Finance Concept Comparisons
Each guide answers one question: which of two commonly confused measures or instruments to use, and when. Every page comes from the free courses and states the decision first, then the criteria behind it.
NPV vs IRR
NPV measures dollars of value created; IRR reports an annualized percentage return. When rankings disagree, NPV generally orders deals by value added.
IRR vs MIRR
IRR assumes interim cash flows reinvest at the IRR itself, which can overstate returns. MIRR applies an explicit reinvestment rate. When to rely on each.
Cap rate vs Cash-on-cash return
Cap rate is an unlevered pricing yield on property value; cash-on-cash is a levered yield on equity after debt service. How to apply each metric correctly.
DSCR vs LTV
LTV caps a loan against property value; DSCR caps it against income coverage of debt service. Lenders fund the smaller result, and DSCR often binds first.
DSCR vs Debt yield
DSCR divides NOI by the actual debt service; debt yield ignores loan terms entirely. Which lender sizing test binds, when it binds, and why deals fail one.
WACC vs Cost of equity
Discount firm cash flows at WACC, equity cash flows at the cost of equity. How to match the rate to the cash flow stream and what a mismatch does to value.
SAFE vs Convertible note
A convertible note accrues interest and matures as debt; a post-money SAFE sets a minimum ownership stake at signing. How to choose and who absorbs dilution.
Pre-money valuation vs Post-money valuation
Pre-money sets the price per share; post-money sets investor ownership. How to quote each number, compute dilution correctly, and read option pool terms.
Customer Lifetime Value (LTV) vs Customer Acquisition Cost (CAC)
LTV measures customer value, CAC the cost to acquire one. Why a healthy LTV:CAC ratio can still burn cash, and why the payback period decides growth spend.
Gross Potential Rent vs Effective Gross Income
Gross potential rent is the theoretical ceiling; effective gross income is what a property collects. Valuing off the wrong line tends to overprice a deal.
Free Cash Flow to the Firm (FCFF) vs Free Cash Flow to Equity (FCFE)
FCFF values the enterprise at WACC; FCFE values equity at the cost of equity. How to keep interest and net borrowing from being counted twice or lost.
Total Value to Paid-In (TVPI) vs Distributions to Paid-In (DPI)
TVPI blends cash returned with unrealized marks; DPI counts only cash back per dollar paid in. Which multiple to trust at each stage of a fund's life.
Direct capitalization vs Discounted cash flow (DCF)
Direct capitalization values stable income in one step; a multi-year DCF handles lease-up, rollover, and uneven growth. How to choose the right method.
Levered returns vs Unlevered returns
Unlevered returns measure the property itself; levered returns measure the equity after financing. How to compare deals when sponsors market levered IRRs.
Own vs Lease
Owning commits capital that must earn a real estate return; leasing keeps that capital in the core business. How to frame own vs lease as an investment.
Cap rate vs Discount rate
A cap rate converts a single year of NOI into value; a discount rate prices an entire cash flow stream. R equals Y minus g explains when each rate applies.
Enterprise value vs Equity value
Enterprise value prices the whole operating business; equity value is what shareholders keep after net debt. When to use each one and how to bridge them.
Participating preferred vs Non-participating preferred
Participating preferred takes its preference and then shares the remainder; non-participating takes one or the other. How each term splits exit money.
Gross burn vs Net burn
Net burn sets your stated runway; gross burn shows the floor if revenue stalls. Which figure to use for runway math, fundraising, and downside planning.
IRR vs Equity multiple
IRR measures how fast equity compounds; the equity multiple measures how much total cash comes back. Why screening real estate deals requires both numbers.