Corporate Finance & M&A

Corporate finance and M&A essentials: NPV, IRR, WACC and DCF valuation, working capital, leverage, treasury, and deal terms like earnouts and royalties.

Key terms & definitions

23 terms in this pack

ACCRETION

A deal that lifts earnings per share is said to show this

COLLABORATION

___ revenue: income recognized from a partnered program

COVENANT

A condition a lender requires a borrower to maintain

DCF

Discounted Cash Flow, a core valuation method (acronym)

DEFERREDTAX

Asset or liability from timing differences between tax and books (two words)

DPO

Days Payable Outstanding, how long you take to pay vendors (acronym)

DSO

Days Sales Outstanding, how fast you collect receivables (acronym)

EARNOUT

Deal payment contingent on the target hitting future goals

EBIT

Earnings Before Interest and Taxes (acronym)

EPS

Earnings Per Share: net income over shares outstanding (acronym)

HEDGE

A position taken to offset a risk like FX or interest rates

IRR

Internal Rate of Return, where NPV equals zero (acronym)

LEVERAGE

Using debt to finance assets or amplify returns

LEVERAGED

A ___ buyout (LBO) funds an acquisition largely with debt

NOL

Net Operating Loss carried forward to offset future taxable income (acronym)

NPV

Net Present Value of discounted future cash flows (acronym)

ROYALTY

Ongoing payment for licensing a drug or technology

SYNERGY

The added value expected from combining two companies

TREASURY

Function that manages cash, debt, and liquidity

UPFRONT

Initial payment made at the signing of a licensing deal

VALUATION

Estimating what a company or asset is worth

WACC

Weighted Average Cost of Capital, the blended hurdle rate (acronym)

WORKINGCAPITAL

Current assets minus current liabilities (two words)