Financial Modelling - Lecture 1 - 1320 Words

Session 1 Page 1 9/29/10 Material presented in four sections. Analytical and ratio techniques for understanding business performance, liquidity, and financial structure. Cash flow forecasting techniques are then applied to to produce a cash flow (and earnings-based) financial valuation model. Special topics include taxes, compensation, pensions, financial institutions (time permitting) Multiples valuation analysis, lawsuits and false information, regulatory environment. Session 1 Page 2 9/29/10 Two projects account for 80% of course. The first group project is to develop a cash flow financial valuation model of a company of your choice (50%) As a second group project,†¦show more content†¦activities Non-Core Non-Operating Net Cash Flow Dividends Buybacks Net Operating (core) + Non Operating net assets Session 1 Page 14 = Invested Capital 9/29/10 Net Operating Assets (NOA) and NOI RNOA = NOI à · NOA (text p. 94) NOA = CE + NFO (text p. 95) What if NOA includes significant non-operating financial assets (e.g, Microsoft), then †¦ NOI* = NOI - financial income NOA* = NOA - non-operating financial assets, and RNOA* = NOI* à · NOA* (see, also, pp. 98,99) Session 1 Page 15 9/29/10 Example: RNOA versus RNOA* Net Financial Assets Net Operating Assets Net Financial Obligations Common Equity EBIT Interest Income Interest Expense Net Interest EBT Taxes Net income after taxes Common Equity + Net Financial Obligations Net Operating Assets Net Financial Assets Operating income after taxes Financial income after taxes After-tax interest expense Net income after taxes ROE RNOA RNOA* 10% 10% 40% Company 1 Company 2 4,000 5,000 5,000 3,000 2,000 9,000 2,000 (300) (300) 1,700 680 1,020 5,000 5,000 1,200 (180) 1,020 51.00% 24.00% 24.00% 2,000 400 400 2,400 960 1,440 9,000 5,000 4,000 1,200 240 1,440 16.00% 16.00% 24.00% Session 1 Page 16Show MoreRelatedBsns106 Finance?1624 Words   |  7 PagesBSNS106 Lecture 2 1. 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