Building Financial Models

This course allows users to improve the reliability, quality and timeliness of their Excel models. Financial modelling demands a logical consistent approach and this workshop builds a financial analysis and a valuation model through a series of practical stages. Upon completion, delegates will have a comprehensive understanding of advanced modelling, as well as how each technique can practically be applied through the use of Excel. On completion of this highly practical, hands-on training course, attendees will be able to: Build a financial model from a blank sheet Design models which minimise errors Write models which can be maintained and augmented in the future Develop models with advanced techniques such as risk, sensitivity, optimisation and forecasting Who should attend The course will be of value to professionals in the following areas: Finance Directors/Financial Controllers/CFO’s Business/Financial/Treasury/Market Analysts Corporate/Structured/Project Finance Officers Financial/Strategic Planners M&A Specialists Private Equity Project/Commercial Management Business Development and Marketing Systems Analysts Budget Managers Profit Centre Managers Credit Risk/Treasury Managers Actuaries Course Methodology This programme will be delivered through a practical and interactive case study and worked examples, demonstrating how and why each technique is used. Emphasis is placed on the delegates gaining practical, hands-on experience of the design and construction of financial models in Excel. Delegates will also benefit from formal lectures and group discussions. Comprehensive product notes and modelling software will be provided for future reference.
Day 1 Introduction Financial Analysis and Valuation Overview of the course Case study outline Different approaches to valuation Financial analysis and valuation framework model Useful Excel methods, features and techniques Common pitfalls and mistakes in Excel Exercise: alternative model review Model Structure and Planning Model design and structure – key steps Planning the equity valuation model Required sheets, calculations and modules Five essential auditing techniques Case: completing and checking the financial analysis/valuation template Adding Cash Flows and Ratios Structured model with a menu and accounting statements Calculating key financial ratios Deriving a UK and international cash flow Case: adding cash flow and ratios to template Non-cash Flow Valuation Non cash flow methods Accounting methods Dividend discount models Market-based methods – EPS and multiples Peer groups Case: calculating accounting and market value on template Day 2 Forecasting and Equity Valuation Forecasting Methods Review of forecasting methods Macro forecasting Linear methods Review of historical performance Relationship between company and financial strategy Identifying and forecasting key drivers Linkages and modelling problems Case: Reviewing performance and adding a forecast to the case template and deriving forecast financial statements Free Cash Flows Derivation of free cash flow Checking model results and redefining forecast Reasonableness of forecast and results Case: adding free cash flow to the model Cost of Capital Alternative theories – bonds and arbitrage pricing theory Capital Asset Pricing Model constituents Discussion and agreement on WACC inputs Asset and equity betas and risk Mathematical derivation Exercse: deriving beta from data and adding WACC to case Initial Equity Valuation Methods of adding terminal value Producing an equity valuation Comparison to existing share price Exercise: adding equity valuation to the template Day 3 Risk, Targeting and Other Layers Alternative Cash Flow Valuation Time varying WACC Adjustments to value Adjusted present value (APV) method Existence and addition of financial and operational synergies Reconciliation to economic profit Exercise: adding APV to the template Adding Risk and Sensitivity Understanding of risk and multiple answers Sensitivity and tables Creating sensitivity graphs Scenario planning based on economic climate Alternative scenario methods Case: testing the models with different sensitivity and risk matrices Optimum Structure and Targeting Achieving a target valuation Goal seeking method Testing valuation with leverage and structure Case: targeting the case to improve valuation sensitivity Management Reporting and Model Review Management reporting and summary Exercise: adding reporting to the valuation model Suggestions for other improvements to the valuation model Final audit Help and user assistance Securing and protection Documentation and maintenance Course summary and close