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Stock Market Basics 93: Scenario Analysis, How Not to Bet on Only One Future 3-Line Summary Scenario analysis is a method of evaluating investments by dividing the future into optimistic, base, and conservative cases. It reflects the fact that growth rate, profit margin, discount rate, interest rates, economic conditions, and competition can change together. Investors can use scenario analysis to examine not only upside potential but also downside risk and margin of safety. Recommended Keywords scenario analysis, sensitivity analysis, business valuation, DCF, margin of safety, intrinsic value, investment risk management, growth rate, discount rate, PER, financial statement analysis, stock market basics, long term investing Table of Contents What Is Scenario Analysis? Sensitivity Analysis vs Scenario Analysis Why Investors Should Not Rely on Only One Future How to Build an Optimistic Scenario How to Build a Base Scenario How to Build a Conservative Scenario How to Reflect Economic Cycle...

Stock Market Basics 91: DCF, How to Estimate Business Value Using Future Cash Flow 3-Line Summary DCF is a valuation method that estimates a company’s intrinsic value by converting future cash flows into present value. The key factors are future free cash flow, discount rate, long-term growth rate, and terminal value. DCF is not a formula that gives one perfect answer, but a tool that helps investors think about valuation range and margin of safety. Recommended Keywords DCF, discounted cash flow, business valuation, intrinsic value, free cash flow, discount rate, WACC, terminal value, margin of safety, value investing, financial statement analysis, stock market basics, long term investing Table of Contents What Is DCF? Why Future Cash Flow Must Be Converted Into Present Value The Basic Structure of DCF Why Free Cash Flow Matters in DCF Why the Discount Rate Matters The Relationship Between WACC and DCF What Is Terminal Value? Understanding the DCF Process With a Simple Example Why Grow...