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Finance GlossaryComparable Company Analysis
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Comparable Company Analysis

Definition of Comparable Company Analysis

Comparable Company Analysis (CCA) is a method used to evaluate a company’s value by comparing its essential metrics like EBIT, EBITA, and more with other companies.

The underlying assumption of CCA or “Comps” is that publicly traded companies from the same sector or industry will have similar metrics that are comparable.

Related Terms

Acid Test Ratio

An Acid Test Ratio shows whether a company has enough liquid short-term assets to deal with current liabilities.

The higher the Acid Test Ratio the better a company’s ability to deal with debt.

Acid Test Ratio = (Cash + Marketable Securities + Accounts Receivable)/Current liabilities

Capital Gain Or Loss

A capital gain is a profit that an investor or trader earns by selling an asset while a capital loss is the money a trader or investor loses after selling an asset. Capital gains are taxed while capital losses can be used to offset gains.

Interest Coverage Ratio

Interest Coverage Ratio (ICR) is used to determine the likelihood of a company’s ability to pay interest on existing outstanding debt. A low ICR typically indicates that a company is less likely to pay interest.

In fact, it indicates that the company may be heading towards bankruptcy. A higher ICR means that a company’s financial health is solid and more than likely to pay interest on existing outstanding debt.

Book Running Lead Manager

A book running lead manager is the head or lead of the underwriting process when new shares or securities are issued for their client, most commonly during an IPO.

For context, there was a time when physical ownership certificates were issued. If someone wanted to sell their shares, they’d have to present the ownership certificate and get it transferred to the buyer.

Also known as the book runner, the book running lead manager handles these crucial elements of the underwriting process:

  • Perform due diligence
  • Determine the final offering price
  • Record & track interested buyers
  • Confirm orders
  • Guarantee purchase

Gravestone Doji

A Gravestone Doji is a candlestick pattern that signals the reversal of a bullish trend into a bearish one. The key marker of a Gravestone Doji pattern is the open, low, and closing prices being near to one another.

This is a price action type trading strategy that is formed with a tall upper shadow, which is a signal of a bearish reversal.

Issuer

An issuer is the company that sells its shares to the public for the first time via an IPO. Investors can buy the freshly issued shares from the issuer by meeting the issue price. Large Cap Stocks



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