A reference guide for the valuation practice

Written for specialists

as well as non-financial experts

What determines a company’s financial health and what drives company value? Knowledge on financial analysis and business valuation is not always accessible for non-financial specialists. Nevertheless, having this intellectual skill set can leverage your ability to make better strategic decisions. Therefore, the authors have structured this book in a way that enables non-specialists to grasp all relevant financial information using tools that allow efficient financial analyses. For the non-financial experts the book starts by presenting the essentials of financial analysis and business valuation in a structured way. However, this book is not only written for non-financial specialists as also more experienced readers may find new perspectives for conducting financial analyses. Professionals who work with relatively ‘static’ financial data concerning solvability and debt will welcome the more dynamic financial toolset incorporated in this book. This toolset will enable them to get to the heart of the (financial) matter faster by focusing on relevant data. By making the relevant financial analyses this book gives the reader a better insight in the company’s value. Not just by explaining theory, but also by showing how you can use the output of the financial analyses to challenge the forecasted data that will determine the price you get or have to pay. About the authorsGuy Parmentier is a Belgian certified public accountant. He runs a renowned valuation practice and is executive professor at the University of Antwerp Management School and lecturer at the Karel De Grote Hogeschool – College of Higher Education Antwerp.Bart Cuypers is a financial analyst in an international banking group with vast valuation expertise.

Business Valuation

Using financial analysis to measure a company’s value

www.intersentia.comwww.intersentia.co.uk

· Guy Parmentier and Bart Cuypers

· 2012 | ISBN 978-1-78068-016-3

· x + 264 blz. | paperback

· 79 EUR

Groenstraat 312640 MortselBelgiumT +32 3 680 15 50F +32 3 658 71 21mail@intersentia.be www.intersentia.com

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Business ValuationUsing financial analysis

to measure a company’s value

PART I FINANCIAL ANALYSIS

CHAPTER 1 THE BALANCE SHEET 1.1. Introduction to balance sheets 1.2. The yin and yang of accountancy 1.3. Assets 1.4. Reinterpreting ‘assets equal equity plus liabilities’ 1.5. Liabilities and shareholders’ equity 1.6. Returning to balance sheets as a box of blocks 1.7. Net long-term financing 1.8. Review and conclusions

CHAPTER 2 WORKING CAPITAL REQUIREMENTS, MANAGERIAL BALANCE SHEET AND MATCHING 2.1. Working Capital Requirements 2.2. Managerial Balance Sheets 2.3. Matching strategies 2.4. Review and conclusions

CHAPTER 3 BALANCE SHEETS AND STRATEGIC DECISION-MAKING 3.1. Step one: Measuring net long-term financing (NLF) 3.2. Step two: Calculating and monitoring working capital

requirements 3.3. Step three: Liquidity levels and financial structures:

NLF & WCR 3.4. Review and conclusions

CHAPTER 4 PROFIT AND LOSS STATEMENTS 4.1. Balance sheets and profit and loss statements 4.2 Exploring profit and loss statements 4.3. Review and conclusions

CHAPTER 5 PROFIT AND LOSS STATEMENTS AND STRATEGIC DECISION-MAKING 5.1. Step four: EBIT and EBITDA developments 5.2. Step five: Net Operating Cash Flow 5.3. Step six: Debt repayments and Net Operating Cash

Flow 5.4. Review and conclusions

CHAPTER 6 FORECASTS FOR MANAGERIAL BALANCE SHEETS AND PROFIT AND LOSS STATEMENTS 6.1. Profit and loss statements: budgets and forecasts 6.2. Managerial balance sheet: budgets and forecasts 6.3. Review and conclusions

CHAPTER 7 A SEVEN-STEP SEQUENCE AND CONCLUSION

PART II COMPANY VALUATION

CHAPTER 8 KEY VALUATION CONCEPTS 8.1. Equity versus entity valuation approaches 8.2. Return on equity and economic profits 8.3. Return on invested capital and economic profits 8.4. Adjusted Book Values 8.5. Economic profits and discounted free cash flow 8.6. Review and conclusions

CHAPTER 9 FOUR MAIN VALUATION METHODS 9.1. Equity cash flow 9.2. Free cash flow (FCF) 9.3. Economic Profits9.4. Conclusions regarding the main valuation methods

CHAPTER 10 WEIGHTED AVERAGE COST OF CAPITAL 10.1. Required returns on debt (Kd) and equity (Ke) 10.2. Capital Asset Pricing Model and beta 10.3. Calculating the Weighted Average Cost of Capital 10.4. Review and conclusions

CHAPTER 11 VALUATION WITH DISCOUNTED CASH FLOW AND ECONOMIC PROFITS11.1. Discounted equity cash flows 11.2. Equity approach to Economic Profits 11.3. Entity approaches to Economic Profits, or EVA™ 11.4. Discounted free cash flow valuation11.5. Review and conclusions

CHAPTER 12 FINANCIAL ANALYSIS AND COMPANY VALUATION

CHAPTER 13 CONCLUSION