The FED
What is the Fed’s long-run inflation target?
2%
What is EBITDA?
Earnings before interest, taxes, depreciation, and amortization
What are the three financial statements?
Income Statement , Balance Sheet, Cash Flow Statement
Largest Oil Merger of 2024
Exxon Mobile Pioneer Natural Resources
What is inflation and why does it happen?
a) value of dollar declines
b) because of increase in money supply, demand>supply, high economic activity
Who is the Fed Chair?
How do you calculate P/E?
Share Price/ EPS
What is the Balance Sheet Equation?
Assets= Shareholders Equity + Liabilities
This big tech company acquired an Israeli Startup for $30B+
Alphabet Wiz Acquisition
3 forms of inflationary economic data
CPI, PCE, PPI
The Fed Funds Rate
what is 4.00-4.25%?
Equation for Equity Value
Equity Value=Share Price×Total Outstanding Shares
List four valuation multiples
P/E, EV/EBITDA, EV/Sales, EV/EBIT, EV/users
What are the 3 ways to finance a merger?
cash, debt, stock
What is a MBS?
A Mortgage-Backed Security (MBS) is a type of investment that is backed by a bundle of home loans
What is the discount rate?
This is the interest rate the Fed charges banks for short-term loans
Equation for Enterprise Value
EV=Market Capitalization+Total Debt+Preferred Equity+Minority Interest−Cash and Cash Equivalents
Rank the four valuation methods
1. Precedent Transactions
2.DCF
3. Comparable Companies
4. LBO
This merger was announced in 2023, but only closed this year involving two Oil Companies
Chevron Hess
How does a tariff function?
What are the Fed's primary goals and how does changing the Fed Funds Rate impact each?
1. low inflation 2. maximum employment.
Raising the Fed Funds Rate makes borrowing more expensive → slows spending → lowers inflation but can reduce jobs
Lowering the rate makes borrowing cheaper → boosts spending → creates jobs but can raise inflation
Name 2 scenarios where Equity Value is higher than Enterprise Value
1. high cash and low debt
2. a lot of non-operating assets
3. high DTA balance
What is EV/EBITDAR? When would you use this and why?
EV/EBITDAR: Enterprise Value / Earnings Before Interest, Taxes, Depreciation, Amortization, and Rent Expenses
Use when comparing companies with different types of rental structures (own vs. operating leases vs. finance leases). Use EBITDAR when operating leases are counted as a lease liability.
The largest merger this year
Union Pacific & Norfolk Southern Merger
What does it mean for the yield curve to be inverted? What is it a sign of?
An inverted yield curve means short-term interest rates are higher than long-term rates. Sign of recession because it means investors think the economy will decline.