*As I mentioned in the video, here are some further explanations of some of the concepts I brought up:* *Capital Expenditures (CapEx)* - Cash you spend on Plant, Property, and Equipment (PP&E). So Apple spends $100 million on a new office building, that's $100 million of Capital Expenditures. CapEx is NOT found in your income statement because they are usually really large one-time expenses and the income statement tries to capture expenses that occur regularly. Instead, the costs of CapEx are depreciated over time (see below). *Depreciation & Amortization (D&A)* - In the CapEx example, if Apple bought a new building for $100 million and that building had a "useful life" of 20 years, the annual D&A would be $100 million / 20 = $5 million a year. D&A IS found in your income statement either embedded into COGS or Operating Expenses. D&A allows you to fairly deduct CapEx spend over a period of time but it's not actual cash that you're spending (instead the actual cash was a one-time payment in CapEx). *Net Working Capital (NWC)* - For a DCF, this is your current OPERATING assets (i.e. excludes cash, includes assets like inventory, accounts receivable, etc.) minus your current OPERATING liabilities (i.e. excludes debt, includes accounts payable, deferred revenue, etc.). Standard definition for NWC is just current assets minus current liabilities but there's a difference for the DCF. NWC looks at the regular cash inflows and outflows from a company's day to day operations. *WACC Formula* - As a reminder, this is your (% of equity * cost of equity) + (your % of debt * cost of debt * (1 - Tax rate)). % of equity means [equity value / (equity value + debt)]. cost of equity is found through the CAPM formula (risk free rate + beta * market risk premium). % of debt is [debt / (debt + equity value)]. You multiply the debt part times 1 - tax rate because interest payments are tax deductible. 💰Get Free Money💰 ► Coinbase - Get $10 in Free Bitcoin: coinbase.com/join/chon_df?src=ios-link ► Moomoo - Get 2 Free Stocks: j.moomoo.com/005RTE ► Webull - Get 2 Free Stocks: act.webull.com/invite/share.html?inviteCode=5gwmzRWoEVWd ► Schwab - Earn up to $500: www.schwab.com/public/schwab/nn/refer-prospect.html?refrid=REFERBYVYKMZ6 ► Blockfi - Get up to $250: blockfi.mxuy67.net/Keje6z ► Audible - 30 Day Free Trial (Unlimited Audio Books!): amzn.to/3u8aBLq
Hey Ben, thanks for all the explainations. I was wondering whether JPM really uses CAPM model and not a more advanced one as other tier 1 banks. It seems too simple to me :D Keep up the good work!
Hi Ben, I am a year-one LSE student. So many of our students are trying to get into investment banking and it's really nice of you to provide free contents. Thank you so so so so so so much!
It is crazy how helpful this channel has been for me over the past couple months. From learning about a career in investment banking a few months ago to helping me prepare for a finance quiz I have tomorrow… The high quality of your videos isn’t going unnoticed and I don’t doubt this channel will really blow up soon!
Your explanation is incredibly amateur-friendly and is definitely interesting that it made me watch the entire thing at 2.30am in the morning. Really appreciate your dedication and knowledge and I am excited to watch your other videos and those upcoming ones! 😁
Interviewer: What's the best method for calculating Terminal Value? Ben: Perpetuity Growth Method is without a doubt the absolute best method Interviewer: Why? Ben: It's the only method I've used.
Thanks so much! Super helpful in preparing for a corp fin interview - concise and to the point. Also thanks for including text boxes - makes it much easier to write down notes 😊
Started watching back your live stream of how to build one of these models. Extremely helpful. Have been looking for a while around this topic, however have found your walk through on the live stream and explanation in this video to be one of the best ive found. Appreciate it.
Really good video! Very informative and easy to understand. But i realised that i really have to up my finance english skills. Some definitions you gave were a little fast for me. But thats not your fault!
Hi I'm recently getting my 1st year Finance classes started in GWU, I'm really nervous and stressful but after learning from your video at least I can have a little bit more confidence on prep for what I will learn in the upcoming classes! Thank you for YOUR useful content!
Very valuable content! I'm trying to go into IB but it's hard if you're 29 yo with no prior exp in that field. My goal is to get an internship (doesn't have to be in a BB oder top tier bank) and I'm trying to increase my chances by completing an IB course on udemy. Keep going with your content! I like them, new sub here👍
I would of lover to seen you use the exit multiple. And fcf gives us market value too, I've seen ppl use a terminal multiple times the fcf to get market cap.
Brother, you are doing such a great thing. Thank you so much. i would like to request you to bring some more videos on financial analysis. if you are free then please try to make details explanation with some examples in excel.
i guess the crypto startup use similar valuation model now. it's a great explanation to a outsider like me who is currently trying to propose a valuation for fundraising event. thanks a lot
So this is really just a way of making a spreadsheet that appears to justify what you already believed. You just need to fudge the numbers to get whatever answer you want. Fiendishly clever.
yes you can always adjust as you would like but it's still a helpful analysis because it shows you what you need to believe to get to a certain valuation
Hello, just discovered and subscribed to your channel 😉 you mentioned DCF applied to biotech companies. Could you please share one of such DCF? I am working in a pharma company and I am very interested in this topic, thank you very much
i did post about comparable comps already but probably won’t do one on lbo or precedent transactions because they’re not really relevant for most retail investors
I made it nearly all the way to the end until you put it all together - fractions, formulae and accounts gave me PTSD from doing algebra, maths and accounting in school, and my brain went into lockdown and noped right outta there; I think I'm doomed to fail! I went and re-watched the suggested video about valuing a company, and if I took everything in, I think I have a noob question: in every example (around the 7:00 min mark here/the whole other video in its entirety), the companies used are solid, for lack of a better word. Can you use any of these methods to value high-growth stocks where they're not making money, taking out loans, etc to get a good idea of how to value them? It doesn't seem like it's appropriate with DCF, but I'm still a little unsure about the other scenario. Or is this an entirely different video altogether? I hope my question makes sense....
yes as i mentioned really high growth companies or cash flow negative companies can be analyzed with a DCF as long as there is confidence that those companies will eventually generate positive cash flow. back at jpm i did 20-30 year DCFs for biotech companies that didn't even have any products on the market and in those scenarios you use a probability weighted valuation to value the company (which is another topic)
@@rareliquid - Awesome, thanks for the clarification! If it's worth your time, I wouldn't mind seeing you do a sample like you did at JPM (or just put it on the list!). Cool video overall. I'm an absolute idiot when it comes to numbers, formulae, etc, so it's gonna take a whole load more time with me to come to grips with DCFs, but I want to learn 😅
Excelent viseo. a pity it was so fast. please elaborate more in other videos and please speak slower so that foreigners can understand you better. Thank you for this video
Bro please make a video on the topic of investment bank analyst interview questions and his clearrful answers humble request you to and i am from india
Hey Ben, quick question. Where do assumptions come from? You said that almost all assumptions will be wrong but I doubt that IB analysts input random numbers there. Are the assumptions derived from various findings in the 10-Ks?
Can u also show us how u get the figures to calculate? Like which page which line of Yahoo Finance for eg... Sorry need some hand holding, if not i can't link theory to practical.. Towards the end... what is cash, why not same as free cash flow? Debt is Total Debt?
![CRAZY - LE SSERAFIM ルセラフィム 르세라핌 [Music Bank] | KBS WORLD TV 240830](http://i.ytimg.com/vi/GRQ4luUX15w/mqdefault.jpg)
*As I mentioned in the video, here are some further explanations of some of the concepts I brought up:*
*Capital Expenditures (CapEx)* - Cash you spend on Plant, Property, and Equipment (PP&E). So Apple spends $100 million on a new office building, that's $100 million of Capital Expenditures. CapEx is NOT found in your income statement because they are usually really large one-time expenses and the income statement tries to capture expenses that occur regularly. Instead, the costs of CapEx are depreciated over time (see below).
*Depreciation & Amortization (D&A)* - In the CapEx example, if Apple bought a new building for $100 million and that building had a "useful life" of 20 years, the annual D&A would be $100 million / 20 = $5 million a year. D&A IS found in your income statement either embedded into COGS or Operating Expenses. D&A allows you to fairly deduct CapEx spend over a period of time but it's not actual cash that you're spending (instead the actual cash was a one-time payment in CapEx).
*Net Working Capital (NWC)* - For a DCF, this is your current OPERATING assets (i.e. excludes cash, includes assets like inventory, accounts receivable, etc.) minus your current OPERATING liabilities (i.e. excludes debt, includes accounts payable, deferred revenue, etc.). Standard definition for NWC is just current assets minus current liabilities but there's a difference for the DCF. NWC looks at the regular cash inflows and outflows from a company's day to day operations.
*WACC Formula* - As a reminder, this is your (% of equity * cost of equity) + (your % of debt * cost of debt * (1 - Tax rate)). % of equity means [equity value / (equity value + debt)]. cost of equity is found through the CAPM formula (risk free rate + beta * market risk premium). % of debt is [debt / (debt + equity value)]. You multiply the debt part times 1 - tax rate because interest payments are tax deductible.
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► Moomoo - Get 2 Free Stocks: j.moomoo.com/005RTE
► Webull - Get 2 Free Stocks: act.webull.com/invite/share.html?inviteCode=5gwmzRWoEVWd
► Schwab - Earn up to $500: www.schwab.com/public/schwab/nn/refer-prospect.html?refrid=REFERBYVYKMZ6
► Blockfi - Get up to $250: blockfi.mxuy67.net/Keje6z
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Hey Ben, thanks for all the explainations. I was wondering whether JPM really uses CAPM model and not a more advanced one as other tier 1 banks. It seems too simple to me :D Keep up the good work!
i am missing an explanation of the following term: cost of debt
would highly appreciate it.
@@qwertz9501 cost of debt (i think) would be the interest rate that theyre paying on debt, its like how much its costinf them to borrow money.
I took a 9hr course on DCF and you cleared my problems in 18mins. Thank you so much
good to hear! haha
Hi Ben, I am a year-one LSE student. So many of our students are trying to get into investment banking and it's really nice of you to provide free contents. Thank you so so so so so so much!
It is crazy how helpful this channel has been for me over the past couple months. From learning about a career in investment banking a few months ago to helping me prepare for a finance quiz I have tomorrow… The high quality of your videos isn’t going unnoticed and I don’t doubt this channel will really blow up soon!
Your explanation is incredibly amateur-friendly and is definitely interesting that it made me watch the entire thing at 2.30am in the morning. Really appreciate your dedication and knowledge and I am excited to watch your other videos and those upcoming ones! 😁
This was extremely helpful! I’d love more basic corporate finance videos and examples. Looking forward to your next vid🙂
thanks daniel!
Interviewer: Walk me through a DCF
Me: hold my rareliquid subscription
LOL
Interviewer: What's the best method for calculating Terminal Value?
Ben: Perpetuity Growth Method is without a doubt the absolute best method
Interviewer: Why?
Ben: It's the only method I've used.
Thank you for the really clear explanation! Would like to see more in-depth dive into case studies using excel :))
Noted!
Really helpful. I’m 17 trying to get into this and your channel is so helpful
DUDE I needed this like last week!! The struggles I had at work trying to figure this out 😂😂
Thanks so much! Super helpful in preparing for a corp fin interview - concise and to the point. Also thanks for including text boxes - makes it much easier to write down notes 😊
You are the best bro
Leaving some love in the comments!
thank you!
Started watching back your live stream of how to build one of these models. Extremely helpful. Have been looking for a while around this topic, however have found your walk through on the live stream and explanation in this video to be one of the best ive found. Appreciate it.
Thank you for clarifying the concepts of DCF and WACC. it is very helpful to a non-business student earning an MBA.
Content keeps getting better and better🙌🏼
thanks!
You should do a series of videos making in-depth models for trending stocks. Oh and thanks I really enjoyed your video.
Very helpful! I really like that you added explanation and how you use the DCF model at work .
Favorite kind of videos!! keep it up man!
thanks! will do
This is higher quality that the materials I was given at Uni.
Thanks for sharing Ben. I'll be greatful if you do a series about finance for beginners😍
Thanks Ben for sharing precious information as always!
no prob~
This is amazing bro as a trader this gives you an edge when it comes to trading and valuations thanks a lot brother
Nice and simple breakdown. Great job. This would be useful for people who are learning
I’ve been waiting for this. Thank you for doing ittttt
no prob!
Thanks for sharing. Very articulated piece
really appreciate this content. looking forward to future contents like this
Man, that General Electric comment did not age well at all. But I appreciate what you were trying to say. :)
absolutely clear! Could u plz make M&A transactions on the next one?
great informative videos and appreciate the added video effects you do to make it more appealing
Thank you for this! Super helpful and useful- loving the IB insights.
Glad it was helpful!
Thank you, This video is very helpful, I'll learn many thing from your channel
Really good video! Very informative and easy to understand.
But i realised that i really have to up my finance english skills. Some definitions you gave were a little fast for me. But thats not your fault!
Hi I'm recently getting my 1st year Finance classes started in GWU, I'm really nervous and stressful but after learning from your video at least I can have a little bit more confidence on prep for what I will learn in the upcoming classes!
Thank you for YOUR useful content!
Eyyyyyy glad to see my fellow bear. Go Bears! , instant sub.
Love your teaching!!! so simple and clear :)
Really great video! I personally look at forecasting and DCF as two different parts of an analysis
Thank you for this great video, I love the formatting
Glad you enjoyed it!
do you have any eli5 videos? so many concepts and steps are confusing, fast and non intuitive. a detailed breakdown of this would be really helpful!
Appreciate the work and effort in explaning the concepts!
This is helpful...assisted me in my home work
Your content is great man!!
Love from India 🇮🇳
Where Can i download the Excel dcf?
yo could you do a dcf or how you would value stocks that operate at a loss like coinbase?
Here before rareliquid reaches 1M 🤩
Very valuable content! I'm trying to go into IB but it's hard if you're 29 yo with no prior exp in that field. My goal is to get an internship (doesn't have to be in a BB oder top tier bank) and I'm trying to increase my chances by completing an IB course on udemy. Keep going with your content! I like them, new sub here👍
Commenting for the algorithm
thanks!
Request to also put up This kinda series on LBO you did for 6.1 Bn deal
You are super helpful! Thank you so much for this!
You rock, dude. 😊
Great Video! Even that i am advanced in this field, i kind of enjoyed the explanation. More of that !!👍
Very clear explanation, extremely helpful ！ thanks a lot ~~~~
How do you determine how many years to project out and discount back? The difference between choosing like 5 and 10 can be massive
usually if it’s a company with a lot of growth potential then 10 years if it’s more stable then 5 years
It was pretty much helpful 👍🏻👍🏻
Good video, very helpful for my group work haha, thanks
Can you teach us other valuation methods like ratios and other stuff.
You saved me for my finance final
Hey Sydney! Glad I could help
Thanks for this! You're a good teacher! 👍🏾
Love ur videos better than my professors~
great video very informative
I would of lover to seen you use the exit multiple. And fcf gives us market value too, I've seen ppl use a terminal multiple times the fcf to get market cap.
Brother, you are doing such a great thing. Thank you so much. i would like to request you to bring some more videos on financial analysis. if you are free then please try to make details explanation with some examples in excel.
Love the videos. Keep em coming!
Thanks Andrew!
Great video, thank you for sharing it. Congrats!
great explanation, rareliquid!
thank you anna!
i guess the crypto startup use similar valuation model now. it's a great explanation to a outsider like me who is currently trying to propose a valuation for fundraising event. thanks a lot
very useful video. My question is based on what you make your assumptions ?
Love this type of videos
good to hear!
Fire video, thank you.
Thanks It very helpful
So this is really just a way of making a spreadsheet that appears to justify what you already believed. You just need to fudge the numbers to get whatever answer you want. Fiendishly clever.
yes you can always adjust as you would like but it's still a helpful analysis because it shows you what you need to believe to get to a certain valuation
Thank you!!
Love your videos so much!
Thank you so much!
Just found you. Please give more content so we can continue to learn to invest lol
Hello, just discovered and subscribed to your channel 😉 you mentioned DCF applied to biotech companies. Could you please share one of such DCF? I am working in a pharma company and I am very interested in this topic, thank you very much
5:21
8:08 cf. Stable top line rev
Enterprise value means the same thing as intrinsic value?
'Relatively predictable'
Before picking colleges what was your second and third school you almost went to? Which was your dream?
thanks more then a lot (= keep up the grind: its unique
Great video! Would really appreciate if you could also make some videos on LBO analysis and other valuation methods.
i did post about comparable comps already but probably won’t do one on lbo or precedent transactions because they’re not really relevant for most retail investors
I made it nearly all the way to the end until you put it all together - fractions, formulae and accounts gave me PTSD from doing algebra, maths and accounting in school, and my brain went into lockdown and noped right outta there; I think I'm doomed to fail!
I went and re-watched the suggested video about valuing a company, and if I took everything in, I think I have a noob question: in every example (around the 7:00 min mark here/the whole other video in its entirety), the companies used are solid, for lack of a better word. Can you use any of these methods to value high-growth stocks where they're not making money, taking out loans, etc to get a good idea of how to value them? It doesn't seem like it's appropriate with DCF, but I'm still a little unsure about the other scenario. Or is this an entirely different video altogether? I hope my question makes sense....
yes as i mentioned really high growth companies or cash flow negative companies can be analyzed with a DCF as long as there is confidence that those companies will eventually generate positive cash flow. back at jpm i did 20-30 year DCFs for biotech companies that didn't even have any products on the market and in those scenarios you use a probability weighted valuation to value the company (which is another topic)
@@rareliquid - Awesome, thanks for the clarification! If it's worth your time, I wouldn't mind seeing you do a sample like you did at JPM (or just put it on the list!).
Cool video overall. I'm an absolute idiot when it comes to numbers, formulae, etc, so it's gonna take a whole load more time with me to come to grips with DCFs, but I want to learn 😅
i am missing an explanation of the following term: cost of debt
would highly appreciate it.
Thank you
Excelent viseo. a pity it was so fast. please elaborate more in other videos and please speak slower so that foreigners can understand you better. Thank you for this video
Bro please make a video on the topic of investment bank analyst interview questions and his clearrful answers humble request you to
and i am from india
Mans taught a whole unit in my finance major in under 20mins 🫡🫡
Very helpful! Thank you!
np sara!
Great content and love the animations in your presentation. "Off-White vibes"
Good Job!
Thanks!
Hey Ben, quick question. Where do assumptions come from? You said that almost all assumptions will be wrong but I doubt that IB analysts input random numbers there. Are the assumptions derived from various findings in the 10-Ks?
Thanks, your video help me a lot thanks
Damn bro wanna be my tutor 😂🤣 studying this in uni rn 👏😎
Can u also show us how u get the figures to calculate? Like which page which line of Yahoo Finance for eg... Sorry need some hand holding, if not i can't link theory to practical.. Towards the end... what is cash, why not same as free cash flow? Debt is Total Debt?
Amazing😍
Waiting for the advanced DCF Model :)) Thanks a lot
coming soon~
Please do the three financial statements from scratch, Ben.
Great video, keep it up!!
Thanks!
How did you calculate the change in revenue % under change in NWC?
Nvm, I figured it out. Thanks for the vid!
Can you do more examples and analysis of companies? Like a top down analysis of Ali Baba stock and then a DCF on it. Thanks!
nice content !