Posts From Allan Millar
Allan has an MBA from Strathclyde Business School, where he specialised in Finance. He is also a Chartered Global Management Accountant. He has worked in commercial and financial roles and currently works for a global Bank. Allan lives near Glasgow, with his wife and son.
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In my last two articles we looked at the Liquidity Coverage Ratio and Net Stable Funding Ratio. These are important liquidity standards and the leverage ratios they give us combine with the Core Tier 1 ratio (CET1) to give us an overall view of Funding Risk. As you know, these ratios and standards are a result of the financial crisis in 2007 and the ratios, if they are not maintained,
More bite size banking insights today. In my last article we looked at the Liquidity Coverage Ratio, this time we will consider the Net Stable Funding Ratio (NSFR), also known as the Northern Rock rule. You may remember that Northern Rock ran into trouble in September 2007 (maturing money market borrowings could not be replaced). They needed emergency funding and the Bank of England, perhaps unwisely, decided upon a high
My next few articles will look at banking and Basel III implications for banks. In this one, we will focus on the Liquidity Coverage Ratio, also known as the Bear Stearns Rule (although it could equally well be called the Lehman Bros. Rule). The basic principle is that a bank has sufficient liquid assets (of a high quality) to offset net cash outflows under a 30 day stress scenario. Since
In the final article of my series looking at ways in which to value a business, we will look at the Dividend Valuation Model (DVM). The theory is that an entity is worth the sum of its discounted future cash flows. As noted in my previous article on discounted cash flows, if all free cash flows are paid out as dividends, and the same growth rate is used, the same
When valuing a company, an analyst has several options for valuation tools. In this valuation series, we have considered the Asset Valuation method, Calculated Intangible Value and the P/E Method. There was also a brief digression to look at the Weighted Average Cost of Capital (WACC) calculation and the PEG Ratio. This time, we will look at the discounted cash flow method (DCF); theoretically speaking this is probably the best way
In my last few articles we have looked at several valuation metrics, using Caterpillar, Inc. (CAT) as an example. The final method will use discounted cash flow, but before that it is worth considering the PEG ratio – price/earnings to growth. This has the advantage of being very easy to calculate. When considering the PEG ratio, remember that it is considering a company’s future earnings, whereas P/E most commonly uses
In previous articles, using Caterpillar, Inc. (CAT) for the figures, we have looked at different ways in which to value the company. Those considered so far have been Asset Valuation, Calculated Intangible Value and P/E Method. In a future article we will consider perhaps the most reliable – the discounted cash flow. To calculate this, we need a weighted average cost of capital (WACC) for CAT, and that is what
We have looked at asset based valuation and calculated intangible value, and in this article we will look at the P/E valuation method (price to earnings). It is the most commonly used way to value an entity. And it is simple to calculate: Company value = posttax earnings x P/E Breaking this down, we know that the P/E ratio is the share price of the entity divided by its earnings
In my last article we looked at valuing a business using an asset valuation method. One of the issues identified was that intangible assets are not included, thereby giving a misleadingly low valuation of the company. Caterpillar (CAT) value their intangible assets on the balance sheet ($3,596m at 2013 YE) but if the intangible assets are not on the balance sheet, there are a couple of ways in which they
How much is a business worth? Well, basically what you are willing to pay for it. Fortunately, there are some straightforward ways to assist you to determine the value; these are the Asset Valuation Method, Discounted Cash Flow Method and the Dividend Valuation Model. Over my next few articles we’ll look at each in turn, pointing out the obvious problems. For illustrative purposes, we’ll look at Caterpillar’s (CAT) balance sheet.