CORPORATE FINANCE

HANDBOOK
ANALYSI FINANCIAL STATEMENTS FORMULA
S S
sheet 2022 2023 Profit and Loss Account 2022 2023 Cash flow statement
2023
ible 50 350 Revenues 4,200 4,500 Net income 1,186
ROCE
Balance assets 350 380 COGS variable 1,270 1,350
RATIO Tangible assets Depreciation and EBIT / (long term debt + equity)
ANALYSIS 400 730 COGS fixed 380 420 amortization 120
Fixed assets Changes in
COGS 1,650 1,770 account -10 Net present value
Profitabililty 10 20 receivables -10
Gross profit margin = Gross profit / Revenues Inventories 15 25 Gross profit 2,550 2,730 Changes in inventories 5
EBITDA margin = EBITDA / Revenues
Account Receivable
Present value of inflows – Present value of
Net profit margin = Net profit / Revenues 375 1,376 Changes in trade -20 outflows
Return on equity = Net profit / Equity
Return on capital employed = Net profit /(Equity + Long term debt) Cash 400 1,421 Overhead – variable 750 780 payables Changes in 1,271
Return on assets = Net profit / Total assets
Revenue per employee = Revenues / Employee number Current assets Overhead - fixed 254 321 other liabilities Present value - PV
EBITDA per employee = EBITDA / Employee number
Net profit per employee = Net profit/ Employee number 800 2,151 Overhead costs 1,004 1,101 CF from operating
Total assets activities 450
PV = C / (1 + r)
475 1,661 EBITDA / Operating profit 1,546 1,629 -450
Liquidity Equity Sales of capital assets
C = Future cash flow. r = Discount rate n
Net working capital = Account receivable + Inventories – Account
payable Purchase of capital = Number of periods
Depreciation
Current assets – current liabilities = Current assets - current liabilities assets
Current ratio = Current assets / current liabilities 150 250 and 150 120 0
Quick ratio = (Current assets – inventories) / current liabilities
Cash ratio = Cash / current liabilities
Long term fin. Liabilities amortization CF from investing
activities
Cost of equity
Working capital turnover = Cash / current liabilities Interest and 5 28 180
20 25 financial expenses 10 15 180
Trade payables 120 200 Financial income 1,401 1,496
Financial Changes in share
35 15 EBT 1,001
liabilities Other capital Changes in
Efficiency financial liabilities
liabilities 175 240 280 310 375
DSO = Average account receivables / Revenues * 365
DIO = Average inventories / COGS * 365 Tax CF from financing
DPO = Average account payables / COGS * 365 800 2,151 1,121 1,186 activities 1,376
CCC days = DSO+DIO-DPO Current liabilities Ke=RFR+BC*ERP+SRP
Assets turnover = Revenues /Average assets
Fixed assets turnover = Revenues /Average fixed assets
EBITDA to interest coverage = EBITDA / Interest expenses RFR – Risk free rate, BC – Beta
Total cost per employee = Total costs / Employee number
Overhead costs per employee = Overhead costs / Employee number
Coefficient
ERP – Equity risk premium, SRP –
PLANNING, BUDGETING AND Specific risk premium

CASH FLOW FORECASTING

KPIS
Overhead variable 2023 Assumption Value 2024 2025 2026 2027 2028
Cash flow statement 2024 2025 2026 2027 2028

Salaries and wages 370 970 1,141 1,216 1,367 1,567

EVA
Taxes (382) (524) (611) (550) (562)
Net working capital = Account receivable Recruitment
30 % of salaries 5.00% 48 57 61 68 78 Net income

+ Inventories – Account payable Education 39 % of revenues 0.35% 42 46 51 57 63 Depreciation and

amortization Impairment of
195 375 415 465 495
Maintenance
25 % of revenues 0.23% 27 30 33 37 41 receivables Impairment of
inventories
6 7 8 9 10
EVA = NOPAT - (Invested Capital *
Current assets – current liabilities = Miscellaneou
Losses (gains) from sale of non-current assets, net
6 7 8 9 10
WACC)
Current assets - current liabilities s 39 % of revenues 0.35% 42 46 51 57 63 100 150 250 20 0
(Incerease) or decrease of other current assets 170 (102) (49) (55) (62) NOPAT – net operating profit after
Other overhead variable 33 % of revenues 0.30% 36 39 44 48 54 (Incerease) or decrease in account receivables 47 (18) (20) (23) (25) tax
Current ratio = Current assets / current (Incerease) or decrease in inventories 126 (39) (46) (53) (61)
liabilities 39 % of revenues 0.35% 42 46 51 57 63
Increase (decrease) in trade payables
(205) 16 18 21 23
574 1,205 1,406 1,506 1,690 1,928 Increase (decrease) in other liabilities
Total overhead variable (53) 11 12 14 15
Quick ratio = (Current assets – inventories) Revenue 2023 Rate 2024 2025 2026 2027 2028 CF from operating activities 11 (117) (14) (143) (157)
Internal rate of return
/ current liabilities $ (Purchase)
Increase of orshare
salescapital
of capital assets
Changes in Other investments
(750)
150
(50)
(1,050)
250
(70)
(450)
350
20
(150)
450
(50)
(150)
550
(10)
Increase (decrease) other long term liabilities 100 110 110 110 110
Customer 1 3,900 10% 4,290 4,719 5,191 5,710 6,281 CF fromDividends
investingpaid
activities (800) (1,120 (430) (200) (160)
Cash ratio = Cash / current liabilities Customer 2
(500)
(250)
(500)
(140)
(300)
160
(750)
(190)
(900)
(240) (IRR) = (Future Value ÷ Present
1,210 10% 1,331 1,464 1,611 1,772 1,949 CF from financing activities

Working capital turnover = (Current assets

Customer 3
1,090 10% 1,199 1,319 1,451 1,596 1,755 (1,03
9)1,31
(1,37
7) 271
(284
)
(1,10
(533
)
(1,39
(557
)
(1,92
Value)^(1 ÷ Number of Periods) – 1
Existing customers 6,200 6,820 7,502 8,252 9,077 9,985
– current liabilities) / Total assets Lost sales (620) (682) (750) (825) (908)
Total cash flow

Discounted cash flow

Share in total 9% 9% 9% 8% 8% Share in
Cash at the beginning of period
total 88% 87% 86% 84% 83%

INVESTIN
Existing customers 6,200 6,820 7,502 8,252 9,077

271 (1,106 (1,390) (1,923) (2,481)

EBITDA
Cash at the end of period
)
DCF = (CF/(1+r) ) + (CF/(1+r) ) +
KPIS G (CF/(1+r) )
CF = Cash Flow in the Period
Invest in projects that yield a return greater than the minimum acceptable hurdle rate. r = the interest rate or discount rate
EBITDA absolute amount = Net income + n = the period number
interest +tax+ depreciation + amortization
The hurdle rate should be higher for riskier projects and reflect the financing mix used -owners’ funds
(equity) or borrowed money (debt)
EBITDA margin = EBITDA / Revenues
EBITDA to Interest coverage = EBITDA /
Interest expenses COMPANY Cost of equity
EBITDA per employee = EBITDA / Employee
number VALUATIONS
DCF VALUATION BY MULTIPLE NET BOOK
VALUE
Applicable when it is possible to Comparable companies/transactions method: Net book value method: adequate Ke=RFR+BC*ERP+SRP
project cash flows in future with applicable when it is possible to identify method when you can not identify
significant level of certainty. E.g. if companies and/or transactions comparable to yours. comparable companies/transactions RFR – Risk free rate, BC – Beta
company is in financial difficulties, it In practice, it is difficult to identify comparable and can not predict cash flows. Coefficient
VALUATION is hard to predict if company will companies/transactions for young companies and
for companies from emerging markets.
Especially good for companies with
significant fixed assets, but without ERP – Equity risk premium, SRP –
operate in the future and therefore
MULTIPLES DCF method would not be the best to earning power. Specific risk premium
use.

P/E ratio = Market price per ROCE TERMINAL

share / Earnings per share
VALUE
P/S ratio = Market capitalization or
Valuation / Total revenue
M&A SS CFn * (1 + g)
P/B ratio = Market capitalization
/ Book value Preparation : evaluation 4P Sign confidentiality/ NDA 7 Negotiate the terms of the
TV =
(WACC – g)
business operations, purchase agreement as the
financials etc. agreements purchase price, representations
EV/EBITDA ratio = Enterprise
value / EBITDA 1 and warranties, closing
• TV – Undiscounted Terminal
Initial business valuation by Intent (LOI) outlining the proposed conditions
P/CF ratio = Market terms of the acquisition, including Value
capitalization / Cash flow from
operations 2 the most reliable valuation
method and appoint external the purchase price, transaction
structure, and any contingencies 8 Legal aspects and • CFn – Cash Flow in the last

Dividend yield = Annual dividend

consultant
5 ownership transfer
•
year of projections
g – growth rate
per share / Stock price Initial contacts: Reaching out
potential buyer / seller 6 Financial / Tax due diligence
9 Post transaction actions
•
•
WACC – discount rate
n – number of periods for
integrations, covenants, PPA
3 projections

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