The International Business School The Hague (IBSH)

Short Course in Financial Analysis and Corporate Valuation

Programme Fee

€ 3,800 (excl. 21% VAT) including course materials, and lunches and snacks if applicable. Incase of Online Participation, lunches will be borne by participants. These fees do not include hotel accommodation.

Course Location

IBSH The Hague Campus

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Short Course in Financial Analysis and Corporate Valuation

Duration: 5 Day Training Session

Learning Objectives

  • Apply the principles of recognition, measurement and presentation of income statement / comprehensive income and balance sheet items in IFRS
  • Analyze and interpret financial statements using key ratios
  • Learn the creative accounting techniques often used in financial statements and analyze its impact on quality of financial analysis
  • Apply the different approaches to value debt instruments and evaluate the pros and cons of each approach
  • Apply the key approaches to equity valuation and evaluate the issues in relation to unlisted equity, application of discounted cash flow method and estimation of cost of capital

Who Should Attend

  • Finance department staff involved in the preparation of valuations for IFRS reporting purposes
  • Regulators who analyse financial statements and valuations to ensure compliance
  • Analysts who review valuations in IFRS or other accounts
  • M&A teams involved in assessing acquisition or divestment opportunities
  • Auditors and their valuation advisers involved in reviewing IFRS valuations
  • Valuation consultants involved in valuing shares or investments in businesses for any purpose – tax, litigation, under the Articles of Association, matrimonial, M&A, financial reporting under IFRS or
    other GAAP

Key Topics

Different accounting frameworks

  • Why Different Frameworks Exist
  • International Financial Reporting Standards (IFRS)
  • Other GAAP (Generally Accepted Accounting Practices)

Narrative Reporting

  • What to Look For
  • How to Interpret the Information
  • Auditor’s Role

Income Statement / Comprehensive Income Analysis

  • Accruals Concept
  • Revenue Recognition
  • Expense Recognition
  • Presentation
  • Key Performance Indicators including Earnings Per Share
  • Understanding and Interpreting Related Disclosure Notes

Balance Sheet Analysis

  • Recognition and Measurement of
    • Tangible Fixed Assets
    • Intangible Assets
    • Financial Investments
    • Inventories
    • Accounts Receivable
    • Leases
    • Taxes
    • Financing Arrangements
    • Provisions and Contingent Liabilities
  • Presentation
  • Understanding and Interpreting Related Disclosure Notes
  • Interpretation of the Statement of Cash Flows
  • Direct and Indirect Methods
  • Operating Cash Flows
  • Using the reconciliation of net profit to operating in order to identify non cash movements and judgements
  • Investing Cash Flows
  • Financing Cash Flows
  • Estimating Net Debt

Ratio Analysis

  • Performance
  • Liquidity
  • Gearing

Creative/Inappropriate Accounting

  • Revenue Misstatement
  • Expense Misstatement
  • Over/Undervaluing Assets
  • Not Recognizing Liabilities
  • Off-Balance Sheet Financing Opportunities
  • Presentation of One-off Gains and Losses

Corporate valuations

  • Reasons for performing valuations
  • Tax, litigation and dispute resolution, financial reporting (IFRS), M&A, corporate recovery, Stock Exchange reporting – fairness opinions
  • Bases of value – fair value, market value, value to the owner – terminology differences

IFRS 13, Fair Value Measurement

  • Cost, market and income approaches
  • Meaning of fair value
  • Market participants
  • Principal and most advantageous market
  • Link with International Valuation Standards Council, IVSC, guidance
  • Valuation inputs and assumptions
  • Valuation hierarchy and reliability assessment

Valuation of Simple Debt Instruments

  • Understanding the instrument being valued
  • Market and income approaches
  • Using discounted cash flow
  • Benchmarking using credit ratings
  • Assessment of IFRS 13 hierarchy levels

Valuation of unlisted equity – overview

  • Understanding the subject company
  • Industry and economic review
  • Performing research
  • Controlling or non-controlling holding – valuation implications
  • Equity and enterprise value
  • What is meant by a liquidity discount?

Discounted cash flow overview

  • Cash flow forecast
  • Discount rate
  • Consistent treatment of interest and tax
  • The Gordon Growth Model

Projecting cash flows for a DCF exercise

  • Putting together a cash flow forecast
  • Working capital requirements
  • Capital expenditure requirements
  • Risk and growth assumptions

Cost of capital

  • Weighted average cost of capital
  • Estimating cost of debt, Kd
  • Estimating cost of equity, Ke
  • Capital Asset Pricing Model, CAPM
  • The equity risk premium

Market approach to equity valuation – overview

  • Equity and enterprise value
  • EBIT, EBITDA multiples
  • Choice of multiples
  • Research
  • Choice of comparables and peer group

Cost approach to valuation

  • Limited situations in which applied
  • IVSC and other guidance
  • Valuations of investment companies
  • Break-up valuations

Drawing conclusions

  • More than one approach
  • Implied multiples from DCF valuations
  • Reverse engineering
  • Consideration of IFRS 13 disclosures required

Teaching Method

  • Group live instruction in a workshop format
  • PowerPoint presentations with demonstrated examples
  • Numerous examples for participants to work through on their laptops
  • Participant questions and group discussions on real life case studies
  • All participants receive a comprehensive binder containing presentation slides
  • Electronic copies of exercise and case study solutions will be available to participants

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