Analytical Methods: Rapid Fire

What this video covers

• Why more time increases future value through compounding but decreases present value through discounting, and how the Rule of 72 approximates doubling time
• Net present value (NPV) as a dollar amount, the meaning of zero NPV, and why NPV always wins over internal rate of return (IRR) on mutually exclusive projects
• IRR as the discount rate that drives NPV to zero, its relationship to yield to maturity (YTM) on bonds, and the unrealistic reinvestment assumption that undermines it
• Standard deviation as total risk versus beta as systematic market risk, and why a beta of 1.0 still carries unsystematic company-specific risk
• How the Sharpe ratio measures excess return per unit of total risk using the risk-free rate and standard deviation, and why alpha reflects manager skill above the risk-adjusted expectation
• Correlation coefficients from negative one to positive one, why positive one offers zero diversification benefit, and how R-squared interprets fit to a benchmark
• Mean versus median versus mode, right-skewed and left-skewed distributions, and why the quick ratio is always equal to or less than the current ratio
• Price-to-earnings (P/E) and price-to-book (P/B) valuation ratios, why negative earnings render P/E meaningless, and how P/B below one can signal distress rather than value