Untitled

When valuing a company, how does high growth potentially impact its value?

Which of the following is NOT a fundamental approach to estimating a company's growth?

A company reports negative earnings in the initial year of a growth analysis. Which of the following is the MOST appropriate approach when calculating the growth rate?

Callaway Golf's net profits grew significantly between 1990 and 1996. Given this historical data, what is a potential limitation of extrapolating these growth rates far into the future?

What are the key sensitivities to consider when using historical growth rates to project future growth?

When calculating historical growth rates, how do arithmetic and geometric averages differ, and when is each most appropriate?

When a company has negative earnings in the starting period, calculating a growth rate can be problematic. Besides using the absolute value, what is another described solution?

Why can scaling up create challenges when using historical growth rates to forecast future growth?

What is the primary role of analysts regarding company stocks?

What is a significant portion of an analyst's time spent on?

A company had a significant net loss in one year due to a one-time restructuring charge. How should this be handled when calculating historical growth rates?

What is the primary reason for examining analysts' growth rate estimates when forecasting a company's future growth?

Which of the following describes the nature of analyst forecasts of earnings per share (EPS) and expected growth?

A company's net profit grows from $10 million to $30 million over two years. Using the initial year as the denominator, what is the calculated growth rate?

Time Warner had an earnings per share of -$0.05 in 1996 and is expected to have an earnings per share of $0.25 in 1997. Why is it problematic to calculate a growth rate directly from these figures?

A company's earnings were -$0.05 in the first year and $0.30 in the second year. If you choose to use the higher of the two numbers as the denominator, what is the growth rate?

According to studies comparing analysts' EPS forecasts to those of time series models, which statement is most accurate?

Which factor generally reduces the advantage that analysts have over time series models in forecasting?

What is generally observed regarding the correlation of growth forecasts among different analysts?

Based on the study of All-America Analysts, what was the key finding regarding their earnings forecasting ability in the period prior to being chosen for the team?

According to the study, how did the forecasting accuracy of All-America Analysts compare to other analysts in the calendar year following their selection?

What impact do earnings revisions made by All-America analysts tend to have on stock prices, compared to revisions from other analysts?

What is the observed impact of buy recommendations made by All-America analysts on stock prices?

What distinguishes the equity reinvestment rate from the retention ratio?

Which of the following adjustments is necessary when calculating 'Net Income from non-cash assets'?

What is the correct method for deriving 'Non-cash ROE'?

A company has a high equity reinvestment rate. What implications does this have for its expected growth rate in net income?

Coca Cola had a net income of $11,809 million and interest income from cash of $105 million in 2010. What was Coca Cola's Net Income from non-cash assets in 2010?

Coca Cola had a book value of equity of $25,346 million and a cash balance of $7,021 million. What was the non-cash book equity?

Equity Reinvestment is calculated as Net Capital Expenditures + Change in Working Capital - Change in Debt. If a company has capital expenditures of $2,215 million, depreciation of $1,443 million, an increase in working capital of $335 million and an increase in total debt of $150 million, what is the Equity Reinvestment?

Using non-cash ROE and equity reinvestment rate, the expected growth rate in net income is derived. If a company has a non-cash ROE of 63.87% and an equity reinvestment rate of 8.18%, what is the expected growth rate in net income?

How is the reinvestment rate primarily defined in the context of operating income growth?

In fundamental growth analysis, if a company consistently reinvests 60% of its earnings and maintains a stable return on investment (ROI) of 15%, what is the expected growth rate of its earnings?

What does Return on Capital (ROC) measure?

What might be concerning about a company like Cisco having a very high reinvestment rate derived primarily from acquisitions?

A company is evaluating a new project. The ROI on its existing projects is 10%. How would undertaking a new project with an ROI of 15% affect the company's overall growth rate, given the parameters in the content?

If a company's Return on Capital (ROC) is expected to significantly increase, how does this affect the estimation of its operating income growth?

Which of the following reinvestment measures is most appropriate when estimating the fundamental growth rate based on operating income?

A company has a reinvestment rate of 40% and a return on capital (ROC) of 15%. What is its expected growth rate in operating income, assuming fundamentals stay locked in?

A company's ROI increases from 10% to 12%. If the investment in existing projects is $2,000 and new projects is $200, calculate the change in earnings, assuming current earnings are $200.

Company X has a ROC of 12% this year. Next year, it's expected to increase to 15%, with a reinvestment rate of 30%. Using the provided formula, calculate the expected growth rate in operating income.

What is the primary advantage of using non-cash ROE over traditional ROE when estimating fundamental growth?

A firm has a net income of $500, net capital expenditures of $100, an increase in non-cash working capital of $50, and a decrease in debt of $25. What is the equity reinvestment rate?

What is the primary implication if a firm's net capital expenditure needs are inversely proportional to the quality of its investments, given a specific growth rate?

Under which conditions is it generally NOT advisable to use sustainable growth equations to estimate a company's growth?

When estimating sustainable growth, under what condition can the simple formula: Growth Rate in Earnings = Reinvestment Rate * Return on Investment be accurately applied?

A company’s after-tax operating income is $250 million. Its net capital expenditures are $40 million, and the increase in non-cash working capital is $10 million. Calculate the reinvestment rate.

What adjustment is needed when using Return on Equity (ROE) to estimate growth if a company holds a significant amount of cash?

A company reinvests 40% of its earnings and has a ROIC of 12%. If it suddenly decides to increase its reinvestment rate to 60% while its ROIC decreases to 10%, what is the subsequent impact on its sustainable growth rate?

Growth: Good or Bad?

Earnings Growth: 3 factors

Historical EPS Growth

Growth Rates: Arithmetic vs. Geometric

Growth Rates: Sensitivity

Growth Rates: Scaling effects

Calculating Growth Rate

Negative Earnings: Issue

Negative Earnings Growth Rate Issue

Higher Denominator Solution

Absolute Value Solution

Linear Regression Solution

Geometric Average Growth Rate

Extrapolation

Analyst Forecasting Focus

Dissemination of Analyst Forecasts

Analyst Forecast Accuracy

Forecast Period Impact

Firm Size Matters

Industry vs. Company Focus

Correlation in Forecasts

All-America Analysts (Initial)

All-America Analysts (Later)

Market Impact of 'Top' Analysts

Net Income from Non-Cash Assets

Equity Reinvestment Rate

Non-Cash ROE

Expected Growth in Net Income

Equity Reinvestment

Coca-Cola's Non-cash Net Income (2010)

Coca-Cola's Non-cash Book Equity (2009)

Coca-Cola's Reinvestment Rate (2010)

Reinvestment Rate

Return on Capital (ROC)

Growth Rate Formula

Growth vs. Investment Quality

Overstated ROC

Reinvestment via Acquisitions

Growth Rate Formula (Changing ROC)

Limitations of Growth Equations

Current Earnings

Next Period's Earnings

Growth Rate (constant ROI)

Change in Earnings (varying ROI)

Retention Ratio

Fundamental Growth

Return on Equity (ROE)