Finance Formulas / July 27, 2018 / Iliana Williamson
DCF analysis is a key valuation tool at analysts' disposal. Analysts use DCF to determine a company's current value according to its estimated future cash flows. For investors keen on gaining insights on what drives share value, few tools can rival DCF analysis.
The dividend growth rate is necessary for using the dividend discount model, which is a security pricing model that assumes a stock's price is determined by the estimated future dividends, discounted by the excess of internal growth over the company's estimated dividend growth rate. A history of strong dividend growth could mean future dividend growth is likely, which can signal long-term profitability for a given company.
If you have credit cards or bank loans for your home, you pay interest (or a finance charge) on that money at a specific percentage over the course of the year. This is called APR, or annual percentage rate. Calculating your APR on your credit cards takes only a few minutes if you know some key factors and a little algebra. The APR on mortgage loans, however, is different from the simple interest rate because of additional charges or fees to you for securing your loan.
Companies record accounts receivable as assets on their balance sheets since there is a legal obligation for the customer to pay the debt. Furthermore, accounts receivable are current assets, meaning the account balance is due from the debtor in one year or less. If a company has receivables, this means it has made a sale on credit but has yet to collect the money from the purchaser. Essentially, the company has accepted a short-term IOU from its client.
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