Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

7. Receivables and Investments

Introduction to Investments in Securities

Financial Accounting

7. Receivables and Investments

Introduction to Investments in Securities

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Multiple Choice

Which of the following best describes the first step in performing a Discounted Cash Flow (DCF) analysis for valuing an investment in securities?

Determine the market value of comparable securities.

Calculate the terminal value using a perpetuity growth model.

Discount the projected cash flows to present value using the required rate of return.

Project the future free cash flows of the investment.

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Verified step by step guidance

Understand the concept of Discounted Cash Flow (DCF) analysis: DCF is a valuation method used to estimate the value of an investment based on its expected future cash flows, discounted to their present value.

Recognize the importance of projecting future free cash flows: The first step in DCF analysis is to estimate the future free cash flows of the investment. Free cash flow represents the cash generated by the investment after accounting for operating expenses and capital expenditures.

Identify the components of free cash flow: Free cash flow is typically calculated as: Free Cash Flow = Net Operating Profit After Taxes (NOPAT) - Changes in Working Capital - Capital Expenditures.

Gather relevant data: To project future free cash flows, you need historical financial data, industry trends, and assumptions about growth rates, revenue, expenses, and capital requirements.

Develop a financial model: Use the gathered data and assumptions to create a financial model that forecasts free cash flows for a specific time period, typically 5-10 years, depending on the investment's nature.