Important Points for IC 99 - Asset Management Exam
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Free cash flow valuation is an approach to business valuation in which the business value equals the present value of its free cash flow. It discounts the free future cash flows of the company to arrive at an enterprise value.
Price earnings retios (P/E ratio) measures how many times the earnings per share (EPS) has been covered by current market price of an ordinary share. It is omputed by dividing the current market price of an ordinary share by earnings per share.
Price to book value ratio is useful where assets are a core driver of earnings such as capital-intensive industries.
Price to Sales Ratio : It is share price to sales per share. It is easy to calculate. It can be applied to loss making firms less susceptible to accounting differences than other measures.
Beta reflects volatility of return on an investment relative to market swings.
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