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Cap Table Math Cap table refers to a financial investment typically made by entrepreneurs and private equity firms. " CAP ", which stands for cost per thousand, is actually an investment management term that is used to represent the total amount of money an investor (a venture capitalist), would be willing to pay for a specific portfolio of equities in a company. One of the eternal immovable laws of venture capital investing is that there are usually only 100 potential points on the cap table; hence, the term. Anytime an investment reaches this number, it is said to have attained the cap. There is great debate as to the best way to arrive at a valuation of a venture capital portfolio. One school of thought is to price each of the assets in the portfolio, using some standard formulaic metric, such as PEG ratio or other asset pricing models. Others prefer to use financial ratios, such as gross profit to sales, as a guide. Still others prefer to use both types of analysis, though opinions differ as to how each can provide investors with a clearer picture of the underlying value of their portfolio. Determining the value of a venture depends on a variety of different metrics. Among the most common of these metrics is the CAPA, or accumulated earnings per share, which is derived from the net worth of a company and divided by its outstanding shares. Using the same calculation as the PEG, the present value of a company's stock is determined by the total current stock and outstanding shares times the cost per share times the total shares times the total cost. This can be complicated by the fact that companies can have varying numbers of outstanding shares even when they are the same size. Determining the cap table is therefore more a matter of determining what percentage of a company's shares are currently outstanding. There are several different ways of calculating a company's cap: Many companies use the straight-forward method of multiplying the company's market cap by its current market cap, giving the figure a current value. The problem with this method is often that it doesn't take into account how the company's stock price may have changed since the company became publicly traded. This is why it's best to use a method of valuation including not only the change in market cap but also the effect of dividends and liquidity. Option Capital Markets uses both the PEG and the dividend per share to calculate a company's cap tables. Two12 are calculated by dividing the current market price per share by the company's outstanding shares and then dividing the amount by the number of outstanding shares. A company's option capital is simply the total amount of money it could buy at its current stock price if it were to purchase shares. An investor would do well to remember that option prices are volatile and their exact value can change dramatically over the course of a single day. However, most investors can agree that a good option price can make a significant difference to a company's profits. Option Capital Markets looks primarily at the price per share and does not factor in the number of outstanding shares. Dividing the total shares outstanding by the total option pool allows investors to calculate the amount of money they could potentially earn if they purchased all of the company's shares at the company's strike price. Some investors look at this option as their only method of determining an accurate price per share; however, there are some investors that choose not to include the dividend per share in their calculations. These investors have calculated that by subtracting the dividend from the price per share they arrive at the per share price. Other investors may choose to only add up the dividend per share. Dividing the total shares outstanding by their respective ownership percentage gives investors an idea of the company's potential for growth. Options traders will know immediately if a particular stock is overpriced or underpriced given a particular company's ownership structure. Dividing the total number of shares outstanding by their individual preference and option capital columns gives investors an idea of the total amount of shares owned by each shareholder. Option buyers use these numbers to determine if a particular shareholder is holding his or her shares with the expectation of selling them later. Dividing the shares outstanding by their individual call and put options gives investors an idea of the shares they could buy now in the open market to satisfy their future calls and puts. This option market uses the early stage asset value, or EFT, to determine the value of shares at the end of any trading day. Investors who purchase more early stage assets pay less per share than those who do not purchase such shares at the end of the day. The early stage asset value is determined by adding the present value of cash inflows plus the net present value of future cash inflows plus dividends to the existing balance. Cap table calculation is done by adding the premium of the call option to the current fair market value of the security.
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