Financial Analysis & Forecasting

Financial Analysis & Forecasting

OBJECTIVES

• Benchmark corporate performance against peer groups and industry statistics.
• Analyze a company’s annual report identifying key performance indicators in order to understand what the numbers are really saying and make projections of future performance.
• Understand the theory of interest and the time value of money and their applications.
• Develop an Economic Value-Added model to see the organization from the shareholders’ perspective.
• Project the benefit of capital investment.
• Analyze the risks and benefits of proposed acquisitions, valuation of target companies, and issues relating to post-acquisition integration.
• Measure management ability to convert the company’s investment in assets into shareholder return.
• Use Pivot Tables to quickly develop reports.
• Analyze time series data and develop relationships using exponential smoothing and regression analysis techniques.

WHO SHOULD ATTEND?

All financial professionals, financial management, department heads, internal auditors, project professionals, and those responsible for ensuring the effective use and management of corporate resources. Also, sales and marketing professionals, R&D professionals, and anyone who needs to understand the short and long-term financial impact of key decisions. Participants should have a basic understanding of financial statements and may bring their own laptop computer with a full install of Excel®, including the complete “Toolbox.” Access to a desktop PC will be made available to all participants.

COURSE OUTLINE

DAY 1

The International Business Environment

• Overview of the strategic and operational aspects of a global business entity
• The Organizational Planning Model
• The Product/Decision/Information Cycle
• The Objectives of Financial Analysis
• Creating wealth by adding value
• Basic metrics of wealth creation and financial performance

The Financial Reporting Process and the Organizational Planning Cycle

• Review of financial statements using International GAAP
• Different asset concentration in industries and the relative impact on Return
• The picture presented by the financial statements relative to past operations
• The inter-relationship among financial statements, strategic decisions, and operations
• GAAP vs. Cash – How to spot accounting irregularities in financial statements
• Focus provided by NOPAT and ROIC

DAY 2

Analyzing the Annual Report

• Ratio Analysis – The heart of Financial Analysis
• Use Excel® templates to calculate and interpret liquidity, leverage and profitability ratios
• Interpret the results of ratio analysis from an accrual accounting perspective
• The inter-relationship between the DuPont Formula and EVA®
• How to use the Altman Z-Score
• Use various investment surveys to benchmark the results of financial analysis

Creating Shareholder Value

• What constitutes “Shareholder Value?”
• Finding the cost of equity
• Determine the Cost of Debt, Preferred Equity and Common Equity
• Calculate Weighted Average Cost of Capital (WACC)
• Develop the EVA© Model
• Impact of Acquisitions on WACC

DAY 3

The Time Value of Money

• The impact time has on the value of money.
• Understand the various interest calculations
• Using WACC and ROIC as benchmarks
• Use Excel®, to determine Present Value, Future Value, Net Present Value, Internal Rate of Return, Modified Internal Rate of Return
• Using IRR as a basis for capital project evaluation

Steps in Building Financial Models

• Situations that require models
• Models and Shareholder Value (EVA®)
• Identification of Forecast Validation Criterion
• Determination of Model and Forecast Horizons
• The recognition of risk in forecasts
• The Role of Assumptions in Financial Forecasting

DAY 4

Evaluating Capital Project Proposals

• Identify the various types of capital projects
• Discuss the capital project evaluation process
• Determining the initial and subsequent capital project cash flows
• Development of the “Hurdle Rate” for capital projects
• Discuss the use of “Terminal Value” in evaluating capital projects
• Use Excel® to evaluate capital projects by applying NPV, IRR, and Discounted Payback models 

Effective Management of Historical Data Using Excel®

• Understanding the Approaches Used to Build Financial Forecasting Models
• Recognizing the Basic Patterns Inherent in Historical Data
• Using the Exploratory Data Analysis Tools Available in Excel®
• Key Factors in Determining the Proper Time Horizon to Choose for Your Model
• Determining Degrees of Reliability in Model Projections
• Selecting the Degree of Robustness and Sensitivity of the Model
• Understanding and Applying Selected Modeling Techniques

DAY 5

Use of Time Series Analysis

• Development of Time Series Models using histograms, moving averages, exponential smoothing, and regression analysis
• Using Regression as a predictor and estimator
• Mastering the use of Exponential Smoothing as a Data Analysis tool
• Validation of Time Series Analysis
• Appreciate the Meaning and Importance of Sensitivity Analysis
• Developing “What-if” Scenarios in Your Financial or Operational Models
• Using the Excel tools “Scenario and Goal Seek”

Evaluating Investment Portfolio’s

• Principles of risk measurement in individual shares
• Graphing expected return and risk using variance analysis
• Modern portfolio theory using the capital asset pricing model
• Managing a balanced portfolio
• Use Excel® to determine the beta of listed share on a securities market