Level II Equity

Access to all Level II equity articles until the next Level II exam date

FCFF vs. FCFE

Posted by Bill Campbell III, CFA on March 20, 2018
Posted in: Level I Financial Reporting and Analysis, Level II Equity.

Occasionally, you will need to know how to compute free cash flow to equity (FCFE) given free cash flow to the firm (FCFF), or how to compute FCFF given FCFE.  The formulae are relatively easy, but for sake of completeness I thought that I’d write a short article on them Recall that the formula for […]

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Present Value of Growth Opportunities (PVGO)

Posted by Bill Campbell III, CFA on March 17, 2016
Posted in: Level II Equity.

Most companies don’t remain the same size (i.e., have the same amount of earnings, net income) forever; with a soupçon of luck, a company’s earnings will grow, year after year.  The value of a company’s opportunities to grow in the future is known, with no great originality, as the present value of growth opportunities (PVGO).  […]

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Justified Ratios (Price Multiples)

Posted by Bill Campbell III, CFA on March 26, 2014
Posted in: Level II Equity.

In general, price multiples – P/E ratio, price-to-book-value, and so on – are used for relative value comparison,  not absolute value.  That is, a company’s price multiples are generally compared to those of similar companies to determine whether the company’s stock is overpriced, fairly priced, or underpriced compared to the stock of its peers.  The […]

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