Glossary in .NET Printer ECC200 in .NET Glossary

Glossary using .net vs 2010 toembed datamatrix 2d barcode on web,windows application Modified Plessey Future value (FV) A sum visual .net data matrix barcodes of money available at a specified point in the future. Growth value The implied value that a project might have because of the way that it might enable future positive NPV projects to be undertaken.

Under the usual standard methodology conventions suggested by this book such value would not be included as part of a base case valuation. It could, however, be shown as a type 3 sensitivity. Income statement One of the three main accounting statements.

This shows the sales made in a period and the related costs, with the difference being the profit. Hence the alternative name of profit and loss account. Indivisible finance pool A description of the overall sums of money that a company has available.

The term indivisible is included in order to stress that although funds will come from different sources (basically debt and equity), once they go into the pool one should think of them as being perfectly mixed with the other sums of money that are already in the pool. Inventories (also called stocks in the UK) An accounting term which describes holdings of raw materials and partly made/finished products. These are all shown based on what they cost the company and not their potential sales value (unless this is lower than their cost).

Internal rate of return (IRR) The discount rate which, when applied to a project, results in a zero NPV. This is often also referred to as the DCF return. Investment efficiency (IE) A bangs per buck economic indicator which relates net present value to a defined measure of the resources used by a project.

Typically calculated as NPV per unit of capital expenditure. Judgement based on rational analysis The suggestion that good decisions are a subtle blend of analysis and senior executive judgement. Level playing field An expression which describes the intention that investment appraisal should be carried out in a consistent manner across a company.

A level playing field would ensure that individual analysts who were given a set of assumptions would all report the same economic indicators. (See also Standard methodology.) Leverage The way that changes in key economic indicators can be magnified by finance or high fixed costs.

Can also be another name for debt. Market capitalisation The market value of a company s shares. If one adds the value of debt and other long-term liabilities to this one obtains the overall value of a company s assets.

. Glossary McKinsey/GE matrix A two Data Matrix ECC200 for .NET dimensional matrix which plots business unit strength against market attractiveness. The technique is of particular use as input to a study of strategic options.

Me too player A key element of the Sources of Value technique. The me too player is the one which it is reasonable to look to when considering what will be a sustainable set of long-term assumptions. When competition is of the normal free market type, the me too player will be a bottom of the third quartile player.

When competition is regulated the me too player will be that player which the government or the regulator wishes to encourage to invest. Modigliani Miller proposition 1 The suggestion that the value of a company is independent of how it is financed. This proposition greatly simplifies investment evaluation because it allows one to distinguish between the decision to make an investment and what should be the subsidiary decision concerning how it is financed.

Monetising risk A technique which uses the expected value principle. Under the monetisation approach the impact of a risk is assessed as its impact times its probability of occurrence. Net present value (NPV) The sum of the present values of all of the future cash flows which a project is expected to generate.

These will usually involve initial negative flows associated with investing in the project followed by positive flows once a project starts to operate. The term NPV does, however, refer to the present value of all flows associated with something irrespective of whether they are positive or negative. If the NPV is positive then the activity being studied can be said to create value for its owner.

If it is negative it destroys value. NPVs are usually assumed to be incremental to some defined alternative case unless they are stated not to be. The term absolute NPV can be used to describe a situation where a particular course of action is given a value based on what funds flow will be generated and not the changes in funds flow compared with the deemed alternative.

Options and option value An option is a situation where somebody has the right but not the obligation to do something. Financial options refer to situations where the option concerns an item which is quoted on a financial market. These options can be valued through the so-called Black-Scholes model.

Many investment situations have characteristics similar to financial options and traditional DCF analysis tends to miss the value implicit in these situations. This book, however, suggests a series of ways of estimating option value in investment projects using the economic value approach. Payables (also called creditors in the UK) Sums of money owed by the company to its suppliers but not yet paid.

Plan (could also be called a long term plan or a one year plan) A set of projections for the future which sets out the detailed path which a company intends to take..
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