Finance from zero

The language of money

1. 1Money has a time value

   Every valuation you will ever build rests on one idea: a dollar today is worth more than a dollar tomorrow. This lecture makes that idea precise. By the end you will be able to move any cash flow through time, value a… 45 minute read

2. 2Interest rates, bonds and risk

   Last time we treated the discount rate as given. Today we ask where it comes from. We start with the simplest risky asset, a bond: how to price it, what its yield means and how much its price moves when rates change. We… 45 minute read

Accounting

3. 3The income statement

   Accounting is the language companies use to describe themselves. You cannot value a business, build a model or survive a technical interview without speaking it fluently. We start with the statement everyone has heard… 45 minute read

4. 4The balance sheet

   The income statement is a film of the year. The balance sheet is a photograph taken on the last day. It tells you what the company owns, what it owes and what is left for shareholders, and every line on it has a story… 45 minute read

5. 5The cash flow statement and how the three statements connect

   Profit is an opinion; cash is a fact. The cash flow statement reconciles the two, and it is where the three statements lock together. Master this lecture and you will answer the most common accounting question in… 45 minute read

6. 6Accounting topics interviewers love

   You now speak basic accounting. Today we cover the topics that separate a prepared candidate from a nervous one: deferred taxes, acquisitions and goodwill, stock-based compensation, stakes in other companies, pensions… 40 minute read

Valuation

7. 7Enterprise value and equity value

   “What is this company worth?” has two correct answers, depending on who is asking. A lender, a shareholder and a buyer of the whole business each look at a different number. Today we separate the value of the operating… 50 minute read

8. 8Valuation by comparison: trading comps and precedent transactions

   The quickest way to value a house is to ask what similar houses nearby sold for. Bankers do the same with companies. Relative valuation is less elegant than a DCF, but it is what markets actually do, and it is the first… 50 minute read

9. 9The DCF, part one: from free cash flow to value per share

   Comparables tell you what the market pays. A discounted cash flow tells you what a business is worth on its own fundamentals. It is the most important model in finance and the one interviewers ask you to walk through… 50 minute read

10. 10The DCF, part two: the cost of capital

    Last lecture we discounted a company's cash flows at 9% and took the number on trust. Today we earn it. The discount rate is the return investors require for bearing the risk of those cash flows, and it moves a DCF more… 50 minute read

Deals

11. 11Mergers and acquisitions

    This is the job most of you want. An M&A banker helps one company buy another, or helps an owner sell. Today we build a full merger model in numbers, from the offer price to the buyer's earnings per share, then step… 60 minute read

12. 12Leveraged buyouts

    A leveraged buyout is a house bought with a large mortgage, where the house pays its own mortgage. Private equity funds have built a trillion-dollar industry on this idea. Today you will learn to value one on the back… 50 minute read

13. 13Raising capital: equity and debt markets

    Companies need money to grow, to buy, or sometimes to survive. Investment banks raise it in two markets, equity and debt, and each has its own products, prices and rules. Today we tour both: how a company lists its… 50 minute read

Interview ready

14. 14Cracking the technical interview

    You now know the material. A technical interview tests something slightly different: whether you can explain it clearly, quickly and correctly while someone watches and pushes back. This lecture is about technique: how… 55 minute read

15. 15Fit, markets and your story

    Technical skill gets you through the door. Whether you get the offer often depends on the other half of the interview: are you motivated, will you be good to work with at two in the morning, and do you follow the… 60 minute read