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Author: Jens Jannasch
Publisher: GRIN Verlag
ISBN: 3638261174
Category : Business & Economics
Languages : en
Pages : 35
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Book Description
Seminar paper from the year 2003 in the subject Business economics - Controlling, grade: 1,3 (A), European University Viadrina Frankfurt (Oder) (Economics), course: Seminar: Budgeting and Performance Measurement, language: English, abstract: This paper will evaluate the Discounted-Cash-Flow-Method (DCF) as a certain value based performance measurement system (VBPMS). Therefore criteria of evaluating performance measurement systems (PMS) in generally will be created (Chapter 2). This strategy will guarantee the fundamental comparability of the derived features of the DCF with these of other PMS (including non-VBPMS, too). Chapter 3 will emphasize a fundamental feature of VBPMS, the shareholder orientation. After a detailed investigation of the DCF in chapter 4, its criteria will be evaluated in chapter 5. Finally a quintessence closes this paper (chapter 6). 2 Criteria for evaluating performance measurement systems In this chapter criteria of value based performance measurement systems will be developed. Therefore the sense of performance in connection with enterprises will be explained, at first. Finally, the term “performance measurement system” (PMS) will be defined in order to point out there criteria. 2.1 The performance of an enterprise Performance of an enterprise stands for its achievement, its power or its output 1 . To describe this term exactly, it is important to get an impression of the objectives of an enterprise (see Figure 7.1).The objectives of an enterprise are derived from its mission 2 . The mission of a company stresses its basic function in society. Qualitative aims, called goals, are derived from the mission. If they are expressed in a way that can be measured, they are called objectives. Shareholder wealth maximisation is the traditional objective of firms 3 . In general, “any group or individual who can affect or is affected by the achievement of the organization’s objectives” 4 (Stakeholder) can influence its mission and therefore its objectives. And some of them do so, as one can realise for example by investigating the success of the Balanced Score Card 5 as a performance measurement instrument that emphasises the objectives of several stakeholders 6 . Obviously, not every Stakeholder can by considered. Only the interests of a few key-stakeholders will be regarded by the target system of a firm. Shareholders are one of the considered key-stakeholders because of their influence on the process of creating the mission (consider the rights of co determination of the general business meeting and the supervisory board 7 at share companies; the influence of the shareholders on partnerships is trivial).
Author: Jens Jannasch
Publisher: GRIN Verlag
ISBN: 3638261174
Category : Business & Economics
Languages : en
Pages : 35
Get Book Here
Book Description
Seminar paper from the year 2003 in the subject Business economics - Controlling, grade: 1,3 (A), European University Viadrina Frankfurt (Oder) (Economics), course: Seminar: Budgeting and Performance Measurement, language: English, abstract: This paper will evaluate the Discounted-Cash-Flow-Method (DCF) as a certain value based performance measurement system (VBPMS). Therefore criteria of evaluating performance measurement systems (PMS) in generally will be created (Chapter 2). This strategy will guarantee the fundamental comparability of the derived features of the DCF with these of other PMS (including non-VBPMS, too). Chapter 3 will emphasize a fundamental feature of VBPMS, the shareholder orientation. After a detailed investigation of the DCF in chapter 4, its criteria will be evaluated in chapter 5. Finally a quintessence closes this paper (chapter 6). 2 Criteria for evaluating performance measurement systems In this chapter criteria of value based performance measurement systems will be developed. Therefore the sense of performance in connection with enterprises will be explained, at first. Finally, the term “performance measurement system” (PMS) will be defined in order to point out there criteria. 2.1 The performance of an enterprise Performance of an enterprise stands for its achievement, its power or its output 1 . To describe this term exactly, it is important to get an impression of the objectives of an enterprise (see Figure 7.1).The objectives of an enterprise are derived from its mission 2 . The mission of a company stresses its basic function in society. Qualitative aims, called goals, are derived from the mission. If they are expressed in a way that can be measured, they are called objectives. Shareholder wealth maximisation is the traditional objective of firms 3 . In general, “any group or individual who can affect or is affected by the achievement of the organization’s objectives” 4 (Stakeholder) can influence its mission and therefore its objectives. And some of them do so, as one can realise for example by investigating the success of the Balanced Score Card 5 as a performance measurement instrument that emphasises the objectives of several stakeholders 6 . Obviously, not every Stakeholder can by considered. Only the interests of a few key-stakeholders will be regarded by the target system of a firm. Shareholders are one of the considered key-stakeholders because of their influence on the process of creating the mission (consider the rights of co determination of the general business meeting and the supervisory board 7 at share companies; the influence of the shareholders on partnerships is trivial).
Author: Nils Eikelmann
Publisher: Springer Nature
ISBN: 365831429X
Category : Business & Economics
Languages : en
Pages : 309
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Book Description
Nils Eikelmann describes the framework conditions for the application of value-based performance measures and critically analyses selected ones. The disclosure of value-based performance indicators is important in order to demonstrate the successful management of a company and to satisfy the increasing information needs of investors. However, companies adapt the developed theoretical concepts of value-based performance measures to their practical needs and thus investors are no longer able to compare the performance of companies. In addition, there is a variety of different metrics from which companies can choose. The empirical study aims to reduce existing research gaps and is divided into three parts: the analysis of annual reports of selected European companies, the calculation of a standardised value-based performance measure and a value relevance study in the form of an association study.
Author: Henry A. Davis
Publisher:
ISBN:
Category : Business & Economics
Languages : en
Pages : 236
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Book Description
Author: Dennis Schön
Publisher: GRIN Verlag
ISBN: 3638702618
Category : Business & Economics
Languages : en
Pages : 76
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Book Description
Bachelor Thesis from the year 2003 in the subject Business economics - Investment and Finance, grade: 1,3 (A), Northumbria University (Newcastle Business School), language: English, abstract: This study investigates the underlying theories and assumptions of two modern capital market-based valuation approaches, the Discounted-Cash-Flow (DCF) and the Economic-Value-Added (EVA) approach, which are nowadays applied principally for industrial and manufacturing firms. This general examination is then transferred into a more specific investigation exploring whether these valuation concepts can be applied to the strongly regulated and more specific field of bank valuation. A questionnaire addressing bank analysts was created to analyse this question. The project indicates that the ideas of shareholder value which have been enforced over the last decade have implemented the need for a more shareholder-focused valuation. The application of DCF is basically attributed to this movement. It is revealed that this concept uses cash flow streams which depict a more realistic picture of an organization's true earning power. Moreover, it employs a discount rate based on the capital market and thus reflecting the yield expectations of the investors. EVA, on the other hand is a relatively new concept, copyrighted in 1994 by Stern Stewart. It highlights an organization's true economic profits. The study examines its components NOPAT, Capital and Cost of Capital, establishes a relation to DCF, points out some general limitations due to the fact that it falls back on accounting figures and critically assesses its dependence on the CAPM whose inherent assumptions of efficient markets that are not transferable into reality, might affect the valuation. The primary research undertaken finally reveals that the concepts of DCF and EVA are basically suitable to be applied to the valuation of banks. However, there are some peculiarities, primarily due to difficulties associated with the defin
Author: Erik Ottosson
Publisher:
ISBN:
Category :
Languages : en
Pages : 10
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Book Description
The biases in accounting causes management to choose inappropriate investment strategies since manager is influenced by their inaccurate perception of successful and unsuccessful businesses. Management needs a model that bridges the gap between measurement of historic financial performance and investment evaluation in order to make better strategic choice. The model must measure discounted cash flow, since cash flow and time value of money determines value. Shareholders want to make money on the company's ventures and therefore have financial requirements on management's strategic decisions, i.e. strategic investments. All additional, nonstrategic outlays with the purpose of maintaining the original value of the venture should be considered as quot;costsquot;. In this paper we present a new model called Cash Value Added (CVA) that introduces a relevant cash flow benchmark which will make it possible to measure historic financial performance based on discounted cash flow.
Author: Penelope B. Wellington
Publisher: Xspurts.com
ISBN: 199109311X
Category :
Languages : en
Pages : 237
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Book Description
"The beauty of DCF analysis is that it allows you to see the future potential of a company, not just its current state." Decoding DCF is the ultimate beginner's guide to Discounted Cash Flow (DCF) analysis. This comprehensive book covers everything you need to know about DCF, from the basics to advanced applications in a variety of industries. The book begins with an overview of the essential concepts behind DCF, including the time value of money, risk and return, and the mathematics of DCF. It then walks readers through the components of a DCF budget, including cash inflows, cash outflows, and net present value. Readers will also learn how to build their own DCF budget, including estimating future cash flows, determining the discount rate, and calculating net present value. The book includes detailed guidance on how to conduct sensitivity analysis, which can help users identify variations in cash flow estimates and changes in the discount rate. The book also covers advanced topics in DCF budgeting, such as the adjusted present value method, real option valuation, and DCF for startup businesses. Readers will also learn how to apply DCF analysis to other areas, such as debt management, personal financial planning, non-profit organizations, government budgeting, and corporate social responsibility. In addition to practical guidance, the book includes case studies that illustrate successful and failed attempts at DCF budgeting. Readers will also find information on the future of DCF budgeting, including trends and innovations in the field, cultural and ethical considerations, and resources for further learning. Decoding DCF is the perfect resource for anyone looking to master DCF analysis. Whether you are a finance student, a professional analyst, or simply someone interested in improving your financial skills, this book has everything you need to get started. With clear explanations, real-world examples, and practical tools and techniques, Decoding DCF will help you unlock the power of DCF and take your budgeting to the next level. And with resources for further learning, you can continue to improve your skills and stay up-to-date with the latest trends and innovations in DCF budgeting. If you're ready to take your financial skills to the next level, Decoding DCF is the perfect guide to get you started.Table of Contents Understanding the Basics of Discounted Cash Flow (DCF) What is Discounted Cash Flow? Importance of Discounted Cash Flow in Budgeting The Theory Behind Discounted Cash Flow Time Value of Money Risk and Return The Mathematics of DCF Present Value and Future Value Discount Rate Components of a DCF Budget Cash Inflows Cash Outflows Net Present Value Building Your DCF Budget Estimating Future Cash Flows Determining the Discount Rate Calculating Net Present Value Sensitivity Analysis in DCF Budgeting Variations in Cash Flow Estimates Changes in Discount Rate DCF in Capital Budgeting Evaluating Investment Projects Comparing Different Financing Options DCF for Business Valuation Free Cash Flow Forecasting Terminal Value Calculation DCF in Real Estate Investment Estimating Rental Cash Flows Determining Property Value DCF for Stock Valuation Dividend Discount Model Earnings Discount Model Limitations of DCF Budgeting Uncertainty and Risk Dependence on Assumptions Overcoming DCF Limitations Conservative Estimations Regular Review and Adjustment DCF Budgeting Software and Tools Excel for DCF Budgeting Professional Financial Software Case Studies in DCF Budgeting Successful DCF Budgeting Examples Lessons from Failed DCF Budgeting Attempts The Future of DCF Budgeting Impact of Technology on DCF Budgeting Trends and Innovations in DCF Budgeting Advanced Techniques in DCF Budgeting Adjusted Present Value Method Real Option Valuation DCF for Startup Businesses Projecting Cash Flows for Startups Valuing a Startup Using DCF DCF in Mergers and Acquisitions Valuing a Target Company Assessing the Financial Feasibility of a Merger DCF in Debt Management Evaluating Loan Options Assessing the Cost of Debt DCF for Personal Financial Planning Planning for Retirement Estimating the Value of Investments DCF in Non-Profit Organizations Project Evaluation Fund Allocation DCF in Government Budgeting Public Project Evaluation Debt Management DCF and Corporate Social Responsibility Valuing Social and Environmental Impacts Sustainable Investment Analysis DCF in Uncertain Economic Times Role of DCF during Economic Crisis DCF in Post-Covid World Cultural Considerations in DCF Budgeting Differences in DCF Approaches Across the Globe Adapting DCF to Local Contexts Ethical Considerations in DCF Budgeting Manipulation and Misrepresentation Risks Ensuring Ethical Conduct in DCF Budgeting Teaching DCF Budgeting DCF for Finance Students Professional Development in DCF Budgeting A Career in DCF Budgeting Roles and Responsibilities of a DCF Analyst Skills and Qualifications for DCF Professionals Resources for Further Learning Books and Journals on DCF Budgeting Online Resources for DCF Budgeting. Have Questions / Comments? Get Another Book Free ISBN: 9781991093110
Author: Lutz Kruschwitz
Publisher: John Wiley & Sons
ISBN: 0470870451
Category : Business & Economics
Languages : en
Pages : 178
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Book Description
Firm valuation is currently a very exciting topic. It is interesting for those economists engaged in either practice or theory, particularly for those in finance. The literature on firm valuation recommends logical, quantitative methods, which deal with establishing today's value of future free cash flows. In this respect firm valuation is identical with the calculation of the discounted cash flow, DCF. There are, however, different coexistent versions, which seem to compete against each other. Entity approach and equity approach are thus differentiated. Acronyms are often used, such as APV (adjusted present value) or WACC (weighted average cost of capital), whereby these two concepts are classified under entity approach. Why are there several procedures and not just one? Do they all lead to the same result? If not, where do the economic differences lie? If so, for what purpose are different methods needed? And further: do the known procedures suffice? Or are there situations where none of the concepts developed up to now delivers the correct value of the firm? If so, how is the appropriate valuation formula to be found? These questions are not just interesting for theoreticians; even the practitioner who is confronted with the task of marketing his or her results has to deal with it. The authors systematically clarify the way in which these different variations of the DCF concept are related throughout the book ENDORSEMENTS FOR LÖFFLER: DISCOUNTED 0-470-87044-3 "Compared with the huge number of books on pragmatic approaches to discounted cash flow valuation, there are remarkably few that lay out the theoretical underpinnings of this technique. Kruschwitz and Löffler bring together the theory in this area in a consistent and rigorous way that should be useful for all serious students of the topic." --Ian Cooper, London Business School "This treatise on the market valuation of corporate cash flows offers the first reconciliation of conventional cost-of-capital valuation models from the corporate finance literature with state-pricing (or 'risk-neutral' pricing) models subsequently developed on the basis of multi-period no-arbitrage theories. Using an entertaining style, Kruschwitz and Löffler develop a precise and theoretically consistent definition of 'cost of capital', and provoke readers to drop vague or contradictory alternatives." --Darrell Duffie, Stanford University "Handling firm and personal income taxes properly in valuation involves complex considerations. This book offers a new, precise, clear and concise theoretical path that is pleasant to read. Now it is the practitioners task to translate this approach into real-world applications!" --Wolfgang Wagner, PricewaterhouseCoopers "It is an interesting book, which has some new results and it fills a gap in the literature between the usual undergraduate material and the very abstract PhD material in such books as that of Duffie (Dynamic Asset Pricing Theory). The style is very engaging, which is rare in books pitched at this level." --Martin Lally, University of Wellington
Author: Marie Happe
Publisher: GRIN Verlag
ISBN: 3346294382
Category : Business & Economics
Languages : en
Pages : 128
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Book Description
Master's Thesis from the year 2020 in the subject Business economics - Investment and Finance, grade: 1,0, University of Pavia, language: English, abstract: Company valuation is requisite to identify the deviation of the intrinsic value of an asset from its market price. The Discounted Cash Flow method is a frequently used method to determine intrinsic value. It determines the intrinsic value based on the discounted future cash flow of the asset and works in two stages. The first stage refers to an explicit forecast of the cash flow followed by the second stage which captures the cash flow beyond the forecast period with a terminal value. The cash flow is usually discounted at the Weighted Average Cost of Capital which consists of the cost of debt and cost of equity. The latter is mainly determined by the systematic risk, measured with a beta factor. The aim of the present thesis is to analyze beta factor and terminal value as the key input factors of the Discounted Cash Flow model. A comprehensive overview of the different estimation methods of beta factor and terminal value will be provided and critically reviewed. To illustrate the valuation procedure and to analyze the impact of both parameters on the intrinsic value, a case study of Microsoft Corporation is conducted. The findings of the literature and the case study demonstrate that the main challenge of the Discounted Cash Flow model is the determination of terminal value and beta factor since both parameters can be estimated with different methods that lead to different results. Moreover, the case study provides evidence that the intrinsic value is sensitive to the input factors of terminal value and to the discount rate which is primarily determined by the beta factor. The results indicate that analysts who apply the Discounted Cash Flow model should be aware that this model is mainly based on assumptions and therefore can lead to different results. The dependence of intrinsic value on the terminal value and the beta factor stresses the importance of a critical examination of these both parameters and requires a need for further investigation.
Author: Joseph Tham
Publisher: Elsevier
ISBN: 0080514804
Category : Business & Economics
Languages : en
Pages : 517
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Book Description
Principles of Cash Flow Valuation is the only book available that focuses exclusively on cash flow valuation. This text provides a comprehensive and practical, market-based framework for the valuation of finite cash flows derived from a set of integrated financial statements, namely, the income statement, balance sheet, and cash budget. The authors have distilled the essence of years of gathering academic wisdom in the study of cash flow analysis and the cost of capital. Their work should go a long way toward bridging the gap between the application of cost benefit analysis and the theory of capital budgeting. This book covers the basic concepts in market-based cash flow valuation. Topics include the tme value of money (TVM) and an introduction to cost of capital; basic review of financial statements and accounting concepts; construction of integrated pro-forma financial statements; derivation of free cash flows; use of the WACC in theory and in practice; estimating the WACC for non traded firms; calculating the terminal value beyond the planning period. It also revisits the theory for cost of capital and explains how cash flows are valued in reality. The ideas are illustrated using examples and a case study. The presentation is appropriate for a range of technical backgrounds. This text will be of interest to finance professionals as well as MBA and other graduate students in finance. * Provides the only exclusive treatment of cash flow valuation * Authors use examples and a case study to illustrate ideas * Presentation appropriate for a range of technical backgrounds: ideas are presented clearly, full exposition is also provided * Named among the Top 10 financial engineering titles by Financial Engineering News
Author: Aswath Damodaran
Publisher: Now Publishers Inc
ISBN: 1601980140
Category : Business & Economics
Languages : en
Pages : 102
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Book Description
Valuation lies at the heart of much of what we do in finance, whether it is the study of market efficiency and questions about corporate governance or the comparison of different investment decision rules in capital budgeting. In this paper, we consider the theory and evidence on valuation approaches. We begin by surveying the literature on discounted cash flow valuation models, ranging from the first mentions of the dividend discount model to value stocks to the use of excess return models in more recent years. In the second part of the paper, we examine relative valuation models and, in particular, the use of multiples and comparables in valuation and evaluate whether relative valuation models yield more or less precise estimates of value than discounted cash flow models. In the final part of the paper, we set the stage for further research in valuation by noting the estimation challenges we face as companies globalize and become exposed to risk in multiple countries.
