Value of Corporate Finance
For sustained long-term value creation, you should direct resources to initiatives that exceed this benchmark.
What is the cost of capital?
The two CCB-level profitability ratios reported in the JPMC earnings presentation.
What are ROE and overhead ratio?
This principle states that money is worth more today than it will be worth tomorrow.
What is the Time Value of Money?
This decision metric represents the period when a project’s incremental revenue offsets incremental expenses.
What is PTNI breakeven or Breakeven?
This skill is mentioned to be absolutely essential for model output accuracy.
What is Attention to detail
This group takes the first loss in the event of bank failure.
Who are shareholders?
CCB’s through the cycle ROE target
What is 25%+?
This formula is used to determine the future value of an investment: FV = PV × (1 + r)^t.
What is the Future Value formula?
This decision metric gives the same result as NPV if the timing of accruals and cash flows are the same.
What is Shareholder Value Added (SVA) or Residual Income?
Name one of the three types of incremental deposit benefits we consider in BB value of banker model.
What is Deepening, Acquisition or Retention?
When evaluating projects, we need to ensure that the cash flows we use have these characteristics.
What are marginal, incremental, and firm-wide?
The largest source of revenue in CCB (by product / line item).
What is Deposit NII? (from Consumer Banking or BWM)
This metric equals the present value of cash inflows minus the present value of cash outflows and is used to evaluate investment profitability.
What is Net Present Value (NPV)?
This decision metric represents an investment’s discount rate that makes its NPV $0.
What is Internal Rate of Return (IRR)?
This 3rd skill category is desired if you would like to be a world-class financial analyst, besides Accounting/Finance, and excel skills.
What is Problem solving, Logic or design?
When developing assumptions, these are some best practices.
What are being data-driven, back-testing, using multiple metrics, and providing sensitivities?
An example of a significant “gross-up” item in CCB’s income statement.
What is auto lease income and depreciation expense?
This concept measures financial returns in excess of the theoretical returns required by investors and is often calculated as ROE minus cost of equity.
What is Shareholder Value Added (SVA)?
A high degree of this concept can make a make an economically profitable business case flip negative.
What is cannibalization?
Name one advanced excel formula/tools mentioned in the session.
What is Index, Offset, Goal Seek, Data table or VBA/Macro?
Jamie Dimon believes that this activity doesn’t generate any actual value
What is putting liquid par assets on the balance sheet and adding leverage? or levering up the balance sheet with securities
The three Firmwide expense categories
What are 1) Investments, 2) Volume/Revenue-Related and 3) Structural?
This model is commonly used to estimate the intrinsic value of a stock by calculating terminal value based on perpetual growth.
What is the Gordon Growth Model (GGM)?
This analytical construct involves stressing one assumption at a time and can be used to determine the business case’s sensitivity to that assumption.
What is sensitivity analysis?
The current TTC deposit margin used in BB valuation.
What is 2.75%