Glossary of IPO Analysis Terms

Glossary of IPO Analysis Terms
© 2001 IPOdesktop.com
(Gaskins IPO Desktop)
Seven Summary Ratios
Valuation Metrics...can be applied to any public company
Market Value ======	Price per share times number of shares issued & outstanding
	= MktValue
1. Price-to-Sales	MktValue divided by Annualized Sales. Lower is better
2. Price-to-Earnings (loss)	MktValue divided by Annualized Earnings (loss). Lower is better
3. Price-to-Book Value	MktValue divided by Book Value. Lower is better
4. Price-to-Tangible BkVlu	MktValue divided by Tangible Book Value. Lower is better
5. % offered in IPO	Expected IPO proceeds divided by MktValue.
	Higher is better, unless IPO proceeds go to selling shareholders
	or unless % offered is over 40% (an empirical rule of thumb)
Profit/Loss
6. Gross Margin %	Gross Margin divided by Sales. Higher is better
7. Profit Margin %	Profit divided by Sales. Higher is better
	More definitions are listed below

Proven Venture Capital Scoring System:
one to five, five is high
Management	Does management run a profitable business?
Market Growth	Is the company in a growing market niche?
Dominant	Can the company dominate it's market niche?
Proprietary	Does the company have something that is proprietary?

27 Definitions...used in IPO Financial Analysis
Valuation
% offered in IPO	Expected IPO proceeds divided by market value
Annualized Earnings(loss)	Quarterly earnings (loss) multiplied by four
Annualized Sales	Quarterly sales multiplied by four. Not used for seasonal businesses
Market value	Price per share times number of shares issued & outstanding
Price-to-Book Value	Market value divided by Book Value
Price-to-Earnings (loss)	Market value divided by Annualized Earnings (loss)
Price-to-Sales	Market value divided by Annualized Sales
Price-to-Tangible Bk Value	Market value divided by Tangible Book Value
Selling Shareholders	Pre-IPO investors who use the IPO to sell their stock
Use of Proceeds	Usually for working capital, debt repayment, or selling shareholders

Profit/Loss Income Statement
Amortization	Non-cash (income statement) charge, applies to 'Goodwill'
Cost of GoodsSold(COGS)	Direct cost of goods, not including adv, sales, marketing, etc.
Depreciation	Non-cash charge reducing an asset's value: a building 'depreciates'
Equity Charges	Non-cash compensation charges, usually related to stock options
Excluded charges	Usually equity compensation, amortization, sometimes depreciation
Gross Margin	Sales minus Cost of Goods Sold (COGS)
Gross Margin %	Gross Margin divided by Sales
Income Statement	Sales & expenses over a specified time, similar to a tax return
Profit %	Profit divided by Sales

Balance Sheet
Balance Sheet	A snapshot on a particular day of assets & liabilities
Book Value	Shareholder's Equity on the balance sheet
Current Assets	Assets which can be converted to cash within 12 months
Current Liabilities	Liabilities which are due and payable within the next 12 months
Goodwill	Price paid (in acquiring a business) over Tangible Book Value
Shareholders Equity	Total assets less all liabilities (current + long term)
Tangible Book Value	Book Value less 'goodwill asset accounts' on the balance sheet
Working Capital	Current assets less current liabilities

Alphabetical Listing
% offered in IPO	Expected IPO proceeds divided by IPO market value
Amortization	Non-cash (income statement) charge, applies to 'Goodwill'
Annualized Earnings(loss)	Quarterly earnings (loss) multiplied by four
Annualized Sales	Quarterly sales multiplied by four. Not used for seasonal businesses
Balance Sheet	A snapshot on a particular day of assets & liabilities
Book Value	Shareholder's Equity on the balance sheet
Cost of GoodsSold(COGS)	Direct cost of goods, not including adv, sales, marketing, etc.
Current Assets	Assets which can be converted to cash within 12 months
Current Liabilities	Liabilities which are due and payable within the next 12 months
Depreciation	Non-cash charge reducing an asset's value: a building 'depreciates'
Equity Charges	Non-cash compensation charges, usually related to stock options
Excluded charges	Usually equity compensation, amortization, sometimes depreciation
Goodwill	Price paid (in acquiring a business) over Tangible Book Value
Gross Margin	Sales minus Cost of Goods Sold (COGS)
Gross Margin %	Gross Margin divided by Sales
Income Statement	Sales & expenses over a specified time, similar to a tax return
Market value	Price per share times number of shares issued & outstanding
Price-to-Book Value	Market value divided by Book Value
Price-to-Earnings (loss)	Market value divided by Annualized Earnings (loss)
Price-to-Sales	Market value divided by Annualized Sales
Price-to-Tangible Bk Value	Market value divided by Tangible Book Value
Profit %	Profit divided by Sales
Selling Shareholders	Pre-IPO investors who use the IPO to sell their stock
Shareholders Equity	Total assets less all liabilities (current + long term)
Tangible Book Value	Book Value less 'goodwill asset accounts' on the balance sheet
Use of Proceeds	Usually for working capital, debt repayment, or selling shareholders
Working Capital	Current assets less current liabilities