CFA CFA General I want to play a game…

I want to play a game…

  • This topic has 118 replies, 16 voices, and was last updated Mar-17 by Snippy.
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  • christine
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    @SidMenon’s post on Scrabble got me thinking – can we play a game right on this forum? I had a quick think and search online and may have something that will help CFA prep at the same time (at the risk of sounding too much like an after school special… :D)

    If this goes well, the benefits of playing the game would be:
    1. An increasing knowledge of CFA terms and definitions
    2. Forum points

    A win-win! I start the game by stating and defining a particular CFA Term:

    White knight: A third party that is sought out by the target company’s board to purchase the target in lieu of a hostile bidder.

    The next person (i.e. the next person to reply to this thread) will have to take the last three letters of my Term (in this case G-H-T from ‘white kniGHT’) and their CFA term has to start with any of these letters (so maybe he/she would define ‘Treynor-Black model’). And so on and so forth.

    RULES
    1. Honour code – try not to Google things up beforehand, give it a go at trying to come up with a Term from memory.
    2. You can’t reply to your own Term – you’ll have to wait for someone else to reply first. i.e. I can’t reply to this first post, but if someone else chips in I then can reply to that one.
    3. If you like a particular Term, you can send the player a little love and points by liking that reply.
    4. A winner will eventually be announced – either after a certain time, or a certain number of replies, we’ll tally up each persons Terms and points earned and see who the leaders are.

    So the next person’s Term has to start with G, H or T – and no using ‘Treynor-Black Model’ πŸ˜€

    Anonymous
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    Tangible assets: physical assets of the business

    AjFinance
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    Sharpe Ratio : A measure of risk adjusted return.

    MattyJ
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    Intangible assets: non-physical assets of a business πŸ™‚

    christine
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    @AJFinance – preferably for Sharpe Ratio you should include a definition of the formula! e.g.

    And to continue the game…

    Sunk Cost: A cost that have been incurred and are unrecoverable no matter what business decision is made. Commonly used in NPV/IRR project evaluation CFA questions.

    tacheman
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    Option: A financial instrument allowing the ability to sell or buy a particular asset at a pre-determined price.

    (I did that from memory, not sure if that is the right definition!)

    MattyJ
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    Option-Adjusted Spread: The spread of a bond over treasuries once the premium/discount for an embedded option has been removed.

    jimmyg
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    Exchange Traded Fund: A security that tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange, thus experiencing price changes throughout the day as it is bought and sold.

    ETFs trade throughout whole day, so prices are always updated, while mutual funds only have a price at the close of the day. ETFs are also cheaper use compared to mutual funds.

    fabian
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    Net Present Value: the current value of a particular asset. Calculated by summing up the current value of all future cash inflows, minus all future cash outflows.

    Reena
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    EBITDA = earnings before interest, taxes, depreciation and amortization. that’s a mouthful!

    christine
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    Dividend Discount Model: a method of valuing dividend-paying stocks, essentially by calculating the present value of all dividends to perpetuity.

    Sarah
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    PVGO – the present value of all future cashflows.

    hairyfairy
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    Value Investing – principle of investment strategy focusing on buying equity that is priced low in relation to earnings or assets.

    AjFinance
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    Growth Investing – Investment strategy that focuses on investing in equities with relatively high fundamental ratios like P/E,P/B . In short, a security that is priced high relative to earnings or assets. The relatively low earnings compared to price indicates high earnings growth potential.

    AjFinance
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    @Diya Isn’t PVGO the present value of the growth component of future cash flows?

    Sarah
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    Oh noes I made a mistake! You are absolutely correct. PVGO is used to estimate how much of the stock price is related to the growth component of the company and the “left-over” component is the value of the company if there was no growth.

    christine
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    @AJFinance gets an extra like from me for pointing that out – didn’t see that either πŸ˜€

    Continuing:

    Information coefficient
    The correlation between forecast and actual values – used to demonstrate or analyse the skill of financial analysts

    Sophie Macon
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    equity carve outs = a type of restructuring process where a new independent company is created by giving a proportionate equity interest in a subsidiary to outside shareholders through stock public offering.

    AjFinance
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    @Thanks Christine. One of those few concepts that I can recall πŸ˜‰

    Sarah
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    Bear Hug – when the acquiring firm goes around the management and straight to the board of directors. This usually only happens when the management isn’t being all nice and friendly about the M&A deal.

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