141 lines
7.7 KiB
Org Mode
141 lines
7.7 KiB
Org Mode
#+title: Section 9 | Lesson 50 - How to Value Private Companies and Growth Methods
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#+HTML_HEAD: <link rel="stylesheet" type="text/css" href="../_share/media/css/business.css" />
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* Links
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- [[./../mba-main.org][TOC | Business]]
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- [[https://www.udemy.com/course/an-entire-mba-in-1-courseaward-winning-business-school-prof/learn/lecture/5805330#overview][S09:L50. How To Value Private Companies the Easy Way & Growth Methods]]
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- tables: [[file:../_data/market share spreadsheet.numbers][Market Share Spreadsheet.numbers]]
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* Notes
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** Financial Table
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| Year | 2015 | 2016 | 2017 | 2018 |
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|-----------------------------------+-----------+------------+-------------+-------------|
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| Revenue | 2,000,000 | 20,000,000 | 350,000,000 | 661,500,000 |
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| COGS (Cost of Goods Sold) | 1,800,000 | 16,000,000 | 175,000,000 | 264,600,000 |
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| Gross Profit | 200,000 | 4,000,000 | 175,000,000 | 396,900,000 |
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| Gross Margin % | 10% | 20% | 50% | 60% |
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|-----------------------------------+-----------+------------+-------------+-------------|
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| *Gross Profit = Revenue - COGS* | | | | |
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| *GM pct = Gross Profit / Revenue* | | | | |
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** Financial Table: Operating Expenses
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| Category | 2015 | 2016 | 2017 | 2018 |
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|----------------------------+---------------+----------------+-----------------+-----------------|
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| Sales & Marketing | ₪500,000.00 | ₪4,000,000.00 | ₪66,500,000.00 | ₪112,455,000.00 |
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| % of sales | 25% | 20% | 19% | 17% |
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| % YOY | | | | |
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|----------------------------+---------------+----------------+-----------------+-----------------|
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| General & Administrative | ₪500,000.00 | ₪4,000,000.00 | ₪66,500,000.00 | ₪112,455,000.00 |
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| % of sales | 25% | 20% | 19% | 17% |
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| % YOY | | | | |
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|----------------------------+---------------+----------------+-----------------+-----------------|
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| Research & Development | ₪4,000,000.00 | ₪20,000,000.00 | ₪24,500,000.00 | ₪26,460,000.00 |
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| % of sales | 200% | 100% | 7% | 4% |
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| % YOY | | | | |
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|----------------------------+---------------+----------------+-----------------+-----------------|
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| *Operating Expenses Total* | ₪5,000,000.00 | ₪28,000,000.00 | ₪157,500,000.00 | ₪251,370,000.00 |
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*** Operating Expenses
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these can also be found in every company
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- Sales & Marketing
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- General & Administrative
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- Research & Development
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*** how to calculate
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1. go see similar publicly traded companies and find out what percent of revenue/sales
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- security and exchange commision requires all publicly traded companies to put this up
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2. from the initial point we make assumptions
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** Operating Profit (EBIT)
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- the company is breaking even when Total Operating Expenses equals or exceeds Gross Profit
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- In the example, this occurs in year 2017
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\[ \text{Operating Profit (EBIT)} = \text{Gross Profit} - \text{Operating Expenses Total} \]
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*** Key Components of EBIT
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1. *Revenue*: Total income from sales or services.
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2. *COGS (Cost of Goods Sold)*: The direct costs of producing the goods or services sold by the company.
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3. *Gross Profit*: Revenue minus COGS.
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4. *Operating Expenses*: Costs not directly tied to production, such as:
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- Sales & Marketing
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- General & Administrative (G&A)
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- Research & Development (R&D)
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*** Why EBIT Is Important
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1. *Operational Focus*: EBIT shows how efficiently a company runs its operations without considering external factors like financing (interest) or tax obligations.
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2. *Comparison*: Useful for comparing companies in the same industry, as it ignores the effects of different tax rates and financing structures.
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3. *Profitability Analysis*: Highlights whether the core business is profitable.
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** What is YOY?
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*** Definition
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YOY stands for *Year-over-Year*. It is a method of comparing data from one period (usually a year) to the same period in the previous year. YOY is often used in business, finance, and economics to evaluate *growth*, *performance*, or *trends* over time.
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*** Formula
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\[ \text{YOY % Change} = \frac{\text{Current Year Value} - \text{Previous Year Value}}{\text{Previous Year Value}} \times 100 \]
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*** Why YOY Is Important
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1. *Growth Analysis*: YOY highlights whether a metric (like revenue, profit, or expenses) is increasing or decreasing compared to the previous year.
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2. *Seasonal Neutrality*: YOY comparisons help account for seasonality, as the same time periods are compared.
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3. *Trend Insights*: Helps identify long-term trends and patterns by consistently comparing yearly changes.
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*** Example
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Calculate YOY for *Revenue*:
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| Year | Revenue (₪) | YOY % Change |
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|------|-------------------|-----------------------------------------------|
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| 2016 | ₪20,000,000.00 | \((20,000,000 - 2,000,000) / 2,000,000 \times 100 = 900\%\) |
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| 2017 | ₪350,000,000.00 | \((350,000,000 - 20,000,000) / 20,000,000 \times 100 = 1650\%\) |
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| 2018 | ₪661,500,000.00 | \((661,500,000 - 350,000,000) / 350,000,000 \times 100 = 89\%\) |
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| 2019 | ₪999,600,000.00 | \((999,600,000 - 661,500,000) / 661,500,000 \times 100 = 51\%\) |
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| 2020 | ₪1,399,440,000.00 | \((1,399,440,000 - 999,600,000) / 999,600,000 \times 100 = 40\%\) |
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*** Uses of YOY
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1. *Revenue Growth*: Are sales increasing year over year?
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2. *Expense Management*: Are costs growing faster than revenue?
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3. *Profitability Trends*: Is the business becoming more or less profitable over time?
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4. *Operational Insights*: Are marketing or R&D expenses increasing efficiently year over year?
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** taxes and interest
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| | 2015 | 2016 | 2017 |
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|-----------+------+------+---------------|
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| Interest | | | ₪85,000.00 |
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| Tax | | | ₪4,250,000.00 |
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| % of EBIT | | | 24.29% |
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*** % of EBIT formula
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\[
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\text{Tax as \% of EBIT} = \left( \frac{\text{Tax Amount}}{\text{EBIT}} \right) \times 100
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\]
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*** Why No Taxes Before 2017?
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**** Taxes Are Based on Profit (EBIT)
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- Corporate taxes are typically calculated as a percentage of **profit** (Earnings Before Interest and Taxes, EBIT).
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- If the EBIT is **negative** (i.e., the company has an operating loss), there’s no taxable income, and thus no corporate income tax is owed.
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**** Losses in 2015 and 2016
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- EBIT values:
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- 2015: -₪4,800,000
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- 2016: -₪24,000,000
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- Since the company had **operating losses** during these years, there was no taxable profit.
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**** Profit in 2017
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- EBIT in 2017: ₪17,500,000.
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- By 2017, the company had a positive EBIT, meaning taxable profit existed, and taxes were applied from that year onward.
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*** How Losses Affect Taxes - Loss Carryforward
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- Many tax systems allow companies to carry forward losses from previous years to offset future taxable income.
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- Loss carryforwards reduce taxes owed in profitable years.
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*** No Tax Obligation Without Profit
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- If a company doesn’t generate profit, it generally doesn’t pay income taxes.
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- Other taxes (e.g., payroll, VAT, property taxes) may still apply.
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*** Conclusion
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- Taxes weren’t calculated before 2017 because the company didn’t have taxable profit.
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- Once the company turned a profit in 2017, taxes were applied.
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