Decoding Crowd Finance

By Lauren Leibowitz, CrowdFundBeat Guest Contributor, Principal at 1st BridgeHouse Securities, LLC,

Part 1: When Reviewing An Investment Opportunity

 

Entering the crowd finance world is very overwhelming with lots of numbers, unfamiliar words and acronyms being tossed around in documents and conversations. So let me lend a helping hand and get you started on sounds like a professional.

bigstock-Investment-Word-Cloud-79391737-1024x426

 

 

  1. EBITDA: EARNINGS BEFORE INTEREST, TAXES, DEPRECATION AND AMORTIZATION.

EBITDA definition: An accounting technique valuable for business owners as an important standard measure of profitability.

What makes EBITDA valuable is that unlike standard net income calculations that use a simple formula of revenue minus expenses, EBITDA factors in other expenses, like taxes and interest. EBITDA allows analysts to generate useful comparisons between companies, and to project long-term profitability and the ability to pay off future financing. EBITDA assists investors in comparing probability between companies and industries, since it eliminates the effects of financing and accounting. Because EBITDA is not a part of generally accepted accounting principles (GAAP), it may not automatically be included in a company’s financial statement. With an EBITDA value, the business and its investors are now able to better compare profits against those of the business’s competitors.

EBITDA calculation

To calculate EBITDA, a business must know its income, expenses, interest, taxes, deprecation (the loss in value of operational assets, such as equipment) and amortization, which is expenses for intangible assets, such as patents, that are spread out over a number of years. With those numbers in hand, the formula is:

EBITDA = Net Income +interest, taxes, depreciation and amortization.

Related formulas: EBITDAR & EBITARM

EBITDAR, stands for earnings before interest, taxes, depreciation, amortization, and rent or restructuring costs. It is useful for companies undergoing restructuring.

EBITDARM, adds rent and management fees to the EBITDA calculation. Credit rating agencies often use this to make comparisons of companies that carry a high debt load.

  1. ROI: RETURN ON INVESTMENT

The most common profitability ratio. Decision makers should remember that an ROI figure by itself is not a sufficient basis for choosing one action over another. An ROI figure says nothing about uncertainty or risk.  It simply shows how returns compare to costs if the hoped for results arrive.

ROI= Net Profit /total Investment costs

There are several ways to determine ROI, but this is the most frequent formula. A ROI is usually a presented as a percentage.

  1. EPS: EARNINGS PER SHARE

The portion of a company’s profit allocated to each outstanding share of common stock. Earnings per share serves as an indicator of a company’s profitability.

EPS= (Net Income – Dividends on Preferred Stock) / Average outstanding shares.

Therefore you must look at EPS along with the ROI to determine if the company is using its capital efficiently

  1. PPM: PRIVATE PLACEMENT MEMORANDUM

A legal document used in the private placement industry that gives investors details about a company’s business plan, investment information, and other pertinent details. Private placements are offerings of stocks or bonds that institutions or accredited, wealthy individuals may participate in, but which the public at large is excluded from.

A Private Placement Memorandum allows issuers to disclose all facts of the company and the specifics of the investment transaction offered. Private placements memorandums are for private placements, while prospectuses are for publicly-traded issues.

Stayed tuned for Decoding Crowd Finance Part 2: Investment Structures.

 

Stayed tuned for Decoding Crowd Finance Part 2: Investment Structures.

Lauren LeibowitzPrincipal at 1st BridgeHouse Securities, LLC,

images (1)

Tags: , , , ,

HEADLINE NEWS

This RSS feed URL is deprecated, please update. New URLs can be found in the footers at https://news.google.com/news [...]

Kirkland ReporterMillennial entrepreneurs gearing up to launch crowdfunding campaign for Ombraz SunglassesKirkland ReporterWhile the common mistake may seem fairly mundane to most, the broken hinges on Brehm's sunglasses — and how he would fix them — planted a seed for the Kirkla [...]

IGNHasbro Announces Toy Crowdfunding Platform With 4-Foot Jabba's Barge ModelIGNBy Shabana Arif Hasbro's HasLab crowdfunding platform is like Kickstarter for cool toys, and first up is Jabba's Sail Barge, weighing in at 14lbs. HasLab "hopes to bring dream products [...]

GizmodoHasbro Is Getting Into Crowdfunding With an Insane Star Wars ToyGizmodoToday, Hasbro unveiled Haslab, which promises to basically be the toymaker's answer to Kickstarter, for diehard fans of its toys. The new crowdsourcing program is kicking off with one hell of a project: [...]

Comics BeatCrowdfunding Watch: The Awesome Fantasy Adventure EditionComics BeatOn this particular President's Day I'd like nothing more than to step outside this current reality. Thankfully, fantasy adventure let's me do exactly that. I've located three fantasy com [...]

Cinema BlendHasbro Unveils Crowdfunding For Insane Star Wars ToysCinema BlendBeing one of the most powerful franchises ever created, Star Wars has provided fans with countless characters, worlds, and stories to fawn over across just about every conceivable medium, but any executive wi [...]

ESPN.co.ukBritish bobsleigh team hoping to repay faith of crowdfunding backersESPN.co.ukBritish bobsleigh team hoping to repay faith of crowdfunding backers. play. British bobsleigh team thankful for crowdfunding backers (3:03). ESPN's Tom Hamilton caught up with the GB women [...]

Prosecco producer launches crowdfunding campaign for Giacomo Casanova museumThe Drinks BusinessCasanova hopes that the museum will help to increase tourism to the region and lead to further job opportunities in the area. They are currently finalising the details of the project with as [...]

The IndependentFlorida shooting: Crowdfunding page set up for victims' families raises more than $750k in just one dayThe IndependentMourners stand during a candlelight vigil for the victims of Marjory Stoneman Douglas High School shooting in Parkland, Florida on 15 February 2018 [...]

Decentralized EnergyCrowdfunding appeal for Indian village cogenDecentralized EnergyA crowdfunding campaign is aiming to bring power to a remote Indian village through a containerized waste-to-energy solution. UK-based SEaB Energy's 'Flexibuster' cogeneration system (pi [...]

CFB Finance

Marketwired

  • Crowdfunding
  • Crowdfund
  • Peer to Peer Lending
  • FinTech
  • Reg A+
  • Reg CF
  • Crowdfunding USA

Press Release

Live Crowdfunding .tv

What's Next Step in Regulation A+ JOBS ACTS Title IIII :L Interview : Steve Cinelli with Brian Korn Securities and Crowdfunding/Peer-to-Peer Lending Lawyer, Watch more video library | Conference | Interview | Campaign Showcase | Research | Education |