notes for last review.docx

1、notes for last review Coefficient in a regression = stocks beta, measures the systematic risk of the stock Intercept term = stocks ex-post alpha, measures excess risk-adjusted reture Muti-regressionAdjusted RMulti-regerssion 3 mainly problems!Detect by Therefore you should reject the null hypothesis

2、 and conclude that you have a problem with conditional heteroskedasticity.robust standard errors (also called White-corrected standard errors or heteroskedasticity-consistent standard errors).Time-series need covariance stationary under the following conditions:Test for serial correlation for AR mod

3、el:a time series must have a finite mean-reverting level to be covariance stationaryAbout inventory:the adjustment affect 3 accounts(cash, inventory, equity): For example, say the LIFO reserve is $150, and the tax rate is 40%. To convert the balance sheet to FIFO, increase inventory by the $150 LIFO

4、 reserve, decrease cash by$60 ($150 LIFO reserve x 40% tax rate), and increase stockholders equity (retained earnings) by $90 $150 reserve x (1 40% tax rate). This will bring the accounting equation back into balance. The net effect of the adjustments is an increase in assets and shareholders equity

5、 of $90, which is equal to the LIFO reserve, net of tax.FIFO COGS = LIFO COGS (ending LIFO reserve beginning LIFO reserve)Adjustment to income statement: COGS /tax expense/ gross profit/ net profit The cumulative effect of the change is reported as an adjustment to the beginning retained earnings of

6、 the earliest year presented.Reporting inventory above historical cost is permitted under IFRS and U.S. GAAP in certain industries. This exception applies mainly to producers and dealers of commodity-like products, such as agricultural and forest products, mineral ores, and precious metals.Long-term

7、 asset:Adjust Capitalized interest to interest expense:Capitalized&expense compare:Finace lease & operating lease: Finance lease 求implied discount rate , make : Present value of future minimum lease payments = all cash flow from 1 to finalIntercorporate investment:The difference between return on pl

8、an asset VS. expected return on plan asset Increasing the expected return on plan assets have No affect the benefit obligation or the funded status of the plan For mature plans, a higher discount rate might increase interest costs. In rare cases,interest cost will increase by enough to offset the de

9、crease in the current service cost, andperiodic pension cost will increase.For example, return on assets (ROA) would likely be lower if the gross amounts were reported on the balance sheet (higher denominator). In addition, leverage ratios would likely be higher with the gross amountsMultinational O

10、perationsFirst, you need to become familiar with the terminology of translation. Second, you need to be able to distinguish between and implement the two methods of accounting for foreign operations (i.e., measurement via the temporal method or translation via the current rate method). Third, you ne

11、ed to be able to analyze the impact of these two methods on reported earnings, cash flows, and financial ratios for both the subsidiary and the parent.报表调整：Current method VS. temporal method: The current rate is the exchange rate on the balance sheet date. The average rate is the average exchange ra

12、te over the reporting period. The historical rate is the actual rate that was in effect when the original transaction occurred.There is one exception. Nonmoitetary assets and liabilities measured on the balance sheet at “fair value” are remeasured at the current exchange rate, not the historical rat

13、e.财务评价2模型：Benith model: critical value -1.78, 大于此数值，manipulation more than acceptable Altman Z score model: higher value, less possibility to bankruptEconomic income: cash flow + (ending market value beginning market value)Cash flow = (S-C-D)(1-T) + D= afer-tax operating cash flowbeginning market va

14、lue - ending market value = value depreciationEconomic profit: Nopat - $WACC, 其中 NOPAT= EBIT(1-T)interest expense = beginning of period market value * debt ratio * interest rateDividends and share repurchase analysis:Stable Dividend PolicyInterest converage ratio VS. FCFE converage ratioStock price

15、change by ex-dividendM&A:3 Merger classification:A+B=A+B A+B=A A+B=CDIFF life cycle character and the merger method choice: Pre-Offer Defense Mechanisms VS. Post-Offer Defense MechanismsPre: Poison pill / poison put / Restrictive takeover laws/ Staggered board/ Restricted voting rights/ Supermajorit

16、y voting provision for mergers / Fair price amendment /Golden parachutes/Post : “Just say no” defense. / Litigation/ Greenmail / Share repurchase./ Leveraged recapitalization/ Crown jewel defense/ Pac-man defense/White knight defense/ White squire defense.Herfindahl-Hirschman Index (HHI) judgement s

17、tandard based on post-merger indexLess than 1000 : competitiveBetween 1000 and 1800: moderate concentrated, change more than 50 points, caused illegal chargeMore than 1800: highly concentrated, chage more 100 , caused illegal chargeValuing target company 3 methods:1 DCF+ deferred tax liability / - d

18、eferred tax asset2 comparable company VS. comparable transaction method Equity valuation:3 mainly methods: DDM, DCF, relative ratio valuation, residual income, PE valuation Clean Surplus (ending book value = beginning book value + net income dividends) Violations include:Common adjustments to the ba

19、lance sheet necessary to reflect fair value include the following:Private company valuation:Excess earning method used for PE firm :can be used for small firms when their intangible assets are significant.In the excess earnings method, the FCFF may be given in place of the normalized earnings. The g

20、rowth rate in free cash flow may be given in place of the growth rate of residual income. After these substitutions, the calculations are identical to those above3 methods for valuing PE firm: 1 income method( free cash flow, capitalized cash flow, excess income) 2 market method ( price multiple) 3

21、asset-based method ( based on not going concern)3 discount rate: CAPM, the expanded CAPM, and build-up methodsthree methods discussed in the following are the : guideline public company method (GPCM), the guideline transactions method (GTM), and the prior transaction method (PTM).two ways to incorpo

22、rate control premium under a guideline public company method: total discount = 1 - (1 - DLOC)(l - DLOM)DLOM= price of a put option divided by the stock priceReal estate investment valuation:Real estate must be actively managed.the percentage of debt and equity used by an investor to finance real estate does not affect the propertys valueGross lease VS. net leasePercentage lease3 methods used to evaluate real estate: income method, cost method, sales comparison approachIncome method: direct captalized & DCF method all based on NOI