Glossary

Working definitions.

Short, opinionated primers on the corporate-finance work Smalt AI helps you build. Each entry is written the way an analyst would explain it — formula, worked example, common errors, and how it ties to a real model.

Valuation methods

DCF Discounted cash flow — present-value the future Comps Comparable company analysis — relative valuation by peers Precedent transactions Multiples paid in past M&A deals — includes a control premium LBO Leveraged buyout — debt-financed acquisition math

Building blocks

Three-statement model P&L, balance sheet, cash flow linked WACC Weighted-average cost of capital — the discount rate CAPM Capital Asset Pricing Model — the cost of equity build Free cash flow FCFF and FCFE — the fuel of every DCF Working capital AR, inventory, AP — and the sign errors that break models Terminal value Gordon growth vs exit multiple — 50–80% of EV

Profitability metrics

EBITDA Earnings before interest, tax, depreciation, amortisation Enterprise value Whole-firm value — capital-structure neutral EV/EBITDA The default M&A and PE valuation multiple ROIC Return on invested capital — the value-creation test

Returns

NPV Net present value — the cleanest go/no-go test IRR Internal rate of return — PE's headline metric

M&A analysis

Accretion / dilution Whether a deal increases or decreases the acquirer's EPS

Stress testing

Sensitivity analysis How outputs move when inputs move