Valuation
What is the difference between FCFF and FCFE?
FCFF is the cash flow available for distribution to all company investors, both equity and debt, after paying for cash operating expenses and capital expenditures. FCFE is the cash flow available only to equity holders of a company.
What does GAAP stand for?
Generally Accepted Accounting Principles
What company has the largest market capitalization as of today?
Apple
On October 7, 2023, ________ launched a massive military operation into ______.
Hamas, Israeli territory
BHIC was founded in _____ with $______.
1996, $500,000
Name six company valuation methods.
DCF, Residual Income Model, Transaction Comps, Trading Comps, Dividend Discount Model, and Liquidation value (Others can be accepted as well)
What are deferred tax liabilities?
Deferred tax liabilities are created when a company recognizes a tax expense on its GAAP income statement that, because of a temporary timing difference between GAAP and IRS accounting, is not actually paid to the IRS that period but is expected to be paid in the future.
When interest rates rise, existing bond prices ______.
Fall/Decrease
_________ went public this week but fell roughly 13% post-IPO.
Birkenstock (NYSE: BIRK)
True or False: According to the BHIC constitution, an elected official for the club can be democratically removed under certain circumstances.
True
How would you handle restricted stock in the share count? (Valuation perspective)
Unvested restricted stock is included in the diluted share count under the logic that eventually, they will vest, and it is thus more conservative to count them.
Why is the effective and marginal tax rate often different?
Effective and marginal tax rates differ because the effective tax rate calculation uses pre-tax income from the accrual-based income statement. Since there's a difference between the taxable income on the income statement and taxable income shown on the tax filing, the tax rates will nearly always be different.
What is one difference between a futures contract and a forward contract?
A forward contract is a private and customizable agreement that settles at the end of the agreement and is traded over the counter (OTC). A futures contract has standardized terms and is traded on an exchange, where prices are settled on a daily basis until the end of the contract.
September 2023 CPI numbers were recently released. The so-called core consumer price index, which excludes food and energy costs, increased ____% last month, more than expected.
0.3%
Who were the past five BHIC presidents?
(Not including this term)
Mike Egan, Will Haskell, Will Hoffman, Jesse Alba, and Ryan O'Donnell
What’s the difference between WACC and IRR?
The IRR is the discount rate on a stream of cash flows that leads to a net present value of 0. The WACC is the minimum required internal rate of return for both debt and equity providers of capital.
How does a $20 increase in depreciation affect the three financial statements?
(Assume 20% tax rate)
Income Statement: -$20 Dep. Expense, -$16 dollar change in Net Income
Balance Sheet: Cash +$4, PPE -$20, Retained Earnings -$16
Cash Flow Statement: Net Income -$16, +$20 non-cash expense, net change in cash of +$4
What is the key difference between the NYSE and the NASDAQ?
NYSE is the older of the exchanges that portrays the historic Wall Street narrative. NASDAQ was opened later as a newer and completely electronic exchange with more flexible listing requirements that appealed to former startups that at one point didn't qualify for the NYSE.
Lat week, the FTC said Amazon used an algorithm to test how much it could raise prices in a way that competitors would follow. What was the effort called?
Project Nessie
(A range within +/-15% is acceptable)
605%
Why might a company prefer to repurchase shares over the issuance of a dividend?
- Avoid double taxation on dividends
- Share repurchases artificially increase EPS and potentially the share price
- Helps counteract the dilutive impact of stock-based comp
- Share buybacks imply a company's management believes their shares are currently undervalued
- Share repurchases are often one-time events, unlike a dividend. Cutting a dividend can be interpreted very negatively by the market
Why are circularities created in financial models?
A circularity is introduced into a financial model when a cell, either directly or indirectly, refers to itself. The most common circularity is created by interest expense and interest income.
For example, interest expense is calculated off the beginning and ending balances of a company's debt outstanding, which includes the revolver. Furthermore, the revolver drawdown/(paydown) for a given period is directly impacted by interest expense – thereby, a circular reference is created.
What would happen if interest rates turned negative?
The borrower is being paid interest by the lender, rather than the other way around. Central banks use this drastic monetary policy tool to incentivize commercial bank lenders to make loans rather than sit on the funds.
Katalin Karikó and Drew Weissman won the Nobel Prize for their mRNA research. What university first demoted Karikó, then licensed the technology to Covid vaccine makers?
University of Penn
Who was BHIC's faculty advisor in 1999?
Donald Puglisi