1. Financial Markets – Fall, 2019 – Oct 17, 2019

2. Valuation of securities in the real world
Cash Flow

3. Balance Sheet and the “Value of the Firm”
Liabilities
Assets
This is the “Value
of the Firm”
Net Worth

4. Net Income Plus Interest Expense and Taxes
E B I T
Earnings Before:
Interest Expense
Taxes
Net Income Plus Interest Expense and Taxes

5. EBIT plus Depreciation & Amortization
E B I T D A
EBIT with Adjustments:
Depreciation
Amortization
EBIT plus Depreciation & Amortization

6. The Concept of “Free Cash Flow”
EBITDA
Minus Necessary CAP-EX (necessary capital expenditures)

7. The End