Comprehensive Investment Banking, Private Equity, and Valuation Terms

0.0(0)
studied byStudied by 0 people
learnLearn
examPractice Test
spaced repetitionSpaced Repetition
heart puzzleMatch
flashcardsFlashcards
Card Sorting

1/100

encourage image

There's no tags or description

Looks like no tags are added yet.

Study Analytics
Name
Mastery
Learn
Test
Matching
Spaced

No study sessions yet.

101 Terms

1
New cards

Mergers & Acquisitions (M&A)

The process of consolidating companies or assets through various types of financial transactions.

2
New cards

Initial Public Offering (IPO)

The process through which a private company offers shares to the public for the first time.

3
New cards

Debt Financing

Raising capital through the issuance of debt instruments, typically loans or bonds.

4
New cards

Equity Financing

Raising capital by selling shares of stock in the company.

5
New cards

Leveraged Buyout (LBO)

The acquisition of a company using a significant amount of borrowed money to meet the cost of acquisition.

6
New cards

Pitch Book

A marketing document used by investment banks to pitch their services to potential clients.

7
New cards

Due Diligence

The investigation and evaluation of a business or investment opportunity before finalizing a transaction.

8
New cards

Capital Markets

Financial markets where long-term debt or equity-backed securities are bought and sold.

9
New cards

Enterprise Value (EV)

A measure of a company's total value, often used as a comprehensive alternative to equity market capitalization.

10
New cards

EBITDA

Earnings Before Interest, Taxes, Depreciation, and Amortization; a measure of a company's overall financial performance.

11
New cards

Discounted Cash Flow (DCF)

A valuation method used to estimate the value of an investment based on its expected future cash flows.

12
New cards

Comparable Company Analysis (Comps)

A valuation method that compares a company's financial metrics to those of similar companies.

13
New cards

Precedent Transactions

Analysis of past transactions involving similar companies to derive valuation benchmarks.

14
New cards

Accretion/Dilution Analysis

An analysis to determine the impact of an acquisition on the acquiring company's earnings per share.

15
New cards

Synergies

The potential financial benefit achieved through the combining of companies.

16
New cards

Underwriting

The process by which an underwriter assesses the risk of insuring a company or issuing securities.

17
New cards

Roadshow

A series of presentations made by a company to potential investors prior to an IPO.

18
New cards

Bookbuilding

The process of generating, capturing, and recording investor demand for shares during an IPO.

19
New cards

Fairness Opinion

An assessment by a financial advisor of the fairness of a transaction's financial terms.

20
New cards

Sell-side vs Buy-side

Sell-side refers to firms that issue, sell, or trade securities, while buy-side refers to firms that purchase securities for investment.

21
New cards

Limited Partner (LP)

An investor in a private equity fund who has limited liability and does not participate in the management.

22
New cards

General Partner (GP)

The partner in a private equity fund responsible for managing the fund and making investment decisions.

23
New cards

Carried Interest

The share of profits that the general partners of a private equity fund receive as compensation.

24
New cards

Management Fees

Fees paid to the general partner for managing the fund, typically a percentage of the committed capital.

25
New cards

Fundraising

The process of gathering capital from investors to create a fund.

26
New cards

Deal Sourcing

The process of identifying and pursuing potential investment opportunities.

27
New cards

Portfolio Company

A company in which a private equity firm invests.

28
New cards

Exit Strategies

Methods by which an investor can realize a return on investment, such as IPO, strategic sale, or secondary buyout.

29
New cards

Internal Rate of Return (IRR)

The discount rate that makes the net present value of all cash flows from a particular investment equal to zero.

30
New cards

Multiple on Invested Capital (MOIC)

A measure of the total value of an investment relative to the amount of capital invested.

31
New cards

Debt/Equity Ratio

A financial ratio indicating the relative proportion of shareholders' equity and debt used to finance a company's assets.

32
New cards

Add-on Acquisition

An acquisition of a smaller company by a private equity firm that already owns a larger company in the same industry.

33
New cards

Capital Call

A request by a private equity fund for investors to provide a portion of their committed capital.

34
New cards

Distribution Waterfall

The order in which profits are distributed to investors in a private equity fund.

35
New cards

Fund Vintage Year

The year in which a private equity fund begins investing.

36
New cards

Secondary Market (for PE stakes)

A market where investors can buy and sell existing stakes in private equity funds.

37
New cards

Asset Classes

Categories of investments, including equities, bonds, and alternatives.

38
New cards

Risk vs. Return

The relationship between the potential risk of an investment and the expected return.

39
New cards

Alpha & Beta

Alpha measures an investment's performance relative to a benchmark, while Beta measures its volatility relative to the market.

40
New cards

Sharpe Ratio

A measure of risk-adjusted return, calculated as the excess return per unit of risk.

41
New cards

Market Capitalization (Market Cap)

The total market value of a company's outstanding shares of stock.

42
New cards

Dividend Yield

A financial ratio that shows how much a company pays out in dividends each year relative to its stock price.

43
New cards

Price-to-Earnings (P/E) Ratio

A valuation ratio calculated by dividing the current share price by its earnings per share.

44
New cards

Book Value

The value of a company's assets minus its liabilities.

45
New cards

Free Cash Flow

The cash a company generates after accounting for cash outflows to support operations and maintain its capital assets.

46
New cards

Volatility

A statistical measure of the dispersion of returns for a given security or market index.

47
New cards

Bull Market / Bear Market

A bull market is characterized by rising prices, while a bear market is characterized by falling prices.

48
New cards

Market Correction

A decline of 10% or more in the price of a security or market index from its most recent peak.

49
New cards

Drawdown

The reduction of one's capital after a series of losing trades.

50
New cards

Stop Loss

An order placed with a broker to buy or sell once the stock reaches a certain price.

51
New cards

Order Types

Different types of orders that can be placed in the market, such as market, limit, and stop orders.

52
New cards

Liquidity

The availability of liquid assets to a market or company.

53
New cards

Spread (Bid-Ask Spread)

The difference between the bid price and the ask price of a security.

54
New cards

Exchange-Traded Fund (ETF)

A type of fund that owns underlying assets and divides ownership of those assets into shares.

55
New cards

Mutual Fund

An investment vehicle made up of a pool of money collected from many investors to purchase securities.

56
New cards

Hedge Fund

An investment fund that employs various strategies to earn active return for its investors.

57
New cards

Index Fund

A type of mutual fund with a portfolio constructed to match or track the components of a market index.

58
New cards

Sovereign Debt

Debt issued by a national government in a foreign currency.

59
New cards

Credit Rating

An assessment of the creditworthiness of a borrower in general terms or with respect to a particular debt or financial obligation.

60
New cards

Yield Curve

A graph that plots the interest rates of bonds having equal credit quality but differing maturity dates.

61
New cards

Seed Stage

The earliest stage of a startup's lifecycle, where initial funding is sought to develop a product.

62
New cards

Series A, B, C Funding

Rounds of financing for startups, typically following the seed stage, to scale the business.

63
New cards

Pre-Money vs. Post-Money Valuation

Pre-money valuation is the value of a company before investment, while post-money valuation is after the investment.

64
New cards

Cap Table (Capitalization Table)

A table that shows the equity ownership capitalization for a company.

65
New cards

Term Sheet

A non-binding agreement that outlines the basic terms and conditions of an investment.

66
New cards

Convertible Note

A type of debt that can be converted into equity at a later date.

67
New cards

Equity Dilution

The reduction in existing shareholders' ownership percentage due to the issuance of new shares.

68
New cards

Vesting Schedule

A timeline that outlines when an employee earns their equity in a company.

69
New cards

Runway

The amount of time a company can operate before it runs out of cash.

70
New cards

Burn Rate

The rate at which a company is spending its capital before reaching profitability.

71
New cards

Exit Event

A liquidity event that allows investors to realize their investment gains, such as an acquisition or IPO.

72
New cards

Unicorn

A startup valued at over $1 billion.

73
New cards

Lead Investor

The investor who takes the initiative in organizing a financing round.

74
New cards

Syndicate

A group of investors that come together to fund a particular investment.

75
New cards

Liquidation Preference

The order in which investors are paid back in the event of a liquidation.

76
New cards

Pro Rata Rights

The right of existing investors to maintain their ownership percentage by purchasing additional shares in future rounds.

77
New cards

Management Fee

A fee charged by a fund manager for managing the fund.

78
New cards

Valuation Cap

The maximum valuation at which a convertible note can convert into equity.

79
New cards

Discounted Cash Flow (DCF) Model

A financial model that estimates the value of an investment based on its expected future cash flows.

80
New cards

Weighted Average Cost of Capital (WACC)

The average rate of return a company is expected to pay its security holders to finance its assets.

81
New cards

Terminal Value

The value of a business at the end of a forecast period, often used in DCF calculations.

82
New cards

Free Cash Flow to Firm (FCFF)

Cash flow available to all investors in a firm, including equity and debt holders.

83
New cards

Free Cash Flow to Equity (FCFE)

Cash flow available to equity shareholders after all expenses, reinvestments, and debt repayments.

84
New cards

Net Present Value (NPV)

The difference between the present value of cash inflows and outflows over a period of time.

85
New cards

Sensitivity Analysis

A technique used to determine how different values of an independent variable affect a particular dependent variable.

86
New cards

Scenario Analysis

A process of analyzing possible future events by considering alternative possible outcomes.

87
New cards

Leveraged Buyout (LBO) Model

A financial model used to evaluate the feasibility of a leveraged buyout transaction.

88
New cards

Precedent Transactions Analysis

An analysis of past transactions involving similar companies to derive valuation benchmarks.

89
New cards

Depreciation & Amortization

Accounting methods for allocating the cost of tangible and intangible assets over their useful lives.

90
New cards

Working Capital

The difference between a company's current assets and current liabilities.

91
New cards

Capital Expenditures (CapEx)

Funds used by a company to acquire, upgrade, and maintain physical assets.

92
New cards

Debt Schedule

A detailed breakdown of a company's debt obligations.

93
New cards

Accretion/Dilution

The impact of an acquisition on the acquiring company's earnings per share.

94
New cards

Beta (Levered vs. Unlevered)

Beta measures the volatility of an asset in relation to the overall market; levered beta includes debt effects.

95
New cards

Cost of Equity

The return a company requires to decide if an investment meets capital return requirements.

96
New cards

Cost of Debt

The effective rate that a company pays on its borrowed funds.

97
New cards

Cash Flow Statement

A financial statement that provides aggregate data regarding all cash inflows and outflows a company receives.

98
New cards

Income Statement

A financial statement that reports a company's financial performance over a specific accounting period.

99
New cards

Balance Sheet

A financial statement that summarizes a company's assets, liabilities, and shareholders' equity.

100
New cards

EBITDA Margin

A measure of a company's operating profitability as a percentage of its total revenue.