Financial Modelling for Company Valuation

Class 1
Varun Gupta
MBA, CA, CFA
Course Agenda
 Financial modelling is a Tool to represent a firms financial performance and
position for investment analysis and various other decision-making. The
course on Financial modelling is structured in following sections:
 Section 1 - Understanding financial modelling and financial statement -
Income Statement, Balance Sheet, Cash Flow Statement
 Section 2 – Building a Financial Model – Step by step understanding and
developing a financial model including forecasting business assumption
and drivers, forecasting financial statement, linking financial statements,
and understanding complex financial concepts such as DTL/DTA,
Consolidation, etc
 Section 3 – Developing an end to end basic case study applying the
knowledge developed above
 Section 4 – Modeling carry forward losses, interest income, etc
 Section 5 – Valuation using DCF and Relative valuation, Sensitivity Analysis,
SoTP (Sum of the parts)
 Section 6 – Comprehensive Case Study for understanding and building an
end-to-end financial model and valuation taking Media industry as
example
Why Financial Modeling ?

Basics of Financial
Intention Tools
Research

Analyzing current and Financial Model

Financial Analysis
future growth

Writing Reports Present Arguments Financial Write-up

 Why do we need Financial Analysis

M&A Perspective
What is the value of
my company from
market perspective

Analyzing the Lender/Supplier Perspective

Owner/Investors Perspective
financial position Assessment of Credit Risk
Valuation of the company
and performance
of the company
Tool to Value a Company – Financial Model
Financial Modeling – Building Blocks

Populating Analyse
Understanding Valuation &
Historical and business drivers
Business Drivers analysis
Linking and forecast
Income Statement / Profit & Loss Statement/
Statement of Operation

Revenue 1000
COGS

Revenue – Expenses = Net Income

Balance Sheet
Fixed Assets
Tangible
Intangibles
Investment
Current Assets
Stocks/Inventories
Accounts Receivables/Sundry Debtors
Cash & cash Equivalents 50
Total 1500
Liabilities (Source of Funds)

Share Capital
Reserve & Surplus (Retained Earnings)
Long-Term Liabilities
Current Liabilities & Provisions
Accounts Payable
Outstanding Expenses
Total
Asset = Liabilities + Equity
Cash Flow Statement

Cash Flow from Operating Activities 75

Cash Flow From Investing Activities
Cash Flow from Financing Activities
Net Increase or decrease in Cash
+Opening Balance
Closing Cash Balance
Linkage between FS
Cash Flow
Income Statement Balance Sheet
Statement

Depreciation PP&E Capex

Amortization Intangible Assets Acquisitions

Debt:
Interest income/expense Debt Issuance/repayment

Shares: Issuance / Buy-

Net profit less dividend Share Capital
back

Current Assets/Liabilities Change in working capital