The section under ASC 718 considers the volatility of similar companies for comparison. The variability or fluctuations in the stock price over a certain time are measured by the volatility.
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To understand the downloaded ASC 718 report, you must first create a form. Check out our support guide to learn how to create an ASC 718 report on Eqvista.
Here are the steps to follow:
Step 1: Double-click the file to open the ASC 718 report in Excel format that was downloaded. At the bottom of the page, you will see the different sections of the report. Here, click the tab “Volatility Calculation”.
Step 2: The section calculates the volatility of similar companies by taking into account the volatility term (time period), applying daily average standard deviation over the term, and arriving at the total volatility calculated.
To calculate volatility, we take the formula:
The number of trading days in a year is assumed to be 252 for stocks.
The total number of years and trading days is calculated over the volatility term.
After calculating the volatility of similar companies taken for comparison, the average is calculated.