Index

  • A
  • Accountants, entrepreneurs (contrast), 21–23
  • Accounts receivable (business investment component), 19
  • Accumulated depreciation, 22
  • Acquiror earnings accretion, positive P/E multiple acquisitions (impact), 181
  • Adjusted funds from operations per share (AFFO), 43
  • After-tax cash flow, 39–40, 45–46, 123–124
  • After-tax corporate rate of return, 40
  • After-tax current equity returns, 82
  • After-tax distributions, absence, 124
  • After-tax market return on equity, 141–143
  • Alphabet, 130, 132–134, 136–138, 141–144
  • Amazon, 136, 215
    • Households, net worth, 22, 43
  • Animal spirits, 149–150, 160, 162
  • Antioco, John, 201
  • AOL-Time Warner, 178
  • Apple, 72–73, 80, 82, 203–204
  • Arbitrage, usage, 181
  • Asset-based lines of credit (ABLs), 32, 167, 169
  • Asset efficiency, 75, 80–85, 171, 227
  • Asset light, 23–24, 82, 171
  • Assumed borrowings, 168
  • Average dividend yield, 43
  • B
  • Baker, George, 212
  • Balance sheet, 25–26, 28
  • Bankability, 20
  • Banking, changes, 212–213
  • Bank of America, Countrywide Mortgage acquisition, 176–178
  • Banks/brokerage firms, combinations, 174
  • Berkshire Hathaway, 40, 130, 161, 184–185
  • Bezos, Jeff, 13, 136, 153, 215
  • Billionaires, U.S. number, 13, 14, 41, 211, 221, 222
  • Blank check companies, usage, 216
  • Blockbuster Video, 200–203
  • Book equity, 63–64
  • Borrowings, 168–169
  • Boston Chicken, 158–159
  • Brin, Sergey, 12–13, 16, 41, 131–132, 136–137
  • Buffett, Warren, 13, 40, 45, 68, 152
  • Business development companies (BDCs), 33
  • Business investment (variable), 16, 23–24, 53, 55, 80–84, 227
  • Business models, 6–7, 41–42, 49, 61, 66–67, 81–82, 100, 102, 123, 126–127, 154, 161, 163, 188, 197–198, 209, 214
  • Business valuation, three steps, 170
  • Buy-sell arrangements, 129
  • C
  • Capital sources, 14, 25, 169, 216–219
    • Cost of capital, 30–31, 228
  • Capital efficiency, 75, 85–88, 172, 227
  • Capital expenditure (capex), 71
  • Capitalization rate (cap rate), 94
  • Capital stack, 25, 27, 31–33, 41–42, 67, 92, 96–97, 111, 227
  • Capital Structure Irrelevance Principle, 86–88
  • Carnegie, Andrew, 212
  • Case, Steve, 177
  • Cash (business investment component), 19–20
  • Cash flows
  • Champy, James, 206
  • Cheriton, David, 136
  • Chrysler, Daimler-Benz (merger), 165, 173
  • Collateral, limitation, 32–33
  • Commercial mortgage-backed securities (CMBS) market, emergence, 191
  • Commercial real estate lenders, product delivery, 106–107
  • Compound annual return rate, 124, 127–128, 136
  • Compound return rate, 124, 142
  • Compound EMVA growth, determination (formula), 65
  • Compound growth rate, computation, 4
  • Compounding, usage, 44–46
  • Conglomerate (business), 133, 180, 227
  • Cook, Steve, 204
  • Core competencies, 192–195, 228
  • Corporate after-tax cash flow, 119
  • Corporate borrowing, access (absence), 26–27
  • Corporate business valuations, variance, 170–171
  • Corporate capital stack, 27–28, 32
  • Corporate cultures, 174, 206
  • Cost of goods sold, 78–79
  • Covenant violation, risk, 102
  • Current equity return, 58, 141–142, 231–234
  • Customer deposits, 81
  • D
  • Data tables, usage, 7
  • Davenport, Thomas, 205
  • Denominator effect, 136
  • Depreciation, 37–38, 96–97, 106–107, 182
  • Designed revolutionary change, 203–205
  • Designed structural change, 189–197
  • Discount brokers, incentivization, 219–220
  • Discount Tire, success, 99–100
  • Disney, Pixar acquisition, 175
  • Disruptive innovation, 215
  • Diversified loan conduits, usage, 86–87
  • Dividend payout, 46, 48, 49, 157
  • Dot-com boom/bubble, 150–151, 154, 174, 219
  • Drucker, Peter, 196–197, 206–207
  • E
  • Earnings before interest, taxes, depreciation, amortization, and rent (EBITDAR), 36–37, 79, 228
  • Earnings before interest, taxes, depreciation, and amortization (EBITDA), 228
  • Earnings growth, 155, 180
  • Eastman Kodak, 202
  • Economics in One Lesson (Hazlitt), 101
  • Economic value added (EVA), 52–53
  • Edgar search engine, 137
  • Efficiency levers, usage, 174
  • Efficient Markets Hypothesis (EMH), 159
  • EF Hutton, demise, 198
  • Enterprise purchase, meaning, 166
  • Entrepreneurs, accountants (contrast), 21–23
  • Equipment financing options, 28, 167
  • Equity, 30–31, 33–34, 43, 45, 47, 63–64, 94–96, 112, 113, 170, 228
    • Equity market capitalization, computation, 137
  • Equity market value added (EMVA), 4–5, 43–44, 46, 50, 53, 55–56, 59, 64–65, 82, 94, 96, 105, 110, 119, 125, 135–136, 140, 143, 145, 162, 173, 186, 188, 197, 213, 224–226, 228, 233–234
  • Equity returns, 43–44, 97, 134, 154, 187
  • Equity valuation, 43–44, 47, 111–113, 170–172
  • Equity value, 53, 105, 119, 154, 233
  • Excess return, 3
  • Expansion funding, landlord commitments, 109
  • External growth, 64
  • F
  • Facebook, 130, 176
  • Facebook, Apple, Amazon, Netflix, and Google (FAANGs), 66–74
  • Fama, Eugene, 159–160
  • Financial Accounting Standards Board (FASB), lease accounting standards, 28–29
  • Financial companies, risk, 193
  • Financial covenants, 102
  • Financial efficiency, 75
  • Financial levers, 171–172
  • Financial limitations, 103
  • Financial model scenarios, 7
  • Financial success, measurement, 61–62
  • Financial win, defining, 221–224
  • Fixed-charge coverage ratio, 57–58, 96, 228
  • Fleischer, Mort, 31, 130, 151, 161
  • Ford, Henry, 16
  • Ford Motor Company, Class B shares (creation), 130
  • “For Us By Us” (FUBU), 17–21, 26–27, 33–34, 78, 80–82, 169
  • Franchise Finance Corporation of America (FFCA), 114, 151, 179–182, 190
  • Franklin, Benjamin, 45, 215
  • Free cash flows, 45, 47–48, 50, 123–124
  • Free enterprise, system, 11, 226
  • FTSE NAREIT All Equity REITs Index, 64
  • G
  • Galloway, Scott, 210
  • Gates, Bill, 13
  • General Electric (GE), 151, 179–185
  • Generally Accepted Accounting Principles (GAAP), 22, 28, 229
  • Gilded Age, 14, 212
  • Gladwell, Malcolm, 210
    • Supply chain technology, growth, 23–24
  • Golf, business (contrast), 15
  • Goodwill, 140, 178, 181
  • Google, 12–13, 131–137, 140–141, 175
  • Gordon Growth Model, 42–43, 59, 63, 142
  • Graham, Benjamin, 160
  • Great Recession, 176, 184
  • Greenspan, Alan, 174
  • Greiner, Lori, 115, 117
  • Growth, 49, 64, 67, 122, 174–175
  • H
  • Halle, Bruce, 99–100
  • Halliday, Robert, 114, 216
  • Hammer, Michael, 205
  • Hard assets, impact, 140
  • Hard asset variables, 81, 138
  • Hastings, Reed, 201
  • Hazlitt, Henry, 101
  • Household income percentiles, U.S., 222
  • Huizenga, Wayne, 201
  • Hurdle rate, 3, 46–47
  • I
  • Imposed structural change, planned structural change (contrast), 197–198
  • Income statement, operational fundamentals (appearance), 35–36
  • Inflation, impacts, 82
  • Information technology, outsourcing, 190
  • Initial public offerings (IPOs), 131–134, 217–218
  • Inorganic growth, 174–175
  • Intangible assets, 140, 181
  • Interest costing proceeds, amount (variable), 16
  • Interest/lease rate, 57
  • Interest only borrowings, 167
    • Interest coverage, determination, 57
  • Internal rate of return (IRR), 49
  • International Financial Reporting Standards (IFRS), 22
  • Inventory (business investment component), 19
  • Investment-grade corporate credit ratings, usage, 87
  • Investment returns, 3, 47–50
  • IPO and private equity cumulative issuance, 216
  • Irrational exuberance, 174
  • K
  • Keynes, John Maynard, 149–150
  • Krause, Aaron, 115–117
  • Kroc, Ray, 98
  • L
  • Landlords
    • commitments, 109
    • intractability, 104, 106–107, 109–110, 112
    • landlord-funded location investment, 110
    • material cost, 106
  • Law of large numbers, 171
  • Leach, Robin, 221
  • Lease capital, 85, 91–93
    • accounting standards (FASB), 28–29
  • Leased property expansion, 92, 103, 107–109
    • performance, problems, 103
    • substitution rights, 92
    • OPM proceeds, 107, 172–173
    • stacks, contrast, 27
    • tax benefits, 87
  • Levin, Gerald, 177
  • Liabilities, disclosure, 22–23
  • Lifestyles of the Rich and Famous, 221
  • Liquidity access, 20
  • Loan conduits, usage, 87
  • Loan covenants, 90
  • Loan prepayment restrictions, 97
  • Lone Star Steakhouse & Saloon, 155–157, 175
  • Long-Term Capital Management (LTCM), collapse, 91
  • M
  • Maintenance capital expenditures (capex), 37–38, 62–63, 83–85, 109–110, 166, 228–229
  • Majority ownership, maintenance, 130
  • Management by objectives (MBO), 197, 206
  • Marginal profits, 229
  • Market current equity returns, 179–180
  • Market return on equity, 235
  • Market value added (MVA), 15–16, 30, 229
  • Market V-Formula, 141, 229
  • Marx, Groucho, 145–146
  • McDonald's, 78, 98–99
  • Mellon, Andrew/Richard, 212
  • Mergers and acquisitions (M&As), 165, 178
    • earnings growth, impact, 181
    • risks/rewards, 173–178, 185–186
  • Mezzanine borrowing, 168
  • Microsoft, 66
  • Miller, Merton, 85–86
  • Modified internal rate of return, 48
  • Modigliani, Franco, 85–86
  • Momentum investing, value investing (contrast), 219–220
  • Morgan, J.P., 212
  • Mort's Model, 31–32, 41, 57, 71, 89, 137, 171, 173
  • Motorola Mobility, 132, 140
  • Musk, Elon, 13, 152–153
  • N
  • Nasdaq Composite stock market index, change, 150–151
  • Nasdaq stock market, founding, 154
  • Nest Labs, acquisition, 132
  • Netflix, 201–202
  • Net-lease companies, values (trading), 63–64
  • Net lease transaction averages, basis, 69
  • Netscape, 136
  • New York Stock Exchange, 6, 117, 146, 154
  • Nikkei 225 Index, increase, 150–151
  • Nippon Telegraph and Telephone, value (change), 151
  • Non-cash accounting conventions, 36, 69
  • Non-recurring expense, 38
  • O
  • Oaktree Capital, 215–217
  • Online trading platforms, performance valuation, 220
  • Operating cash flow, division, 31
  • Operating efficiency, 75–80, 171, 229
  • Operating leverage, 155, 229
  • Operating model, alteration, 21
  • Operating profitability, 77
  • Operating profit margin (variable), 16, 36–37, 49, 53–54, 78–80, 107–108, 110, 166, 175, 229
  • Operational fundamentals, appearance, 35–36
  • Opportunity costs, 87, 91, 101–114, 229
  • Opportunity value, 102, 103, 114
  • Organizational structure, 129–130, 196
  • Other people's money (OPM) (variable), 26–29, 52, 85–88, 229
    • adjusted OPM, 72
    • alternatives, understanding, 41
    • amount, 29–30, 62
    • business models, margins of error, 214
    • capital options, 167–169
    • constant, usage, 70
    • cost, 16, 29–30, 37, 53, 112–113, 115
    • designing, 27, 31–33, 52–53, 56, 89–91, 93–98, 194
    • elimination, 72
    • Lease capital OPM proceeds, 166, 172–173
    • mix, 82, 128, 139, 141, 144, 209–210
    • obligations, 33, 96
    • payment, 58, 67
  • Other people's money (OPM) (variable) equity, 116–118, 135, 216, 229
    • amount, usage (decision), 121–122, 127–130, 187, 210
    • OPM equity investors, expectations, 195
  • P
  • Page, Larry, 12–13, 16, 41, 131–132, 136–137
  • Payment constant, 58, 167, 230
  • Personal wealth creation 122, 126, 211
  • Planned structural change, imposed structural change (contrast), 197–200
  • Preferred stock, 169
  • Preferred return rate, 128
  • Price, definition, 160
  • Pricing power, 78
  • Private equity investment companies, growth, 5–6, 216
  • Projections, creation, 7
  • Protégé Partners, 160
  • Public companies
    • contrast with privately held companies, 217
    • examination, 131
    • business percentage, 185
    • equity returns/share performance, valuation (impact), 183
  • Q
  • Quest for Value, The (Stewart), 52
  • R
  • Real estate
    • appreciation, loss, 96
    • businesses, financial performance (examination), 38
    • capital solutions, providing, 106, 126
    • ownership financing, 26–27, 91, 95, 99, 167
    • divestures, tax consequences, 107
    • investment, 98–100
    • lease financing, 27–28, 33, 62–63, 167
      • opportunity costs evaluation, model creation, 104–114
  • Real estate investment trusts (REITs), 62, 64–65, 117, 151
  • Reengineering, impact, 205–207
  • Reengineering the Corporation (Champy), 206
  • Reinvested free cash flows, 50
  • Rent obligation, payment, 103
  • Repayment
    • requirements, 32, 167–168
  • Reported OPM, adjustment, 139
  • Research and development (R&D) costs, 83, 229
  • Restaurant
    • business
      • complexity, 189
      • five-year model, creation, 122–125
    • case studies, 104, 111, 112, 118, 155
    • chains, shares (sale), 155
    • deal, improvement, 125–127
    • growth, 187–189
    • real estate financing, 80
  • Retirement withdrawal, 4% rule, 223
  • Return on equity (ROE), 51, 58–59
    • after-tax market return on equity, average, 141
    • estimation, 59
    • growth, raising, 63
    • market return on equity, 235
  • Return rates
    • business realization, 3–4
    • capital cost, comparison, 16
    • determination, 137–143
    • modified internal rate of return, computation, 48
    • pre-tax equity return rate, 44
    • pre-tax, 44, 45, 127–128
    • production, business models (usage), 6–7
  • Revenue
    • creation, 83
    • cycle, 81
    • increase, 108
  • “Right to use” assets/liabilities, 29, 137
  • Robertson, Julian, 15, 154
  • Rockefeller, John D., 212
  • S
  • Sales (variable), 16, 36, 53, 76–78
    • growth, 82
    • operating efficiency, 76–77
  • Sales to business investment, efficiency ratio, 58–59, 62
  • Same-store sales, 77
  • Savings and Loan (S&L) crisis, 191
  • Scalability, 61, 66, 82, 230
  • Schmidt, Eric, 136
  • Scrub Daddy, 115–116
  • Sears, Richard, 215
  • Sears, Roebuck and Co., 214–215
  • Second Industrial Revolution, 14
  • Securities and Exchange Commission (SEC) filings, 137
  • Self-made billionaires, 14, 41
  • Seller financing, 168–169
  • Shareholder equity, 22–23, 25
  • Shareholder value creation, 75
  • Shareholder wealth creation, 4
  • Shark Tank, 18, 34, 115
  • Short-term money, 32–33
  • STORE Capital, 25–26, 62–66, 87, 194
    • asset investments, 186
    • daily trading, average estimates, 219
    • depreciation conventions, 38
    • dividend yield, average, 43
    • EMVA performance, 64–65
    • financial model, 7–8, 63, 93–94
    • founding, 98
    • profit center, owning, 27
    • public offering, 160–161
    • real estate investment, 213–214
    • secured bond issuance, 198–199
    • share price, 162
    • shares, placement, 220
    • sponsorship, 19
  • Six-Shot Economics, 88
  • Six Sigma, 206
  • Six Variables, 16, 75, 188, 216
    • business investment (variable), 23–24
    • combination, 39–42
    • corporate leader usage, 8
    • expansion, 76–77
    • framework, 155
    • maintenance capital expense (variable), 16, 37–38
    • operating profit margin (variable), 16, 36–37
    • OPM amount/cost (variables), 29–30
    • Sales (variable), 16, 36
  • Sloan, Albert P., 16
  • Small Business Administration (SBA), 14, 169
  • Small business investment companies (SBICs), 33
  • Standard & Poor's 500 (S&P 500) stock index, 3
    • holdings, weightings, 219
    • performance, 159–160
    • share buybacks, 217
    • usage, 136
  • Start-up business, investment, 2–3
  • Stern Stewart & Co., 52
  • Stewart, G. Bennett, 52
  • Stock exchange differences, 154
  • Stock market bubbles, occurrence, 151–152
  • Straight-lined rents, 137
  • Strategic investor, 173
  • Success, 14–16, 211
  • Supply chain management, impact, 81–82
  • Sustainable growth rate, 118–120, 234
  • T
  • Technologies, changes, 152, 202, 206
  • Technology-enabled changes/enhancements, 190–191, 194
  • Tenant fair market value purchase options, 92
  • Term debt (securing), assets (usage), 167–168
  • Term debt, types, 168
  • Tesla, 152–154
  • Third Industrial Revolution, 14
  • Tiger Funds, 151
  • Time Warner, America Online acquisition, 177, 178
  • Treasury bonds, investment, 146
  • U
  • Unicorn, likelihood, 13–14
  • United States Steel Corporation, foundation, 212
  • V
  • Value, definition, 160
  • Value Equation (V-Formula), 51, 63, 230
    • adjustments, 138
    • appearance/application, 68
    • application, 52
    • complexity, 88
    • data tables, 58–60
    • deconstruction, 232
    • determination, 83
    • framework, 23
    • impact, 107
    • interest rate input, 120
    • Market V-Formula, 141, 229
    • numerator, 76
    • relative V-formula, 232–233
    • restaurant case study, 111, 112
    • results, 139
    • simplification, 54
    • usage, 137
    • variables, 53–54, 56–58, 79, 81, 124
    • variation, 57
    • V-Formula-driven financial model, creation, 93–94
  • Value investing, 159–163
    • momentum investing, contrast, 219–220
  • Verizon, sale, 178
  • W
  • Walmart, 143–147
    • annual revenues, 78–79
    • cash generation, 144–145
    • EMVA, 146
    • EMVA/equity at cost, 146
    • equity valuation, 145
    • inventory investment, 80–81
    • pre-tax equity return rate, 144
    • transformation, 147
  • Walton, Sam, 143
  • Wealth. See Personal wealth
    • business creation, 1, 2
    • inheritance, 13
  • Wealth creation, 225
    • delivery, 88
    • efficiency, measurement, 55
    • engines, usage, 6–7
    • formulas, 105, 119
    • free enterprise, relationship, 11
    • definition, 3
    • multiple, 230
    • potential, 44–45
  • Wear and tear costs, 22
  • Welch, Jack, 179–181, 183–184
  • Whole business securitizations, usage, 87
  • Working capital
    • business investment component, 94–95
    • support, 82
    • variables, 81, 138
  • Wozniak, Steve, 72
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