Discounted Cash Flow Modelling for Corporates
In-house
This course in offered on in-house basis. For current public Corporate Finance Courses click here.
Intensive 2 day training for Equity Analysts, Equity Sales Managers, Corporate Financial Managers and Analysts as well as M&A specialists.
You will learn:
- How to evaluate company using DCF strategy
- Read and prepare financial statements
- Prepare financial and cash flow prognosis
- Explore the use of WACC calculations
Course level: Introductory to intermediate
Description
Discounted Cash Flow (DCF) modelling is the most effective fundamental valuation methodology.
During this two day practical training you will learn how to read financial statements, choose the most appropriate financial ratios and metrics and make financial forecasting using Excel modelling. You will also learn to estimate the cost of capital and explore different methodologies for the terminal value. The course will also examine more complex issues such as tax and pensions provisions.
This hands-on course contains the valuation of a real life multinational company where all valuation angles will be approached.
Main Topics Covered During This Training
- Key drivers for the modelling process and model structure
- Forecasting the income statement
- Tax, provisions, associates and minority treatment and impact on forecast
- Fixed assets and working capital
- Cash flow statement and balance sheet for different capital structures
- Assessing the company’s operating performance and credit quality
- Use of ratios in evaluating forecasts
- Identifying and forecasting the correct cash flows
- Cost of capital and equity
- WACC calculation
- Terminal value approaches
- Discount periods
What Will You Learn By The End Of This Training
By the end of this training you will be able to:
- Read and analyse financial statements
- Prepare financial forecasting
- Apply Excel modelling to prepare cash flows prognosis
- Understand basic IFRS accounting financial ratios
- Apply absolute valuation methodologies
- Assess the cost of the capital
- Explore the treatment of tax, provisions, associates and minorities and their impact on the income statement
- Explore use of ratios in evaluating forecasts
- Assess the cost of debt and equity
- Apply the WACC calculation in the model
- Gain understanding of key issues surrounding the terminal value in a DCF forecast
Who Should Attend
From Corporates, Investment Banks, Private Equity, Consulting, Accounting and Legal Companies:
- Equity Research
- Equity Analysts
- Equity Sales
- Equity Capital Markets
- Investment Managers
- Heads and Managers in M&As Departments
- Equity Analysts and Sales
- Corporate Financial Managers
- Corporate Development
- Corporate Finance Lawyers
- Financial Managers and Analysts
Teaching Method
This is a highly practical course with many real life case studies and exercises. Tutor will be focused on teaching practical strategies that can be taken back to your business and put into immediate effect.
You will benefit from comprehensive take away course documentation.
In order to help us establish your individual and business concerns, you will be asked to fill pre-course questionnaire.
Because of the nature of the course the number of places is limited and will be filled on first come, first accepted basis. We advise to book in advance in order to avoid disappointment.
Delegates are expected to bring a laptop with Microsoft Excel. If necessary, we can provide one for an additional fee of £100 + VAT.
DAY 1: FINANCIAL FORECAST AND MODELLING
Review of modelling process
- Modelling process overview
- Objectives and approach
- Modelling and formatting best practice
- Model structure
Exercise: Skeleton forecasting model and a set of historical accounts. Input historical income statement
Forecasting the income statement
- Key drivers for modelling
- Revenues and operating costs
- Using equity research to model
Exercise: Forecasting module to the pre-tax level and link it to the income statement
More complex issues
- Taxation, including net operating losses
- Provisions (restructuring, environmental, deferred taxation), effects on income statement and cash flow
- Associates, treatment and forecasting
- Minority interests, treatment and forecasting
Exercise: Income statement to the post-tax and dividend level, to include associates and minority interest
- Fixed assets and working capital
- Forecasting fixed tangible and intangible assets
- Discussion of key drivers of capital expenditure and depreciation
- Forecasting depreciation, existing and new assets
- Forecasting components of non-cash working capital
Exercise: Capital expenditure, depreciation, fixed assets and non-cash working capital
Net income and shareholders’ equity
- Forecasting net income
- Dividend policy and retained earnings
- Forecasting shareholders’ equity
Exercise: Net income based on the assumption of constant debt and a tax rate. Dividend policy and movement in shareholders’ equity
Cash flow statement
- Cash flow from operations
- Cash flow from investing activities
- Cash flow from financing activities
- Modelling the cash waterfall
- Scenario capital structures
- Interest calculation
Exercise: Cash flow statement and balance sheet with cash waterfall. Different capital structures
Ratio analysis
- Assessing the company’s operating performance and credit quality
- Use of ratios in evaluating forecasts, using DuPont analysis in forecasting
Case study
DAY 2: ABSOLUTE VALUATION
Principles of valuing cash flows
- Discounted cash flow theory and rationale
- Absolute and relative valuation
- Basis of DCF
- Earnings compared to cash flows
- DCF in context
Identifying the correct cash flows
- Understanding which cash flows are discounted in valuing a corporate
- Core assets vs. non-core assets
- Free cash flow and NOPAT
- Forecasting free cash flows
- Cyclicality
Exercise: NOPAT and FCF calculation from an income statement
Cost of capital
- Why is the cost of capital important?
- What do we mean by capital?
- Cost of debt
Cost of equity
- Dividend discounting
- CAPM
Weighted Average Cost of Capital (WACC)
- Calculation
- Target capital structure
Exercise: WACC calculation in the model
Terminal values
- Gain understanding of key issues surrounding the terminal value in a discounted cash flow forecast
- How long should the forecast period be?
- What is the terminal value and is it important?
Terminal value approaches
- Stable growth
- Liquidation value
- Multiples approach
- Terminal value issues
Exercise: Stable growth and multiple approaches to terminal value
Discount periods
- Modelling cash flows that arise outside of a period end
- Intra-period discounting
Final step of DCF
- Using the DCF model to build a total value of the firm
- Dealing with core and non-core assets
- Arriving at equity value
Exercise: Link the enterprise value to the total equity value of the firm
Qayyum Hafeez
Qayyum has over 13 years of investment banking and private equity experience. He is currently working as a senior vice president in GCC based private equity fund in an investment bank in oil and gas industry. His role there is to source, evaluate and invest in private equity and execute M&A and joint venture opportunities in oil and gas industries in the Middle East region. Prior to this, Qayyum was a principal at Odeon Capital Partners, a $120 million private equity fund based in New York City and before in Bear Stearns' Mergers & Acquisitions and Leveraged Finance investment banking groups in New York where he was involved with multi-billion dollar transactions in retail, consumer products, technology and manufacturing industries.
While he was living in New York City from year 2000 through 2008, Qayyum was involved in many teaching and training engagements at university and corporate level. He was a guest speaker at New York University's Stern School of Business as well as taught a full-term MBA course at the Long Island University. His teaching experience include workshops at New York Private Equity Network the association which has over 500 active members.
* Eureka Financial reserves right to change trainer due to unforseen circumstances.
IN-HOUSE TRAINING
If you have a team of 4 or more this course can be customised and organised in-house at your convenience. Contact one of our advisors to find out more.
Call now on +44 (0) 20 7193 5035
or send us an e-mail to: enquiry@eurekafinancial.com
