Euromoney Audit Training

Course overview

'Financial Analysis Forecasting' is designed to provide you with a working knowledge of the principles
and practices of the financial management of companies and the financial analysis of leveraged
buy-outs.

Summary of course content:

• Preparation of financial statements
• The profit and loss account and cash flow statement
• Discounted Cash Flow (DCF) valuation techniques
• Key credit ratios
• Modelling cash flows
• Modelling the impact of an investment on cash flow
• Acquisition analysis
• Multiple-based valuation methodologies
• Lending in Leveraged Buy-Outs (LBOs)
• LBO structuring

Course level

By the end of the course, you will have a sound understanding of:

• How accounts and financial statements are compiled
• How to read a balance sheet and a profit and loss account and why the figures cannot always be taken at face value
• The nature of a cash flow statement and why it is especially useful in transforming accounting fiction into fact
• The tools and techniques of financial analysis
• How to calculate and use financial ratios to evaluate business performance and financial health
• The key credit quality ratios
• Accounting scams, why they occur and how they can be spotted
• Methods for judging the viability of investment opportunities
• Financial valuation techniques such as Discounted Cash Flow (DCF) and Weighted Average Cost of Capital (WACC)
• Key design principles for building financial models in Excel
• The nature and uses of investor ratios such EPS, DPS, and P/E
• The key drivers of shareholder value and the methods used to calculate the value of a company such as enterprise value ratios
• Financial analysis for mergers and acquisition
• How leveraged buy-outs are valued, arranged and structured
• Exit strategies for private equity investments

Who should attend

• Executives and managers
• Professionals in all functions
• Investment and commercial bankers
• Equity and fixed income investment managers
• Investment analysts
• Credit analysts and credit controllers
• Treasury managers
• Lawyers and newly-qualified accountants
• Company brokers and advisers  

Supporting publications

 

DAY ONE: Understanding financial statements and valuation

How financial statements are prepared

• Users and uses of financial information
• Financial accounting vs. management accounting
• Fundamental accounting concepts
• How financial transactions are recorded and how financial statements are prepared
• The nature and importance of accounting standards
• Structure of a balance sheet
• Evaluating the strengths and weaknesses of a balance sheet
• Recognising the characteristics of the business from its balance sheet
• Evaluating financial well-being from the balance sheet
• Solvency tests

Case studies:

• Critical examination of a company balance sheet against a competitor
• Computation of key credit and liquidity ratios

The profit and loss account (P&L) and cash flow statement

• Different measures of profit and why they each matter
• Understanding how profit is calculated in different businesses
• Making correct decisions using the P&L
• Preparing a cash flow statement
• Evaluating a cash flow statement
• Impact of the company life-cycle on cash flow
• Financial flexibility:
• What it is?
• How to measure it?
• Performance assessment using comparable company analysis

  Case studies:

  • Critical examination of key financial statements for large and small companies
  • Performance appraisal

Discounted Cash Flow (DCF) valuation techniques

• Basic investment appraisal techniques: payback
• Discounting to measure the impact of time value
• Dividend Discount Model (DDM)

  Exercises:

  • Project appraisal using DCF
  • Share valuation using the DDM

DCF based company valuation

• Capital structure
• Weighted Average Cost of Capital (WACC)
• Valuation using WACC
• Capital Asset Pricing Model (CAPM)

  Case study: valuation employing WACC methodology

DAY TWO: Corporate Analysis

Key credit ratios

• Definitions of gearing, Interest Cover (ISCR)
• Annual Debt Service Cover (DSCR) ratios
• EBITDA and debt
• Liquidity ratios
• Solvency tests
• Loan covenants

  Case study: comparative analysis of the key credit ratios for a highly geared company employing several layers of debt

Cash flow modelling

• Modelling cash flows
• Modelling the P&L
• Working capital
• Key assumptions underlying the projections
• Projections modelled in Excel
• Testing sensitivity of the output to changes in key assumptions

  Case study: participants develop spreadsheet models of cash flow projections and test sensitivity to changes in key parameters

Impact of investment on forecast cash flows

• Modelling the impact of an investment on cash flows
• Testing sensitivity to delays in the investment
• Assessing the impact on key credit ratios
• Mandatory Capex vs. discretionary Capex
• Corporate taxation
• Leasing as an alternative to conventional debt
• Other taxes: GST - cash flow effects

  Case study: you will test cash flow models for Capex assumptions: amount, timing - delays, reductions in revenues and other key parameters

Acquisition analysis

• Modelling an acquisition in cash flows
• Assessing the funding structure
• Bridge financing followed by refinancing
• Assessing debt capacity

  Case study: you will model the cash flows for a potential acquisition including the impact on credit
  ratios and loan covenants and determine a suitable lending package

DAY THREE: Multiple-based valuation and accounting scams

Multiple-based valuation methodologies

• The Price Earnings Ratio (PER)
• Valuation using PER
• Comparable company analysis
• Theoretical background
• Strengths and weaknesses
• Alternative multiples
• Ratios based on Earnings Before Interest and Tax (EBIT)

  Case study: valuation using PERs and enterprise/EBIT ratios

Accounting scams

• The nature of accounting - science or alchemy
• Manipulating the balance sheet
• Window dressing
• Off-balance sheet items and their significance
• Revenue recognition and how to make sales 'take-off'
• Maximising profit by minimising costs and expenses
• Fraud - can it be detected?

  Case study: discussion of an SEC report into a fraudulent accounting scheme

Lending in Leveraged Buy-Outs (LBOs)

• Private equity investors
• Venture capital investment
• Types of deal (MBO, MBI etc)
• Investment horizons
• Reviewing candidate companies
• Objectives of debt providers

  Case studies

  • You will examine possible candidate investments for a private equity firm
  • Review of recent LBO transactions and the associated debt financing

LBO structuring

• The business plan
• Exit strategies
• Return analysis for the private equity investor
• Calculating the incentives for management and their participation
• Capital structure for the LBO
• Determining how much debt can be used
• Assessing the right levels of debt covenants

  Case study: you will structure a LBO transaction

Summary and close

• Paul Richards

  Paul Richards graduated from Cambridge University in mathematics and has a Masters degree in business administration from London Business School. He is also a CFA charter holder, an Associate of the Chartered Institute of Bankers, a Member of the Association of Corporate Treasurers and a Fellow of UKSIP.
  
  Paul has more than 20 years investment banking experience specialising in domestic and international corporate finance at UBS (Warburg), HSBC and Map Securities (part of Skandia Insurance and Mapfre, Spain). He was also the chief executive of the London merchant banking operation of Credit Industriel et Commercial, a major French banking group.
  
  As a result of this experience, Paul has extensive first hand experience of: Mergers and acquisitions; IPOs; bond issues; secondary market issues; privatisation; debt syndications; corporate treasury; equity valuation; investment analysis; security and derivative valuation; private equity; modelling; corporate governance; and compliance.
  
  His consulting and training clients have included a wide range of organisations such as Bowring, Financial Services Authority, Association of Corporate Treasurers and he has also been involved in expert witness work. Paul won the 2004 Wincott Foundation Prize for his article "Lessons in shareholder value" on the boom and bust in new economy stocks, published in Professional Investor (the journal of the UK Society of Investment Professionals - the UK member society of the CFA Institute). He has taught MBAs and Masters to Finance students at Cass and Cranfield Business Schools for more than 12 years in a range of financial disciplines; and has trained staff at major City houses and in banks on different continents.

  Courses run by this instructor

  • Valuing Mining Companies - Sydney

Interested in holding this course in-house? Please fill out your details and a member of our team will be in touch with more information.

Investment Banking

20-22 Sep 2010 (Singapore, Singapore)

'Investment Banking' aims to provide practical "hands-on" experience in giving corporate advice and transaction structuring.

Financial Modelling for Mergers and Acquisitions

8-11 Nov 2010 (Hong Kong, Hong Kong)

'Financial Modelling for Mergers and Acquisitions' is a hands-on course that offers practical instruction on how to model economic, financial and strategic issues associated with M&A.

Corporate Valuations - Techniques and Modelling

13-16 Dec 2010 (Singapore, Singapore)

The valuation of companies is fundamental to the peration of the capital markets. It forms the basis of share trading and corporate finance activity, including capital raising, mergers, acquisitions, demergers and disposals. The ability of market participants to identify under or overvalued companies drives portfolio outperformance and the creation of shareholder value.

Valuing Mining Companies - Sydney

8-10 Sep 2010 (Sydney, Australia)

Financial Modelling in Excel

14-17 Sep 2010 (Hong Kong, Hong Kong)

The principal aim of 'Financial Modelling in Excel' is to enable participants to use Microsoft Excel to prepare logical and easy-to-use financial models to support transactions, forecasts and planning for ongoing business needs.

Technical Trading: Practical Applications of Technical Analysis

24-26 Nov 2010 (Hong Kong, Hong Kong)

Technical analysis is used by traders and investors to identify patterns of market behaviour. This course will review the basics of technical analysis and the practical challenges of using that analysis to make money out of the markets on a consistent basis according to the individual trader’s strengths and weaknesses. Trading based on multiple time-horizon classical bar charting is the initial starting point, but all the main forms of technical trading will be covered.

Private Equity and Leveraged Transactions

13-15 Dec 2010 (Hong Kong, Hong Kong)

This comprehensive course, as two separately bookable modules, will introduce participants to the essential basics of private equity and venture capital.