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Course Overview The practical aspect of the course revolves around the building of a cashflow and financial statement forecast of a company, ensuring that all the drivers are appropriate, that the modelling logic and the accounting treatments are sound and that modelling best practice is applied. This first stage of the course also deals with the issues of multiple currencies, high inflation, tax and distributable reserves. With the financial statements forecasted, the application of DCF to the figures is illustrated and the model is then subjected to sensitivity analysis. A pricing model, as distinct from a valuation model, is also reviewed and investigated. The course also deals with the different approaches to modelling structured financings, where the volatility of the cashflow (as opposed to its value) is the key to determine serviceability of a stressed financing structure. The design and implementation of scenarios, as well as the sensitivity and breakeven analysis, are extensively covered. Common to both borrowers and lenders is the financing worksheet - the complexities of handling multiple tranches of finance with flexible input variables and the associated interest calculations are the subject of an additional practical exercise. In addition to the practical exercises, delegates will review models that illustrate a wide range of issues, encompassing the sectors of MBOs, venture capital and limited recourse financings. Skills Gained Delegates will learn : - How to design a model to suit your purpose
- Valuation modelling using conventional and new approaches
- Accurate forecasting corporate cash flows for project finance deals and structures
- How to identify and control key sensitivities through advanced spreadsheet simulation
- How to build risk into your model to enhance the decision making process
- How to design a model to maximise flexibility and reliability
- Practical tips for checking and debugging the model
Prerequisites Optional One-Day Pre-Course Workshop To fully benefit from the Financial Modelling course it would benefit if you were familiar with various excel tools and features that are frequently encountered in financial models. This optional workshop will prepare the way for the subsequent course by illustrating and giving participants many practical items, including those listed below: - naming conventions and methodologies
- outlines
- worksheet and cell protection
- concatenation
- array formulas
- array functions
- consolidation
- filters
- pivot tables
- goal seek
- data validation
- conditional formatting
- recording macros
- editing macros
- auditing tools
- hyperlinks
- LOOKUP functions
- IF functions
- DATE functions
If you feel you would benefit from brushing up your skills on any of the above functions this workshop will prove invaluable for you in order to gain maximum benefit from the course. Course Outline Illustration of Model Types - Cashflow forecasting and DCF valuation models using publicly available information
- Reverse-flow forecasting models for emerging markets or sectors, where the output is the business plan that needs to be achieved
- Transaction structuring models (e.g. project finance, MBOs, LBOs) to capture volatility and structural robustness as well as IRR
- Statistical probability models - simulations
- Pricing models
Model Design - Identifying the purpose and mode of use of the model
- Designing the analysis worksheet
- Determining the flexibilities required and the variable inputs
- Best practice issues:
- maintaining a log
- status worksheet
- hard coding, SE flow, consistent formulae
- naming conventions, formatting conventions
- consistent timelines, flexibility to change timelines
- Circular references
- which are permissible and which are not
- work-arounds if the model needs to be audited
- Macros
- the dangers and the precautions that should be taken
- editing, to minimise complications
Forecasting Corporate Cashflows - practical - When, and when not, to use generic models
- Modelling of demand side businesses contrasted with supply side businesses
- Modelling logic
- Separating volume and price drivers
- Operating cost drivers
- Capital investment, capacity and output linkages
- Investment expenditure drivers
- Financing interactions
Accountancy Impacts - Deriving depreciation
- Tax treatment; the cash effect of taxes; deferred tax
- Processing capital allowances in place of depreciation
- Capitalisations and provisions
- Deriving distributable reserves
Implementation of Analysis - practical - Structuring the analysis worksheet
- Optimising the model for sensitivity analysis
- Implementing scenarios
How to make a booking for the LF3050 course
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