Thanks have to go to Wallstats.com and blog.mint.com for creating this amazing diagram.

Following on from my previous CFA Blog updates on my CFA progress, I have spent the last month working hard at work, studying the CFA and not finding much time to update this website. My original CFA Level One Study Plan seems far off and I find myslef less than 30 days from the exam…

The title of this post is somewhat misleading as I have not yet passed the exam and I am probably far off being able to claim such a feat.

I do however, feel that I have come up with a strategy that will enable me to use approximately 6 more weekend days, 15 or so after work nights and 5 full days off before the exam to have a good shot at passing the CFA level one exam.

The strategy is as follows:

1. Read learning outcome statements in Scheweser Question Bank program. This program is amazing
2. Complete practice multiple choice questions relating to each LOS in the same program
3. Maintain a simple spreadsheet with key new concepts learnt in super summarised form - refer to this each day until the exam
4. Complete practice CFAI exam papers 2 weeks before the exam. They are apparently much harder than the Schweser material.
5. Rinse and Repeat.

So far, I feel comfortable that I can answer the economics, ethics, quantitative methods (50%) and financial statment analysis (50%) sections of the exam.

My only other feedback at this point is that the CFA program has thus far served the exact purpose I had intended it to. It has forced me to study a very wide range of business/ finance / economics topics in a systematic manner. It has been highly enjoyable and whilst doing it as well as working full-time is not a walk in the park, I highly recommend giving it a go.

My blog will not be updated as often over the coming month but I have plenty of interesting articles on the way in December.

Speak soon.

Here is another CFA link that may be of some use to those doing the exam.

How Many Days Do You need to Pass the CFA Level One?

Six weeks on from my first CFA Blog update and my original CFA Level One Study Plan, I am now 67 days from the start of the CFA exams on December the 7th, 2008, in Sydney.

So let’s hope the answer to the question above is less than 67 days as this link on How to Pass the CFA in 50 days implies.

In terms of progress since my last update, I am feeling much more comfortable with some of the economics material and have revised the quantitative methods topics a few times. I have not yet done many practice questions at all as I have decided to get a good understanding of each of the topics before I do this - this is perhaps not an ideal tactic for all but it works for me. Unfortunately due to work and procrastination, time is running out and it is not looking like I will have a full month to do practice questions as planned.

I have now listened to all the audio tapes (except for some of ethics and alternative investments tapes) several times over between work and home. Just the sound of those two monotonous voices repeating “Question” or “Answer” or reading out a complicated formula makes me shudder at the thought of plugging my iphone headphones into my ears.

As a result of my new found hatred for listening to the audio tapes, I have switched to using a combination of the Schweser “Secret Sauce” (a summarised 220 page version of the 3200 page CFA material which I read on the way to and from work) and the Schweser video lessons, which include videos, the corresponding slides and a navigation mechanism. This switch will hopefully suit my studying technique of taking in little bits of information regularly but I do find it quite painful sitting my room alone, distractions rife, watching a 10 X 10 CM section of my LCD screen tell me about Financial Statement Analysis.

On that point, I have started the Financial Statement Analysis, Debt Investments (bonds) and Derivatives sections of the course. I believe the FSA stuff will be the most challenging for me because whilst none of its is particularly difficult, it is like learning a new language with no accounting and finance background.

I have nine weekends left before the weekend of the exam and am finding that I can make time to study two nights per week. I am obviously going to have to increase this as we get closer to the date and stop hosting Argentinian couch surfing girls at some point soon but overall, I think that whilst I could be further ahead, I am learning the information well and am close to where I would want to be at this point.

The following is an update of how far comfortable I am with each of the topics that I have studied so far:

Ethics - 50%

Quantitative Methods - 60%

Economics - 45%

Financial Statement Analysis - 25%

Debt Investments - 40%

Derivatives - 25%

Corporate Finance - 20%

Other - 5 %

Capitalism’s Holy Grail

Coming up with a system to succeed in the stock market and achieve market beating gains year after year is not an easy task. One might define the capitalist’s holy grail as finding the one system that will acheive the maximum possible returns year upon year.

“If you don’t get this elementary, but mildly unnatural, mathematics of elementary probability into your repertoire, then you go through a long life like a one-legged man in an ass-kicking contest.” Charlie Munger, “A Lesson on Elementary, Worldly Wisdom As It Relates To Investment Management & Business”

No Shortage of Stock Market Strategies

Finding Low price to earnings ratios, high dividend yields, high return on capital and only buying businesses that are priced below their intrinsic asset value would probably set you in the right direction as you entangle the stock market web and attempt to increase the value of your investments.

I have recently read several interviews with the Value Investing meritocracy of Buffet, Munger, Schloss, Robertson and Lynch and begun to invest myself over the past 3 months.

Without discounting the importance of understanding the strategies and financial ratios above, my reading has implied that succeeding in the stock market is less about strictly studying and following the investment strategies of others and more about finding a strategy that you can understand and which also falls within your ‘circle of competence’.

While reading a particular interview with one of the great investors above, you are swayed to believe that their way is the way to succeed, the only way. And seeing as each of their companies has averaged annual returns after fees of over 25% for at least ten years, perhaps you would not be far off the truth (their companies are Berkshire Hathaway, Walter J Schloss Associates, The Tiger Fund and the Magellan Fund if you’re interested).

But the truth is, each of their investment strategies is undeniably linked to their range of personal skills. Schloss sticks to buying businesses with a significant margin of safety below asset or book Value and doesn’t worry too much about the type of business or its management because that is not his area of expertise. Buffett understands and appreciates this method that they both picked up from Benjamin Graham but adds the necessity for the business to be a quality business in a profitable and sustainable industry to his list of investment requirements.

“It is better to buy great business at a fair price than a fair business at a great price”, Buffett says. Schloss feels otherwise.

Stick to Your Circle of Competence

Knowing that each of their investment strategies were fundamentally different from each other despite having commonalities, it became clear that if Warren Buffett were trying to use the strategies employed by Schloss, he would not have been as successful; and vice versa.

I had a tendency before doing all this reading to look for the objectively ideal strategy, the best and most efficient way to invest my money. Now I am seeking a strategy that I can understand, that I will have an edge in applying and that is likely to be successful (this final point is where past analysis is helpful).

Althought I suggest reading the writings of the masters above to get a better defintiion, I will quickly define what I just described as my ‘circle of competence’; an area in which you can excel and ideally an area that you enjoy.

Without intending to turn this piece into a guide to finding your own circle of competence, I found Munger’s article that I linked to above to provide the best guidance I have yet received, in only 5 to 6 pages, to equip someone new to investing (or just life) with the tools you need to succeed.

If you’re Stuck for Fundamentals - Try Some of Munger’s Worldy wisdom

Munger states that we all need a latticework of models to choose from when going through life. He speaks of those who go through life with limited ways of looking at the world as not reaching their full potential:

And the models have to come from multiple disciplines - because all the wisdom of the world is
not to be found in one little academic department. That’s why poetry professors, by and large,
are so unwise in a worldly sense. They don’t have enough models in their heads. So you’ve got
to have models across a fair array of disciplines.

So whilst I recommend reading the article in full, here are the most important models he describes:

1. Mathematics – permutations and combinations –algebra – think in terms of decision trees and permutations and combinations – spend time to devote to apply elementary maths to real life problems.
2. Accounting – know it plus its limitations.
3. Who what where when and why? Science and engineering backed models are best.
4. Statistics? understand well enough – know what a normal or Gaussian distribution looks like and that most things end up distributed like that. “I’m like a poker player who has learned to play pretty well without mastering Pascal”.
5. Engineering - stuff like backup system, breakpoints, the physics notion of a critical mass, cost benefit analysis.
6. Understanding of biology / physiology –Helps to understand what is and what is not going on.
7. Cognitive functioning is helpful to know -The pyshology of misjudgment is the most important part to learn of psychology – 20 little principles that interact with each other. The mind is subject to manipulation – “the mind of man at one and the same time is both the glory and the shame of the universe”.

Try some of my related articles below if you enjoyed this one

I found the following information in the Wetfeet Insider Guide to Careers in Investment Banking. This post follows on from my previous post on Investment Banking Interview Questions and Tips.

The following are good generic questions that will fit most investment banking interviews. However, you’ll want to think of additional ones that apply specifically to the company with which you’re interviewing. One important reminder: If you’ve already covered any of this material in your interview, don’t revisit it. You’ll appear inattentive and unfocused.

A word to the wise: We’ve grouped our questions according to our sense of relative risk. Those in the “Safe” section are meant to be boring and innocuous, while those in the “Well Done” section will help you put the fire to your interviewer’s feet.

Safe Questions

• What kind of person are you looking for? (This question will provide useful information on personal characteristics you should emphasize.)
• What makes a person successful in this business?
• What made you choose this firm over other firms?
• What is a typical career path in the (corporate finance, sales, trading, research) department?
• How much of an analyst/associate’s time is spent pitching new business?
• Is there a formal mentoring program for new analysts/associates?
• If I’m a CEO, why would I choose your firm to take my company public?

Medium

• Beyond the league tables, what differentiates your firm from other firms?
• How is an analyst/associate assigned from the generalist pool to a project?
• How long does it take most people here to become managing directors?
• Can one request specific teams, industries, or product groups?
• How well do the firm’s different divisions work together?
• What’s the path? Are there specific benchmarks you have to hit?
• What are the firm’s biggest challenges and opportunities in the next 2 years?
• What aspect of your job do you find most frustrating?

Well Done

• How has increased consolidation in the industry affected your firm, both positively and negatively?
• If the company has merged: What new business has resulted from the merger? How well have the two cultures mixed?
• How would your firm fare relative to the competition if interest rates suddenly skyrocketed? If oil prices plummeted? (Or whatever else you can think of along these lines, to help you gauge how prepared the firm is for future possibilities.)
• If the company has not merged: Do you think the company needs to acquire or merge with a competitor in the near future?
• How committed is the firm to building its XYZ business? (Investment banks are known to eliminate entire departments when they underperform against expectations, and if you happen to work for one of those departments, that is not usually good news..)
• What percentage of the managing directors are female or minority?

Excited by a delivery I received a few weeks ago whose packaging better resembled that of a fridge than what I would have expected of a curriculum for the CFA, I now find myself stunned by the realisation that weekends are out of stock until December if I wish to pass the CFA.

As I discussed in my CFA Level One study plan, I do not have a finance background short of a bit financial mathematics and general knowledge about particular areas. I hadn’t intended to be able to cruise through the CFA as everyone that I had spoken to had suggested that it was one of the most challenging courses out there. Having said this, I was not expecting the full extent of the enormity of information that I will need to take in before December in order to have a chance on the day.

For those out there who are considering having a go at passing level one of the CFA, consider this: 18 topics spread across mathematics, economics, accouting, financial statement analysis, fixed income securities, derivatives, portfolio management and corporate finance. You are allowed to bring a calculator and pens into the exam, but are not allowed notes or formula sheets or any other aids. You then have 6 hours to answer 240 questions spread across all these topics.

My most relevant initial reflections on my study so far include:

• I have decided that reading all the CFAI Curriculum (3000+ pages) that they sent in the Fridge packaging is simply not possible by December in addition to working 40 hours a week and staying sane. I have decided to use the Schewser course notes, video series and audio files as planned.
• The Schweser Video series that I got my hands on are particularly helpful and I am finding it makes the information much easier to take in if I watch the video, take notes about the concepts in the video at the same time and then read the Schweser course material following this.
• The Audio files that discuss each topic in a question / answer manner, whilst being mindnumbingly monotonous, are very helpful and are good to listen to on the way to work. Especially when combined with my iPhone.
• Ensuring that I think about at least one or two topics every day is important to ensure I committ recently learned information to long-term memory and to stay on top of things. My skiing trip to New Zealand today should make this interesting.
• The prereading that is required for Economics and Financial Statement Analysis (i.e accounting) is looking like it is actually going to be required. I was hoping this would not be the case but it does appear I will have to start at the bottom. This is going to be a challenge!
• The first two books which include Quantitative Methods, Economics and Ethics have so far been relatively straight forward short of my lack of a foundation in economics.
• In particular, Ethics will be very straightforward I believe (helped by my legal background I think).
• Quantitative methods will just be like throwing in first year university advanced maths and stats degree and will be tough but definately doable. I am not yet far enough into Economics to make a judgment.

I plan to continue giving updates about my progress as I continue into to CFA information vault so please sign up to my RSS feed (www.jamescox.com.au/feed).

If anyone else in Sydney is doing the CFA exam in December 2008, get in touch with me if you so wish

My compilation of short articles has been a bit short of articles lately as a result of me beginning a new job and study for the CFA (Chartered Financial Anaylst) level one exam in December.

Firstly, I am working for a stock market research publication known as Intelligent Investor which applies value investing principles to analysis of Australian listed companies. For those out there that invest in Australian equities, either contact me or fill out the form below and I will organise a free trial of the service for you. It is regularly around $600 a year so there is some value here for the readers of my blog.

Now onto my plan for passing the CFA level one exam without a finance background. The following is a somewhat ordered plan of what I will do to pass the CFA level one exam (I found analyst forum very useful here and particularly thank saurya_s for his guidance):

1. Overview - Watch the Schweser videos for each of the course modules with the course notes open on my second monitor at the same time. This will take approximately 48 hours by my estimation but will give me a solid introductory overview to what the whole course is about. I must ensure to cross reference the CFA learning outcome statements during this process. I need to have this done by the end of August 2008.
2. Order of Study - Whilst I am most looking forward to a few key areas, I have been advised that following the order of Quantitative methods, Economics and then Financial Statement Analysis at first will be most beneficial as the course is cumulative. During my study, I plan to read each section and then devote at least a few hours afterwards to revise whatever I have just learned.
3. Get familiar with financial Calculator - I have chosen to use either the Texas Instruments BA II plus or the BA II plus pro. Getting familiar with all the new functions will be important early.
4. Identify and Read Schweser Notes - Identify strong and weak areas and begin reading and annotating the Schweser course notes (books 1-5). During this process, if i get stuck, I will refer to the CFAI texts if necessary or ask someone for help. I am lucky enough to work at a place with a bunch of very intelligent analysts so this should be fine. I estimate this part to take approximately 4 minutes per page as an average or somewhere around 80 hours.
5. Listen - As odd as it may be, I plan to listen to audio tapes explaining the material on my way to work. Again, I will listen to the Schweser material that I have got my hands on.
6. Complete Concept Checkers - Either whilst I am annotating the notes when I read through them or after completing my first read through, I will attack the concept checkers at the end fo each module in each book. I expect this to take approximately an hour per module or 16 hours. I will try to ensure my understanding on the concepts is spot on at this point but also be conscious of getting my time per question down to less than 60-70 seconds as time will be a factor in the exam.
7. Reinforcement and Flashcards- If time permits, I will read through the Schweser CFA level one course notes one more time making reference to my annotations. I will then make flashcards to help me remember key parts of the course.
8. Read Schweser Secret Sauce - This is a condensed 220 page version of the course. I will read through this once I am fairly comfortable with it all and use it to reinforce key concepts. I expect this to take 7-10 hours.
9. Exam practice - practice exams, end of each book questions, Schweser question bank, and Schweser books 6 and 7 that are full of questions. The aim is to do so under time and to get above 80% in each of the more difficult Schweser practice exams. After I have done each question, I will think about what was tested and focus on the concept it is getting at.
10. Exam strategy - Identify strong areas and weak areas.  I will not spend time on questions intended to throw me in the exam, it is well reported that this sends many candidates to their demise. Do the Volume 6 and 7 exams after you have finished all material. You should aim to get 75%. Schweser tests are difficult but if you crack 75% you will surely get at least that much in the real exam which is far more conceptual. By working with maths, you will know how things are affected.
11. Things to remember about the CFA Level one exam - I need to get 70% in the real exam to guarantee a pass.The real exam is less numerical and more conceptual than the practice questions. Constantly revising and keeping tons of key messages in my mind will be crucial.

I may add to this plan over the coming months and write blogs as to my progress. It is August 10 now, I have 120 odd days left.

Updates: CFA Blog Level One reflections Part One. Another great link for CFA study advice. Contact me below if you need help locating any of the materials I mentioned above.

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Business and Company Valuation

“What is a business worth?” Although it seems simple, determining the value of any business requires experience, sound judgment from market and industry experience and at least some understanding of financial analysis.

Underpining everything that is outlined below however (much of which I sourced from wstselfstudy.com), I am certainly a part of the Warren Buffet school of thought that outlines that it is important to be able to understand a business before you decide it is the business for you.

What a company is worth is commonly different between buyers and depends on several factors including:

• Assumptions regarding the growth and profitability prospects of the business,
• An Assessment of future market conditions and demand,
• Assumptions based on the competition in the market,
• Varying appetites for assuming risk (the discount rate on expected future cash flows)
• What unique synergies may be brought to the business after the purchase.

The purpose of this article is to provide an overview of the basic valuation techniques used by financial analysts to answer the question in the context of a merger or acquisition.



Basic Valuation Methodologies

There are several basic analytical tools that are commonly used by financial analysts to determine the value of a company or business. These methods are based on financial theory and market reality but it must be remembered that these tools are only indicators and should not be viewed as a final definitive statement of value, but rather, as a starting point to estimate value.

The Wall Street Self Study course notes that different people will have different ideas on value of an entity depending on factors such as:

• Public status of the seller and buyer
• Nature of potential buyers (strategic vs. financial)
• Nature of the deal (“beauty contest” or privately negotiated)
• Market conditions (bull or bear market, industry specific issues)
• Tax position of buyer and seller

Each methodology is fairly simple in theory but can become extremely complex. They include:

“DCF” – Discounted Cash Flow Analysis

The free cash flows to a company are discounted over projection period. This method is especially relevant where there aren’t any comparable companies allowing the use of the multiples methods below or for smaller companies.

In a DCF analysis, free cash flows are modeled over a projection horizon and then discounted to reflect thier present value in today’s dollars (i.e less). In addition to these cash flows, a value must be determined for the cash flows generated beyond the projection horizon, commonly called the “terminal value”. Thus, DCF accounts for time value of money and relative risk of investment, but is highly sensitive to the discount rate.

The DCF approach is among the most scientific and theoretically precise valuation methodologies because it relates specifically to the profitability and growth of the business being valued. Due to its dependency on the discount rate and a number of long term future assumptions, it must be remembered that it needs to be used in association with other methods.

Analysis of Selected Publicly Trading Companies or Selected Acquisitions using Multiples

A part of most valuation methodologies is the idea of a ‘multiple’. A multiple is simply a ratio of value to a financial statement statistic such as Revenue, EBITDA, EBIT and the Price / Earnings (PE) ratio (Check here for Company Valuation Definitions of these ratios). Each of these multiples are common in different industries for different reasons. In general, the higher the multiple, the higher the value given to the future earnings or cash flow of a company; in other words, the higher the multiple, the more a buyer will pay for the company.

An an examples, If a company’s LTM EBITDA was $50 million and similar companies were trading at a 7X EBITDA multiple, the company would have an implied value of $50 million X 7 or $350 million based on an LTM or trailing basis.

The following is a brief overviewe of the two common methods that are used in selecting appropriately similar company multiples:

Trading Comparables (”Trading Comps”) Analysis

Trading Comps is the term for multiples analysis of publicly traded companies and then making comparisons with other similar or comparable companies.

This method is most relevant for valuing public companies with publicly traded competitiors. A major disadvantage of this valuation method is that often, it is difficult to determine the appropraite competitor and number of variables can get in the way.

Deal Comparables (Deal Comps”) Analysis

Deal Comps or analysis of selected acquisitions are very similar to trading comps except that deal comps compare actual completed transactions instead of publicly traded companies as the domain of comparable companies.

This approach is very relevant in the absence of public traded competitors but information can be very scarce and unreliable depending on company and the particular industry.

Other Methods

The following are other methods that I will not go deeper into in this article:

Asset Valuation – Involves analysis of tangible asset

Break up Analysis – Involves sum of parts analysis based on different business lines

LBO Valuation – Involves financial engineering based on leverage or use of debt

Clerkship Applications, Clerkship Interviews and Law Resumes

For the law students out there who are completing the somwhat daunting legal summer clerkship or articles clerkship applications at the moment, I thought it may be helpful to provide a set of links to each of the main Australian Law Firm careers sites.

It is not an easy job choosing a firm in which to complete a legal clerkship and ultimately the the amount of choice that you have is somewhat dictated by your personal situation, your law average and your connections.

Before making any decisions and in preparation for the process remember to think about why you want to work in a law firm, what about each particular firm makes you want to work there and the practice areas that interest you most. Most importantly however, think hard about your experiences, what you are proud of and how to express them in the most appropriate manner.

Law Firm Summer Clerkship Careers Site Links

Allens Arthus Robinson careers site

Arnold Bloch Leibler careers site

Blake Dawson careers site

Clayton Utz careers site

Corrs Chamber Westgarth careers site

Deacons Careers site

DLA Phillips Fox careers site

Dibbs Abbott Stillman careers site

Freehills careers site

Gadens Lawyers career site

Gilbert and Tobin careers site

Maddocks career site

Mallesons careers site

Middletons careers site

Minter Ellison careers site

Piper Alderman careers site

Slater and Gordon careers site

Sparke Helmore careers site

Whilst this list is not exhaustive, I hope it helps law students out there trying to navigate the overwhelming application maze that you can be drawn into.

Law Resume Advice and Tips

Many of these sites require applications to be submitted to Cv Mail and I wish you the best of luck in doing so. Whilst I am by no means an expert, If you are interested in receiving a document containing law resume advice and example templates (example law resume template here from the Vault Guide), fill out the form below to get in contact:

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Stay sane and good luck,

If Law firms are not for you and you want to have a look at some investment banking interview questions, click here.

James

ANk Annuity factor for N years and an interest rate of k
ABCP Asset Backed Commercial Paper
ACES Advanced Computerised Execution System
ADR American Depositary Receipt
APT Arbitrage Pricing Theory
APV Adjusted Present Value
ARR Accounting Rate of Return
BIMBO Buy In Management Buy Out
BV Book Value
Capex Capital Expenditures
CAPM Capital Asset Pricing Model
CAR Cumulative Abnormal Return
CB Convertible Bond
CD Certificate of Deposit
CDO Collateralised Debt Obligation
CE Capital Employed
CFROI Cash Flow Return On Investment
COV Covariance
CVR Contingent Value Right
D Debt, net financial and banking debt
d Payout ratio
DCF Discounted Cash Flows
DDM Dividend Discount Model
DECS Debt Exchangeable for Common Stock; Dividend Enhanced Convertible Securities
DFL Degree of Financial Leverage
Div Dividend
DJ Dow Jones
DOL Degree of Operating Leverage
DPS Dividend Per Share
DR Depositary Receipt
EAT Earnings After Tax
EBIT Earnings Before Interest and Taxes
EBITDA Earnings Before Interest, Taxes, Depreciation and Amortisation
EBRD European Bank for Reconstruction and Development
ECAI External Credit Assessment Institution
ECP European Commercial Paper
EGM Extraordinary General Meeting
EMTN European Medium Term Note
ENPV Expanded Net Present Value
EONIA European Over Night Index Average
EPS Earnings Per Share
EðrÞ Expected return
ESOP Employee Stock Ownership Programme
EURIBOR EURopean Inter Bank Offer Rate
EV Enterprise Value
EVA Economic Value Added
EVCA European Private Equity and Venture Capital Association
f Forward rate
F Cash flow
FA Fixed Assets
FASB Financial Accounting Standards Board
FC Fixed Costs
FCF Free Cash Flow
FCFF Free Cash Flow to Firm
FCFE Free Cash Flow to Equity
FE Financial Expenses
FIFO First In, First Out
FRA Forward Rate Agreement
g Growth rate
GAAP Generally Accepted Accounting Principles
GCE Gross Capital Employed
GCF Gross Cash Flow
GDP Global Depositary Receipt
i After-tax cost of debt
IASB International Accounting Standards Board
IFRS International Financial Reporting Standard
IPO Initial Public Offering
IRR Internal Rate of Return
IRS Interest Rate Swap
IT Income Taxes
k Cost of capital, discount rate
kD Cost of debt
kE Cost of equity
K Option strike price
KPI Key Performance Indicator
LBO Leveraged Buy Out
LBU Leveraged Build Up
L/C Letter of Credit
LIBOR London Inter Bank Offer Rate
LIFO Last In, First Out
LMBO Leveraged Management Buy Out
ln Naperian logarithm
LOI Letter Of Intent
LSP Liquid Share Partnership
LYON Liquid Yield Option Note
m Contribution margin
MM Modigliani–Miller
MOU Memorandum Of Understanding
MTN Medium Term Notes
MVA Market Value Added
n Years, periods
N Number of years
NðdÞ Cumulative standard normal distribution
NASDAQ National Association of Securities Dealers Automatic Quotation system
NAV Net Asset Value
NM Not Meaningful
NMS National Market System
NOPAT Net Operating Profit After Tax
NPV Net Present Value
NYSE New York Stock Exchange
OGM Ordinary General Meeting
OTC Over The Counter
Frequently used symbols xxiii
P price
PBO Projected Benefit Obligation
PBR Price to Book Ratio
PBT Profit Before Tax
P/E ratio Price Earnings ratio
PERCS Preferred Equity Redemption Cumulative Stock
PEPs Personal Equity Plans
POW Path Of Wealth
PRIDES Preferred Redeemable Increased Dividend Equity Security
PSR Price to Sales Ratio
P to P Public to Private
PV Present Value
PVI Present Value Index
QIB Qualified Institutional Buyer
r Rate of return, interest rate
rf Risk-free rate
rm Expected return of the market
RNAV Restated Net Asset Value
ROA Return On Assets
ROCE Return On Capital Employed
ROE Return On Equity
ROI Return On Investment
RWA Risk Weighted Assessment
S Sales
SA Standardised Approach
SEC Securities Exchange Commission
SEO Seasoned Equity Offering
SPV Special Purpose Vehicle
STEP Short Term European Paper
SV Salvage Value
t Interest rate, discount rate
T Time remaining until maturity
Tc Corporate tax rate
TCN Titres de Cre´ances Negociables
TMT Technology, Media, Telecommunications
TSR Total Shareholders Return
V Value
VAT Value Added Tax
VC Variable Cost
VD Value of Debt
VE Value of Equity
VðrÞ Variance of return
WACC Weighted Average Cost of Capital
WC Working Capital
y Yield to maturity
YTM Yield to Maturity
Z Scoring function
ZBA Zero Balance Account

I obtained the above list from the book Corporate Finance, Theory and Practice by Pierre Vernimmen, John Wiley and sons, 2005.