Introduction to DCF Modelling and Valuation
19 - 20 October 2009 London, The City
This intensive 2 day course has been designed to equip financial professionals with basic knowledge of model structuring and interpretation and analysis of the key ratios in a financial forecast as well as explain the fundamentals of future cash flow valuations.
By the end of this training you will be able to:
- Build simple financial models
- Create and analyse a forecast income, cash flow statement and balance sheet
- Forecast revenues, margins, net income and other financial functions
- Understand the fundamentals of future cash flow valuation and value assets using basic DCF method
- Apply discount rates, terminal values and discount period in a DCF valuation
Course Level: Introductory
If you are looking for more advanced DCF Modelling course check our DCF Modelling and the Cost of Capital training.
Prerequisites
To attend this course delegates are required to have basic Excel knowledge as well as intermediate level of accounting and principals of corporate finance.
You can book 1 day only. See Pricing section for details.
DAY 1: Introduction to Financial Modelling
DAY 2: Introduction to DCF Analysis
Main Topics Covered During This Training
- Overview of the modelling process
- The key Excel functions in modelling
- Model structure: inputs, workings, outputs
- Forecasting revenues and margins
- Calculating tax and dividends
- Incorporating fixed assets and working capital
- Forecasting net income and shareholders' equity
- Analysing cash flow statement from operations, investing and financing activities
- Linking up interest
- Analysing key ratios
- Principles of valuing the cash flows
- DCF theory and rationale
- Forecasting free cash flows
- Calculating NOPAT and FCF from an income statement
- Identifying the correct discount rates and periods
- WACC explained
- Calculating the cost of capital
- Terminal value approach: stable growth, liquidation value and multiple approach
Who Should Attend
Participants who want to be able to build basic financial models and especially a DCF model should attend this course.
From Corporates, Investment Banks, Private Equity, Consulting, Accounting and Legal Companies:
- Equity Research, Analysts and Sales
- Equity Capital Markets
- Investment Managers
- Members of M&As Departments
- Corporate Financial Managers
- Corporate Development
- Corporate Finance Lawyers
Teaching Method
This is a highly practical course with many real life case studies and exercises. Each session terminates with a model buidling exercise. Tutor will be focused on teaching practical strategies that can be taken back to your business and put into immediate effect.
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 required to bring a laptop with Microsoft Excel. If necessary, we can provide one for an additional fee of £60 + VAT per day.
Introduction to DCF Modelling and Valuation - 2 Day Programme
You can book for 1 Day Only
DAY 1: Introduction to Financial Modelling
DAY 2: Introduction to DCF Analysis
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DAY 1: Introduction to Financial Modelling
Modelling basics
- Modelling process overview
- Modelling and formatting best practice
- The key Excel functions used in modelling
- Model structure:inputs, workings, outputs
- Connections between income statement, balance sheet and cash flow statement
- Sources of information
- Inputting historical financials
Model building: Participants are introduced to a forecasting model and a set of historical accounts. Participants input historical income statement
Revenues and operating costs
- Definitions of revenue, EBITDA, fixed and variable costs
- Forecasting revenues and margins
Model building: Participants build a profit and loss forecast to the EBITDA line
Tax and dividends
- Calculating the marginal tax rate
- Calculating dividends
Model building: Participants build out the income statement to the post-tax and dividend level
Fixed assets and working capital
- Introduction to factors driving fixed tangible and intangible assets
- The key drivers of capital expenditure and depreciation
- Forecasting depreciation as percentage of capital expenditure
- Forecasting components of non-cash working capital
Model building: Analysis and forecast of capital expenditure, depreciation, fixed assets, and non-cash working capital
Net income and shareholder's value
- Forecasting net income
- Dividend policy and retained earnings
- Forecasting shareholders’ equity
Model building: Participants forecast net income based on the assumption of constant debt and a simple tax rate. Participants analyse case company’s dividend policy and forecast the movement in shareholders’ equity
Cash flow statement
- Cash flow from operations
- Cash flow from investing activities
- Cash flow from financing activities
- Modelling the cash flow statement, the cash “waterfall”
Model building: Participants complete the cash flow statement and balance the balance sheet by using a cash waterfall
Interest
- Linking up interest
- What is a circular reference and how does it arise?
Model building: Participants complete the model by calculating the interest line in the income statement from the debt schedule
Ratio analysis
- Assessing the company’s operating performance and credit quality
- Use of ratios: Does my forecast make sense?
Model building: Participants build a basic schedule of ratios and use this to interpret and adjust the forecasts for case company
DAY 2: Introduction to DCF Analysis
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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
Case study: Case studies testing participants knowledge and modelling skills
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
- Mid cycle earnings, coping with cyclicality
Case study: Participants calculate NOPAT and FCF from an income statement
Discount rates
- Understanding issues surrounding identifying the correct discount rate
- Which rate to discount at?
- What is WACC?
- Discounting the free cash flows
Case study: Participants calculate the cost of capital for a case company
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
Case study: Participants model the stable growth and multiple approaches to terminal value
Discount periods
- Modelling cash flows that arise outside of a period end
- Intra-period discounting
Bring it together
- Using the discounted cash flow model to build a total value of the firm
- Dealing with core and non-core assets
- Building the bridge between enterprise and equity valuation
Case study: Participants calculate the bridge to link the enterprise value of operations to the total equity value of the firm
Case study: A forecast of case study cash flows is used to calculate the value of a business using the techniques learnt in previous sessions
The course director is a qualified chartered accountant who begun his career in Grant Thornton International and since 1986 worked in Ernst & Young as a senior manager in the corporate advisory team, working on major acquisitions, disposals, IPOs and insolvency/restructuring transactions.
In 1989 he joined Threadneedle Asset Management as an analyst, becoming a fund manager specialising in income funds in 1991. In 1996 he joined Scottish Widows Investment Partnership as a director in the UK Equity team, again specialising in income funds. On becoming head of UK Equities in 1998, he introduced a new investment process incorporating cash flow based corporate valuation techniques. In 2000 he was appointed head of UK Equities when Scottish Widows was acquired by Lloyds Bank and he led the integration of the UK Equity teams.
In 2001 he joined HSBC Asset Management as European Head of Equity Research, managing a team of analysts in Paris and London tasked with developing a new research team and research process.In 2004 he was appointed Global Head of Equity Research, responsible for 60 global equity research analysts and 40 global credit analysts. He developed a global valuation and research process, training local analysts in Europe, the US and Asia in its use.
In 2006 he joined BG Consulting Group, a professional training company, as the head of investment banking and investment management managing a team of 12 trainers. His experience at BG included managing major graduate programmes for investment banking and investment management clients, training graduate to managing director level participants and advising clients on their training requirements for accountancy, corporate finance and valuation, investment management and private wealth training.
His clients have included HSBC, Morgan Stanley, Deutsche Bank, Citigroup, Allen & Overy, JP Morgan, Barclays Bank, Barclays Wealth, Morgan Stanley Investment Management and Schroders.
19 - 20 October 2009 London, The City
Early Bird offer till 30 September: £1350 + VAT
After that date £1480 + VAT
Single day: Early Bird: £750 + VAT; Regular Price: £820 + VAT
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DISCOUNTS
- 3 people - 10% discount. Delegates have to be from the same company and register at the same time.
- If you book for 2 full time (2-3 days) courses at the same time you will receive an additional 15% discount off the full value of the cheaper course.
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 us now on +44 (0) 207 193 5035
