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Clear filtersReturn on Equity, Assets and Invested Capital
Profit means little without knowing how much capital was needed to produce it. These ratios answer that, and the differences between them are mostly about leverage.
Discounted Cash Flow, in Plain English
The theory every multiple is a shortcut for: a business is worth the cash it will produce, discounted for the fact that future cash is worth less than cash today.
Sum of the Parts
Valuing each business within a company separately and adding them up. Useful where the parts deserve different multiples, and dependent on disclosure that may not exist.
Residual Income
Valuing a company as its book value plus the present value of the profit it earns above its cost of capital. It puts the return-against-cost comparison at the centre.
Scenario and Sensitivity Analysis
Varying the inputs to see how much the answer moves. It converts a point estimate into a range and identifies which assumption is actually carrying the conclusion.