Corporate Finance Modeling, Forecasting, Valuation & Capital Structure
DESCRIPTION
This program provides participants the core skills required for valuation and modeling in a sophisticated financial institution. The program focuses on middle-market clients ($50 million – $1 billion in annual sales) and is designed to ensure participants are entirely familiar with (a) forecasting and modeling of a business’s future financial performance, (b) establishing a marketoriented valuation for the business and determining the optimal capital structure for that business. Participants with principal responsibility for financial forecasting and valuation will fully conversant with financial models while learning to appreciate the capital structure implications of their analysis; and, corporate bankers responsible for working with clients will understand in detail the financials that underpin their client discussions and relationships.
TARGET AUDIENCE
- Financial and credit analysts, associates and shared services professionals with 0-3 years exposure to capital markets products and services. This program is ideal for new hires and recent graduates with little practical exposure to the capital markets.
OBJECTIVES
- Learn how to plan and structure simple and complex financial models
- Determine what the model’s end-user requires in terms of model format and structure
- Assess the type, level, and granularity of information required for assumptions, backsheets, projection periods, etc
- Justify why and how information is included or excluded from the financial model
- Explain key performance indicators and risks of a company, given its competitive strategy
- Interpret all the key elements and inter-relationships of a company’s statements
- Articulate how financial statements can be used to assess key success factors and whether business risks are being managed appropriately by management
- Use ratio analysis to identify areas of financial performance
- Accurately assess financial results relative to competitors
- Be fully conversant in forecasting all company financial statements
- Understand and be able to apply and justify major valuation methodologies
- Develop comprehensive skills in financial modeling using Excel
- Develop and maintain financial models
PREREQUISITES REQUIRED
Participants are assumed to be proficient in the use of a financial calculator, such as TI Business Analyst, the HP-12C or HP-19. Participants are also assumed to be proficient in the use of spreadsheet software such as Microsoft Excel.
The program requires access to a PC for participants (either individually or in teams of 2-3) so that each individual can have hands-on experience in spreadsheet development tasks, as well as solving the program’s many exercises and cases. Each program’s introduction and conclusion establishes clear pre-set objectives, and is adjusted if needed to incorporate additional needs of participants.
PRE-READING
Individuals will receive a briefing package for one of two “Comprehensive Case Studies” which will be completed in teams during the workshop. The briefing package will include detailed company financial information as well as an overview and setting for the case. Participants are expected to have a full working knowledge of the company’s business and financial setting by the time the workshop begins. It is imperative that this background information be reviewed prior to the session. Participants should arrive at the session prepared to discuss the specific needs of their selected client and to assist in identifying the needs of the other selected clients.
- Planning the model
- Developing best practices
- Building error-free spreadsheets
- Developing financial projection assumptions
- Computer-based exercise: setting up an integrated balance sheet, income statement, cash flow statement, and statement of changes in stockholders’ equity
- 9 alternative methods for projecting sales
- Cost of goods sold projection alternatives
- Cash and noncash operating expenses
- Interest accrued vs. interest paid
- Other income and expenses
- GAAP-based income tax expense
- Tax attributes of S Corps vs. C Corps and LLCs
- Computer-based exercise: developing an income projection using seminar case
- Considerations in projecting each balance sheet item
- 6 alternative approaches for projecting accounts receivable
- 9 alternative approaches for projecting inventory
- Capital expenditures and fixed assets
- Capitalization and amortization of intangible assets
- Impact of capitalization vs. expensing
- Computer-based exercise: developing a balance sheet projection using seminar case
- 8 alternative methods for projecting accounts payable
- 9 alternative methods for projecting accrued liabilities
- Capital lease obligations
- Projecting funded debt
- Deferred taxes and other liabilities
- Computer-based exercise: projecting liabilities based on seminar case
- Projecting changes in each component of stockholders’ equity
- Impact of options, pension, investments, and foreign currency gains and losses on stockholders’ equity
- Computer-based exercise: projecting statement of changes in stockholders’ equity based on seminar case
- Direct vs. indirect method of projecting cash flow from operating activities
- Developing cash flow statement based on balance sheet changes and input from income statement and statement of changes in stockholders’ equity
- Computer-based exercise: completing integrated financial projection based on seminar case
- Testing the financial statements
- Common financial projection shortcomings
- Sensitivity analysis
- Key financial ratios
- Computer-based exercise: analyzing financial projections using qualitative and quantitative measures based on seminar case
- Projecting cash requirements and ability to service debt
- Alternative measures of cash flow: EBITDA, traditional cash flow, free cash flow to the firm, free cash flow to equity holders
- Computer-based exercise: projecting cash requirements and debt-service capability as well as alternative measures of cash flow based on seminar case
- Applying equity capitalization multiples
- Applying enterprise value capitalization multiples
- Public company vs. merger & acquisition multiples
- Premiums and discounts
- Information sources
- Computer-based exercise: estimating value using equity and enterprise value capitalization multiples based on seminar case
- Estimating cost of each component of capital
- Weighted average cost of capital
- Terminal value
- Estimating equity value based on free cash flow to the firm
- Estimating equity value based on free cash flow to equity holders
- Computer-based exercise: estimating value using alternative discounted cash flow analysis methodologies based on seminar case
- Synthesizing alternative indications of value to develop a comprehensive estimate of value
- Group discussion: developing a comprehensive estimate of value for the company analyzed
- Ownership time horizon
- Business plan
- Risks and opportunities
- Debt/equity tradeoff
- Financing alternatives
- Understanding and using alternative cash flow measures
- Estimating debt service capability
- Impact of alternative forms of debt financing
- Hybrid securities
- Sources of equity
- Criteria and target rates of return
- Alternative methods for estimating cost of equity capital
- Leveraging and de-leveraging the company
- Impact of capital structure changes on cost of capital and value
- Off-balance-sheet financing
- Spin-offs and carve-outs
Current Streaming Courses
"The secret to getting ahead is getting started..." ~ Mark Twain