course | Business analysis and valuation using financial statements

Introduction to Business Valuation:
 

• Valuation fundamentals 
• Drivers of valuation – ROIC, WACC, growth, size 
• The FCF perpetuity valuation formula 
• The key value driver valuation formula 
• Economic profit and enterprise value-added 
• ROIC vs. WACC – computation, and drawbacks 
• Case studies: valuing companies using the above formulae 
• Enterprise value versus equity value
• Calculating Equity Value Including NCI
• Calculating Gross Debt And Net Debt
• Adjusting For Provisions, Quasi-Debt, Equity Linked Instruments, Equity Kickers, Options

Income Statement Analysis 
 

• Cleaning up the reported results to derive the underlying performance
• Adjusting for exceptional and non-core items – restructuring, provisions, impairments, discontinued items, MTM of financial assets and liabilities, disposal gains/losses, employee benefits (IAS 19), business combinations (IFRS 3), leases (IAS 17), customer loyalty programmes (IFRIC 13) 
• How failing to calculate the correct underlying earnings figure will materially distort your valuation 
• Revenues and earnings – sources, sustainability, growth outlook, main risk factors 
• The nature of the cost base, including sources of volatility (commodity prices, currency, regulation, interest rates, tax rates, and other risk factors) 
• The impact of hedging (currency, interest rate, commodity) 
• The impact of joint ventures, associates, and NCI 
• Calculating key financial ratios from the income statement, calculating performance ratios

Cash Flow Analysis 
 

• Analysing the cash flow profile of the firm
• What are the main risks to the cash flow?
• What are the main sources and uses of cash?
• Are new investments adding value?
• Are earnings converted into operating cash flow?
• The impact of networking capital changes and capital spending
• What is the potential for paying dividends and for share buybacks?
• Calculating key financial ratios from the cash flow statement

Balance Sheet Analysis 
 

• The nature of the asset base
• Understanding a firm’s capital intensity and operating leverage 
• Consolidation policies 
• What to include in gross and debt? 
• Valuation adjustments for derivative assets and liabilities, operating leases, contingent liabilities, and other off-balance sheet liabilities 
• Outlook for impairments or revaluations 
• Impact of credit metrics (leverage, interest cover, interest rates, liquidity, covenant breaches) on valuation 
• Calculating key balance sheet ratios to assess a firm’s financial position relative to its sector

Overviewing of a Forecasting Model for Valuation
 

• Creation of key value drivers, including macro-economic and company specific
• Building up the income statement and balance sheet 
• Deriving the cash flow statement 
• Deriving cash available for distributions 
• Dealing with circularity 
• Scenario analysis 
• Return analysis