Comprehensive course analysis
Who should attend
- Investment bankers
- Credit analysts
- Fund managers
- Equity analysts and strategists
- Compliance officers
- Equity sales and traders
- Corporate finance lawyers
About the course
Elevate your knowledge of financial analysis and corporate valuation techniques
The valuation of corporates is a fundamental skill required of a wide range of finance professionals including equity analysts, strategists, corporate finance executives, fund managers, PE/VC executives and general bankers. The recent volatility of corporate valuations, combined with the emergence of new sectors, makes understanding the theory and practice of valuation essential. Module 1 of the course offers a comprehensive introduction to financial analysis from the point of view of valuation. Module 2 then gives a detailed theoretical background to a range of valuation methodologies, followed by plenty of case studies to apply these theories to real life situations.
This practical course is taught using an inter-active classroom format that comprises lectures followed by short, practical and inter-active case studies and exercises to reinforce the concepts covered in each teaching session. Emphasis is placed on delegates gaining handson experience of the various valuation techniques.
Course aims and objectives
Module 1 – after completing this Module, delegates will learn:
- how to analyse a firm’s financial statements when undertaking corporate valuations, including how to derive underlying earnings and cashflow
- ratio analysis, including profitability, performance, leverage, liquidity, returns to firm and equity
- the impact on valuation of debt, financial assets, quasi-debt, provisions, deferred taxes, off balance sheet liabilities and other factors
Day 1: Morning
Session 1: Income statement analysis
- Analysing and forecasting revenues
- The impact of IFRS15
- What are the key revenue drivers and what are their trends?
- Pricing, volumes, currencies, acquisitions, disposals
- Customer, product/service and geographical concentration
- The nature of the cost base including sources of volatility
- How depreciation policies impact EBIT, net income and eps
- How different inventory policies impact earnings
- Fixed versus variable costs – impact on margins
- Provision charges and write-backs
- Defining finance expense and finance income
- Capitalised interest and other capitalised expenses
- Dealing with lease expense (following the introduction of IFRS 16)
- Dealing with exceptional and non-core items
- Assessing underlying EBITDA
Case studies: calculating underlying earnings and net finance expense
Day 1: Afternoon
Session 2: Income statement analysis continued
- Analysing the differences between IFRS earnings and management’s adjusted earnings
- The impact of joint ventures, associates and NCI
- Taxation rates and deferred tax
- Detailed ratio analysis
- Calculating and analysing key operational and financial ratios
- Gross margin, EBITDA margin, EBIT margin, pre-tax margin, net margin
- Interest cover ratios
- Dividend cover and enhanced dividend cover ratios
Case studies: calculating revisions to management’s adjusted earnings; calculating and interpreting income statement ratios
Cashflow statement analysis
- Direct versus in-direct cashflow statements
- Understanding the volatility and predictability of the firm’s cashflow
- Deriving operating cashflow, including changes in NWC
- Understanding typical non-cash and cash adjustments (provisions, extra pension contributions, gains/losses on disposal, impairments, stock option expense etc)
- Do operating earnings generate operating cashflow?
Case study: moving from EBIT to operating cashflow
Day 2: Morning
Session 3: Cashflow statement analysis continued
- Net operating cashflow – deducting net finance expense and tax paid
- Understanding dividends received from joint ventures, associates and investments
- Investment spending, gross and net - are new investments adding value?
- The financing section of the cashflow statement
- How lease repayments are treated in the cashflow statement
- Does the firm generate sufficient cashflow to cover its tax, debt servicing, investment spending and any dividends?
- What is the potential for paying dividends and for share buybacks?
Case studies: commenting on a variety of cashflow statements; calculating and analysing cashflow ratios – interest cover, debt service cover, years to repay gross debt, investment cover, dividend cover, cash conversion ratios, dependence on external funding
Day 2: Afternoon
Session 4: Balance sheet analysis
- The nature of the asset base: PP&E, intangibles, financial assets, joint ventures and investments
- How are the assets valued?
- What is the outlook for impairments or revaluations?
- What are the assets lives and what is the outlook for maintenance and expansionary capex?
- Understanding the firm’s capital intensity and operating leverage
- Understanding NWC and accrued income, including seasonality
- Is there any value in non-consolidated entities?
- What to include in gross debt: bank debt, bonds, derivative liabilities, supplier finance, leases, shareholder loans, pension deficits etc
- What to include in financial assets: cash, investments, derivative assets
- Valuation adjustments for off balance sheet liabilities:, short term operating leases, contingent liabilities, securitised receivables etc
- Valuation adjustments for NWC, deferred tax assets and liabilities, provisions, cash pledges, restricted cash, deferred revenues
- Is the book value of equity important to the valuation?
- What is the impact of credit metrics (leverage, interest cover, interest rates, liquidity, covenant breaches) on valuation?
Case studies: finding the valuation impact of line items in a range of balance sheets; calculating and interpreting key balance sheet ratios to assess a firm’s financial position relative to its sector – leverage, liquidity, working capital, ROCE, ROE
Former Executive Director of CSFB and Lehman Brothers, Sarah Martin has spent seventeen years working as an investment banker in Europe and the US. She has principally worked in the credit markets and has experience of the US and European high grade and high yield markets, the European new issue ...
Videos and materials
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