Private Equity: Definition, How It Works, and Types
What Is Private Equity? Private equity is an investment approach where private equity firms use capital from investors and debt financing to buy companies, improve their performance, and sell them later for a profit. Private equity involves active ownership in private or delisted public companies and aims to generate higher returns through operational and financial...
Private Credit: Definition, Types, and How It Works
What Is Private Credit? Private credit is debt financing provided by non-bank lenders directly to companies or projects through privately negotiated agreements. These loans are not issued or traded on public markets. Private credit gives businesses access to tailored funding solutions and helps fill the gap left by traditional bank lending. Private credit has expanded...
Trade Lifecycle: The Process of Buying and Selling Securities
What Is the Trade Lifecycle? The trade lifecycle is the end-to-end process for buying or selling securities in financial markets. The trade lifecycle includes initiation, order matching, trade capture, confirmation, custodian instructions, clearing, and settlement. The lifecycle of a trade demonstrates how capital markets move securities and cash between buyers and sellers through a coordinated...
Price to Free Cash Flow Multiple (P/FCF Multiple): Definition, Formula, and Example
What is the Price to Free Cash Flow Multiple? The P/FCF multiple measures how much investors pay for each dollar of free cash flow available to shareholders. The formula is P/FCF = Market Cap ÷ Free Cash Flow to Equity (FCFE). This comparative valuation metric focuses on actual cash generation rather than accounting earnings, making...
Price Multiples: Types, Formulas, and Examples
What Are Price Multiples? Price multiples are financial ratios that compare a company’s stock price to a measure of its financial performance, such as price-to-earnings (P/E) or price-to-cash flow (P/CF). Price multiples provide investors and analysts with a simple, market-based benchmark of valuation. Price multiples are commonly used in relative valuation, where a company’s financial...
