MS questions

Question 1

How was it before IFRS 16?

Answer 1

Before IFRS 16:
Operating leases were kept off the balance sheet; companies only showed lease payments as expenses in the income statement.

After IFRS 16:
Companies must now recognize almost all leases on the balance sheet as a right-of-use (ROU) asset and a lease liability.

Question 2

What is the impact of IFRS 16?

Answer 2

Assets and liabilities increase on the balance sheet because lease liabilities and corresponding ROU assets are recorded.

In the income statement, lease expenses change: instead of showing rent as operating expense, companies now show depreciation on the ROU asset and interest expense on the lease liability.

This often increases EBITDA (because rent was previously an operating expense, now replaced by depreciation and interest, and EBITDA excludes those).

Question 3

What is the impact of IFRS 16 on EV/EBITDA?

Answer 3

Both EV and EBITDA increase, but EBITDA increases proportionally more

As a result, EV/EBITDA multiples generally decrease, making companies with significant leases appear cheaper on this multiple after IFRS 16.

Question 4

What problems can occur especially with multiples-based valuations?

Answer 4

Lack of Comparability:
Diff capital structure
Non recurring items
Growth & Profitability not reflected
Negative Earning

Question 5

What is the difference between EV/Revenue and EV/Gross Order Volume (GOV)?

Answer 5

EV / Revenue
Used for traditional companies or SaaS firms where revenue is predictable and recurring.

Good for: businesses with high margins and clean, stable revenues.

EV / Gross Order Volume (GOV)
Used for platform or marketplace businesses (like Uber, Airbnb, Amazon Marketplace).

The company only keeps a small cut of GOV as revenue (their “take rate”).

Good for: measuring scale and customer activity, especially when revenues are small relative to GOV.

Question 6

Why are large blocks of shares (share packages) more expensive than single shares?

Answer 6

Because control has value.

📌 Reasons:

Control Premium: A large share block can give control or influence over the company (e.g. board seats, strategic decisions).

Voting Power: The buyer may gain voting power and decision-making influence.

Liquidity of Premium Buyers: Institutional or strategic investors are willing to pay more for influence.

Synergies: The buyer might be a competitor or partner who sees extra value (synergies) from owning a large stake.

Question 7

how to calculate risk premium thorugh regression

Answer 7

1. Collect historical data:

• Stock returns: Monthly or weekly returns for a company.
• Market returns: Returns for a broad market index (e.g., S&P 500, DAX, MSCI World).
• Optional: Risk-free rate (e.g., 10-year bond yields) to compute excess returns.

2. Calculate excess returns (optional but more accurate):

• Excess Stock Return = Stock Return – Risk-Free Rate
• Excess Market Return = Market Return – Risk-Free Rate

3. Run a regression:

• Regress excess stock returns on excess market returns: