Why would shares slide on the announcement of an M&A deal? Maybe, the deal is dilutive. What do we mean by dilutive? It means that whatever metric we use to benchmark the deal performance is falling after the transaction occurs. The metric we often use in M&A is EPS so see the short-term implications of the transaction. So, if the
Question Does the income statement show financial information for a period of time or a point in time? A) Period of timeB) Point in time Answer Correct Answer: A) Period Explanation: The income statement displays financial information for a specific period rather than a point in time. It summarizes a company’s revenues, expenses, and resulting net income or loss over
Key Events 👉 Hawkish repricing of Fed pivot CPI inflation data has been ahead of consensus for the past 3 releases. CPI numbers come out on a monthly basis. Inflation is an important indicator the Fed is patiently watching. It is coming down slower than expected. So, the market is expecting the Fed to be more hawkish (keep rates at
Information is abundant. It’s excessive. You agree? Good. But, we crave information. We are addicted to it. You agree? No? Check your screen time again pls. – – – Here’s a new paradox I have been running into. We all want more information. It is almost as if information is the cure to our problems. We read a little. Read.
Question Which of the following statements best describes the difference between “point in time” and “period of time” in financial statements? A) “Point in time” refers to a specific moment, while “period of time” refers to a range of moments.B) “Point in time” refers to a range of moments, while “period of time” refers to a specific moment.C) “Point in
When excitement strikes, write it down. It’s easy to go hour by hour throughout your day. Day by day. Week by week. I hate when people tell me “how soon time flies.” Time flies when we do not give attention to it. When we go through the motions day-in and day-out, we are living life on a whim. I have
In business, there is a tradeoff between focusing on short-term and long-term financial performance. Companies can choose to generate short-term cash flows. How so? Sell what sticks today. Sell high margin products. Cut back on operating expenses. Reduce capital expenditures. This helps (i) expand margins and (ii) increase free cash flow generated. But a sole focus on generating high-levels of
Diluted equity value. A pizza party with all your uninvited neighbors. Dilution. It seems bad. But, what does it really mean for shareholders? Dilution means that more people are involved, so you get less value. Say I have a pizza party. I would want the fewest number of people showing up. Why? Because I want the most pizza to eat.
Here’s a new formula for you. A formula I try to preach day in, day out through my writing. OUTPUT = MIN (MINDSET , SKILL SET) What does this really mean? Simple. You are only as good as the lesser of your skills or mindset. If you have no limiting beliefs, your output is limited by your skillset. If this
We often hear that EPS captures all the effects of a transaction. What does this really mean? Well, it refers to the fact that EPS captures the full cost of capital. It does so in a way that other income statement metrics wouldn’t like net income, EBIT, EBITDA, gross profits, or revenue. What do we mean by cost of capital?
