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    C5-Financial Planning Modeling & Business Valuation

    Uploaded by

    Phúc Lê
    The document discusses financial planning modeling and cash flow analysis over multiple years. It provides examples of how to model revenue, assets, debt, and other line items. It also discusses using free cash flow to value businesses and shares.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd

    C5-Financial Planning Modeling & Business Valuation

    Uploaded by

    Phúc Lê
    11 views18 pages
    The document discusses financial planning modeling and cash flow analysis over multiple years. It provides examples of how to model revenue, assets, debt, and other line items. It also discusses using free cash flow to value businesses and shares.

    Original Title

    C5-Financial planning modeling & Business valuation

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    © © All Rights Reserved

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    The document discusses financial planning modeling and cash flow analysis over multiple years. It provides examples of how to model revenue, assets, debt, and other line items. It also discusses using free cash flow to value businesses and shares.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    11 views18 pages

    C5-Financial Planning Modeling & Business Valuation

    Uploaded by

    Phúc Lê
    The document discusses financial planning modeling and cash flow analysis over multiple years. It provides examples of how to model revenue, assets, debt, and other line items. It also discusses using free cash flow to value businesses and shares.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 18

    Chapter 5

    1
     Financial planning modeling: a simple case
    study

     The change in funding decision: balancing


    item

     Financial modeling and free cash flow

     Valuation shares

    2
     Financial planning modeling focuses on using financial report
    to:
    ◦ Valuate business and its stock
    ◦ Analyse finance of business
    ◦ Analyse accountancy

     Financial planning model consulates from sales of business,


    we assume that the entries on the balance sheet and sale
    report will be changed directly or indirectly by sale

    3
     Almost of financial planning models are
    belong to sales. The factors in balancing
    sheet and income statement are belong to
    sales:
    ◦ Fixed assets
    ◦ Receivables
    ◦ Working capital demand
     However, there are some entries maybe not
    belong to sales (debt, dividend)

    4
    Example: Financial planning modeling next 5 years:
     Revenue: 1.000; growth of revenue: 10%
     Current asset: 15% revenue at the end of year
     Short-term debt: 8% revenue at the end of year
     Net fixed asset: 77% revenue at the end of year
     Depreciation: 10% average of book value of fixed asset
     Long-term debt: not pay and not loan next 5 years
     Interest rate of borrowing: 8%/year
     Cash: balancing item

    5
     Cash is balancing item, that will have two meanings:
    ◦ For calculation

    Cash = Debt + Equity – current assets – net fixed assets

    ◦ For finance

    In order to confirm cash is balancing items: to calculate refund itself

    6
    Income statement

    7
    Balance sheet

    8
    Năm 0: P233-235
    Năm 1-5: P238-2429
    Notice
     Financial report model in Excel always include
    cells which link together. So the solution of
    model must be based on ability of Excel when
    solve them and create the circular

     In order to ensure the sheet model could


    calculate, choose Tools/Options/Calculation
    and click Iteration

    10
    11
     Problem: When cash is balancing item then debt does not
    change. However, in some cases, cash and stock in model will
    be negative.
     In this case, the economic meaning of these negative numbers
    is that the obvious growth rate will make the growth of current
    assets and fixed assets. While the demand of investment
    increase and the dividend rate is high, so business must find
    capital from outside

    12
    Case 2: Debt is balancing item, noted:
    ◦ Cash could not negative
    ◦ When business need more fund, they will lend or issue shares.

    The new model will follow these conditions:


     Cash and stock is balancing item.
    Condition:
    1.Current assets + net fixed assets > short term debt + long term debt
    + equity + accumulated retained earning: 1.cash: 0; 2.Funding
    2.Current assets + net fixed assets < short term debt + long term debt
    + equity + accumulated retained earning: Not Funding

    P247

    13
    Case 3: Maintain rate D/E

     Long-term debt = D/E * (Equity + Retained Earning)


     Equity = Total of assets – short term debt – long term debt –
    accumulated retained profit

    P249

    14
    Case 3: Maintain rate D/E

     Long-term debt = D/E * (Equity + Retained Earning)


     Equity = Total of assets – short term debt – long term debt –
    accumulated retained profit

    P249

    15
     Almost of forecast is for purpose to confirm
    free cash flow – FCF

     FCF is the quantity of cash which is created


    from cooperation without any fund – is the
    best method to measure how the cash is
    created from cooperation

    16
     Using FCF to valuate enterprise and shares
     The value of enterprise is defined as its debt, stock which could
    transfer to value of equity of enterprise

    FCF1 FCF2 FCF5 V5


    V0    ...  
    (1  WACC)1 (1  WACC) 2 (1  WACC)5 (1  WACC)5

     V5 is the value of enterprise in year 5th and is approximate


    present value of FCF from year 6th forward.

    FCFt  5 
    FCF5 (1  g %)t  FCF5 (1  g %)
    V5   t
     t
    
    t 1 (1  WACC ) t 1 (1  WACC ) t 1 WACC  g %

    17

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