 4.1.4: Dispersion: Five-Number summary and Standard Deviation. 2 Once we know the central location of a data set, we want to know how close things are to the center. 2 Once we know
More informationQuarterly Journal of the Business Valuation Committee of the American Society of Appraisers
Complimentary Preview Quarterly Journal of the Business Valuation Committee of the American Society of Appraisers Volume 35 Issue 1 Spring 2016 1 Editor s Column Dan McConaughy, PhD, ASA 2 Part I: Appraiser
More informationCHAPTER 1 A Brief History of Risk and Return
CHAPTER 1 A Brief History of Risk and Return I. DEFINITIONS TOTAL RETURN 1. The total dollar return on an equity investment is defined as the: a. increase in value of a share of stock over a period of
More informationValuation-Related Issues as Decided by the Delaware Chancery Court
Judicial Decision Insights Valuation-Related Issues as Decided by the Delaware Chancery Court Chandler G. Dane The Delaware Chancery Court routinely rules on valuation issues relating to dissenting shareholder
More information1 Describing Distributions with numbers
1 Describing Distributions with numbers Only for quantitative variables!! 1.1 Describing the center of a data set The mean of a set of numerical observation is the familiar arithmetic average. To write
More informationReal Estate Ownership by Non-Real Estate Firms: The Impact on Firm Returns
Real Estate Ownership by Non-Real Estate Firms: The Impact on Firm Returns Yongheng Deng and Joseph Gyourko 1 Zell/Lurie Real Estate Center at Wharton University of Pennsylvania Prepared for the Corporate
More informationCOMMONLY USED METHODS OF VALUATION
Fundamentals, Techniques & Theory COMMONLY USED METHODS OF VALUATION CHAPTER SIX COMMONLY USED METHODS OF VALUATION I. OVERVIEW October. This is one of the particularly dangerous months to speculate in
More information