Private Equity Terms

DPI = Distribution to Paid-In aka Realization Multiple. The realization multiple, in conjunction with the investment multiple, gives a potential private equity investor insight into how much of the fund's return has actually been "realized", or paid out, to investors.

Realization Multiple = Cumulative Distributions / Paid-In Capital (Contribution)

TVPI = Total Value to Paid-In aka Investment Multiple. It gives a potential investor insight into the fund's performance by showing the fund's total value as a multiple of its cost basis. It does not take into account the time value of money.

Investment Multiple = (Cumulative Distributions + Residual Value) / Paid-In Capital (Contribution)

Enterprise Value vs. Equity Value

Equity value will tell you what a company is worth.
Enterprise value tells you how much it would cost to acquire a company in totality.

Enterprise Value 
+ Available Cash
- Debt
= Equity Value 

Equity Value
Valuation of Equity/ Equity Value formula = Common Shares Outstanding * Share Price

Enterprise Value
Enterprise Value formula = Equity Value – Cash + Debt + Minority Interest + Preferred Stock

OR

EV = market value of common stock + market value of preferred equity + market value of debt + minority interest - cash and investments.

Need to back out net debt

Reference: Finance Walk

Liquidation FS Disclosure

1. Statement that FS is prepared using the liquidation basis
2. Plan for liquidation
3. Significant assumptions & methods used to measure assets & liabilities
4. Expected time frame for completing the liquidation process
5. Type & amount of costs & income incurred 

Contingencies

Loss Contingencies

• Remote
• Do NOT disclose
• Do NOT accrue 
• Reasonably Possible 
• Do disclose
• Do NOT accrue
• Probable
• NOT Estimable:
• Do disclose
• Do NOT accrue 
• Estimable:
• Do disclose
• Do accrue 

---

Gain Contingencies

DO NOT ACCRUE until realized (occurred)

Calculation of Impairment Loss

GAAP 

• Step 1: (Undiscounted Future Net CF or Fair Value of Reporting Unit) less <Net Carrying Value>
• Positive: ok 
• Negative: IMPAIRMENT --> Step 2
• Step 2: 
• (FV/PV future net CF) less <Net Carrying Value>
• FV of underlying assets less FV of the reporting unit (goodwill)

---

IFRS

(Recoverable Amount) less <Carrying Value> = OK/ <impairment>

• Recoverable Amount is greater of: 
• FV - Cost to sell = NRV
• PV of future CF