This data point is crucial, because the customer counts alone do not enable us to create a detailed revenue build. Now that we have the percentage of revenue by customer segment, however, we can calculate the revenue per segment (segment percentage x total revenue). Then we can divide the revenue per segment by the segment customer coinbase exchange review count in order to derive the average revenue per customer. This is essentially the unit price, so we have price / volume data by segment for a detailed revenue build. That question is the crux of building an operating model. The first step is familiarizing yourself, at a high-level, with the given company and its business model.

1. The upper levels of private equity require suave professionals, who can do basic analysis in their head (or using an iPhone calculator) while golfing several beers deep.
2. You should now be on Slack’s EDGAR page, and you should see “Slack Technologies, Inc.” at the top (here’s the link in case you want to double-check).
3. The one BIG advantage we have as individual investors remains the ability to hold for a long time.
4. A higher P/S ratio can indicate expectations of strong revenue growth and potential for multiple expansions.

And here’s our updated Excel file containing Slack’s cleaned historical financials and operating data. Even if you don’t want to go through this exercise manually, we recommend you skim the guide / discussion below. We’ll pull all other cost data from the income statement. The good and the bad news is that Slack doesn’t provide much besides the mandatory disclosures. That’s good, because it means less work, and it’s bad, because it means we have less operating data for building projections. Just like on the revenue side, we’ll have to make do with what’s available.

Income Statement

For example, when you buy a house, you fund the purchase using some combination of debt and down payment. The enterprise value for the house is octafx review the total amount of money transferred to the seller. Enterprise value ignores capital structure – it is purely a measure of aggregate value.

How do we model PIK interest?

Therefore, Pirate Capital paid a 11x TEV / LTM EBITDA multiple. For now, all you need to know is that multiples represent values where one metric is divided by another (such as rice-to-earnings, P/E). These multiples can be compared between multiple companies to assess value and potential investment opportunities.

Time Period

This guide on how to read a 10-K, provided by the SEC, is pretty thorough without making your eyes bleed (at least mine didn’t). If you’re new to filings research, it’s a good place to start. This will be the first in a series of articles showing you how to model a public company. Next, we’re going to fill in the income statement, copying Slack’s line items exactly.

In the case of an acquisition, the asset being acquired is the company itself and its bundle of assets and liabilities. If you can complete this LBO in under two hours (without looking at the instructions), you’ll be ready for any private equity modeling test. Theoretically, as we shrink the time period (from years… to months… to days), the potential over-discounting (which mid-year convention corrects for) converges to zero. Likewise, the difference between mid-year discounting and period-end discounting also converges to zero. So when we’re evaluating shorter time periods, mid-year discounting has a smaller valuation impact.

She has worked in multiple cities covering breaking news, politics, education, and more. Her expertise is in personal finance and investing, and real estate. The deposit multiplier is frequently confused with the money multiplier. Although the two terms are closely related, they are are distinctly different and not interchangeable. The deposit multiplier is also called the deposit expansion multiplier or the simple deposit multiplier. It’s connected to the portion of a bank’s deposits that can be lent to borrowers.

Enterprise value represents the aggregate value of a business, or collection of assets, irrespective of capital structure. We recommend you start from a blank Excel workbook and try to follow the steps below. More importantly, the Key Business Metrics section of the 10-Q includes the percentage of revenue allocated to customers paying $100,000+.

Remember – 8-Ks contain investor updates, so sometimes you can run into situations, in which an important 8-K is released after the latest 10-Q / 10-K. By default, you should check every filing above the latest 10-Q / 10-K, and it’s also a good idea to check any 8-Ks directly trade99 below the latest 10-Q / 10-K. No subsequent 8-Ks, and the latest 10-Q should have everything we need. Filings are listed in reverse chronological order (most recent filings at the top), and the number-and-letter symbols in the leftmost column represent filing types.

So the number of net shares equals (i) the number of options exercised, less (ii) the option proceeds divided by the stock price. We also learn that the notes are convertible to common stock. That means, layered within the debt instrument, is an option for the debtholders to exchange their notes for stock.

The lower the reserve requirement, the greater the amount of money that can be created (because more money is available to be lent). MoIC and IRRWhen performing a LBO analysis, we measure sponsor returns using the Multiple of Invested Capital (MoIC) and the Internal Rate of Return (IRR). Sponsors get paid based on MoIC, but their investors care about IRR, so both are important. Even if a particular investment has a lackluster IRR, a decent MoIC is good for the sponsor, because they get a share of the dollar profits (not based on IRR). That being said, the fund IRR will be important for marketing their next fund to investors. Every LBO model should include basic credit metrics, because these metrics and the credit profile will inform debt investors’ appetite to fund the transaction.