Course Overview, Objectives & Introductory Concepts

● Financial modelling concepts: Aims, design, structure and development

● Corporate finance and valuation concepts

● Introductory Concepts

○ Cash vs Profit

○ Time Value of Money

○ Cost of Capital

○ Risk, return & value

○ Scenario Analysis

Financial Forecasting & Analysis

● Common difficulties, problems and limitations with financial analysis

● Defining the decision

● Availability of information

● Defining model scope

● Knowing the limitations of financial analysis

● Information overload

● Financial Forecasting

○ What is it?

○ Steps involved

○ Best practices & financial modelling standards

Financial Decision Making & Evaluation

● Common financial / investment decisions

● Understanding the Time Value of Money concept

● Understanding Discounted Cash Flows

● Evaluation of different methodologies (including NPV, IRR, Payback Period)

● Introduction to valuation concepts including NPV

● Identifying & dealing with IRR difficulties

Valuation tools and methodologies

● Reviewing valuation concepts

● Valuation methodologies (including evaluation of different methodologies)

● Dealing with common valuation issues

● Compare & contrast alternative valuation methods to know when to apply each

Discounted Cash flow

● Overview of DCF methodology

● The role of Cash Flow Forecasts

● Cost of Capital

Ratios and Key Performance Metrics

● Performing a Ratio Analysis

● Understanding Profitability Ratios

● Interpreting Liquidity and Solvency Ratios

Financial Modelling & Forecasting in Excel

● Overview & Objectives

○ Defining the scope of your model

○ Objectives: What are the aims of the model?

○ Understanding model limitations

● Development and structuring

○ Planning the financial model

○ Ensuring the model structure matches the objectives

● Incorporating best practice techniques into your models

● Compare a selection of best practice guidelines/standards

Structuring the Cash Flow Model

● Setting Up the Work Book & structure

○ Time scale

○ Separate business areas

○ Timing and frequency formats

○ Data Sources

● Managing the Input Section

● Building the Calculation Section

○ Building the C/Flow Forecast

○ Line by line build-up of cash flows

○ Capex and OpEx

● Presenting Model Outputs

○ Key Financials

○ Summary of model data

○ Dashboards & Graphs

○ Valuations & terminal values

Integrated 3-way Financial Models

● Balance sheet, Income statement, cash flow

● Dealing with interest circularity

● Using ratios to produce financial forecasts

● Debugging a 3-way model

Debt and Capital Structuring

● Typical Bank Covenants & Ratios

● The Importance of Capital Management

○ Why it is important (cost of debt vs equity)

○ Defining your optimal capital structure

● The Effect of Capital Structure

○ Understanding its effects on risk

Sensitivities & Scenario Management

● Sensitivity

○ Identifying key variables for sensitivity

○ Building in sensitivities

○ Displaying the results of sensitivity analysis

● Scenarios

○ How to run multiple sets of inputs through a single calculation engine

○ Building, managing and extending a scenario manager that is far better than Excel

● Introduction to Monte Carlo simulation: how to apply these techniques in practical ways to real-life financial models

Best Practice Reporting, Review and Presentation

● Checking outputs for consistency

● Techniques for building checks & balances

● Model audit & review

● Automated spreadsheet auditing software tools: role, purpose & limitations, demonstration

● Documentation

● Use of financial modelling software: when is it useful or not useful?