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Financial Forecasting Essentials

About Workshop

A Financial Forecasting is a quantitative representation of a company’s present and future business operations. Companies of all types and sizes use Financial Forecasting every day to analyze and plan their business activities. Financial Forecasting serves as the foundation and basis of standard financial accounting reports, including the Balance Sheet (Statement of Financial Position – IAS 1), the Income Statement and the Statement of Cash Flows. To forecast financials is a logical, step-by-step process, where each component builds upon or feeds into another component. Financial forecasting is an integral part of any investment decision process as well. Forecasting future financial data helps to meet up the budget process of any organization. The course on financial forecasting is designed to enable the participants to review financial statements step by step.

Workshop topics to be covered:

Income Statement
- The first step when building any financial model
- Items included in an income statement
- Use order of items

Introducing a Cash calculation
- The importance of cash and cash flows
- Difference between cash flows and accounting profits
- Detailed cash calculation showing all cash flows
- Working out interest on cash without resorting to circular references
- Time weighted average cash calculations
- Types of debt used by companies

Fixed Assets
- What fixed assets are and why we use depreciation to spread their cost
- The importance of not over-depreciating assets
- Straight line and reducing balance methods of calculating depreciation
- How to build a fixed asset when you only have very restricted information
- Alternative ways of calculating fixed asset figures with more information

Balance Sheet
- Building the forecasted Balance Sheet
- Backing schedules
- Using ratios to calculate receivables, payables and inventory
- Using the correct type of backing schedule
- Incorporating error traps

Tax Computations
- Difference between accounting and taxable profits
- Main differences between different tax jurisdictions around the world
- The basic steps involved in adjusting from accounting to taxable profits
- Calculating capital allowances (tax depreciation)
- How to lay out a tax computation
- How to deal with tax losses
- Deferred tax computations and provisions

Shareholdings, Dividends and Goodwill
- Different types of share
- Similarity of the backing schedules
- Dividends paid to each type of shareholder
- How to calculate dividends on preference shares
- Using the payout ratio to calculate dividends on ordinary shareholders
- How ‘Goodwill’ arises
- How goodwill is treated under various tax jurisdictions

Sensitivity Analysis
- What sensitivity analysis is
- Can easily be added to a model
- Importance of having well structured model before trying this
- Recap on the calculation of inflation factors
- Two different ways of including inflation in a model
- Using cut & paste and copy & paste to ensure that all references to an input number are properly uplifted throughout the model
- The importance of having backing schedules that allow you to trace each figure back from a model’s report though the backing to the input sheet

Discounted Cash Flow Valuation
- The theory behind DCF valuation and its importance
- The problems inherent in the assumptions behind DCF theory
- How to calculate the DCF valuation of a company
- Need to use as many different tools as possible when valuing a company

Weighted Average Cost of Capital
- Calculating the cost of debt, ordinary shares and preference shares
- Using the market values of individual instrument to give a weighted average
- Which WACC figures should be used in an acquisition model
- Working out separate WACCs for each year for use in the DCF valuation
Hands on session:
- Calculating WACC for each year and individual figures in your models to improve the accuracy of their valuations

Quality Control
- Critical importance of Quality Control when Developing any model
- Methodology for running quality control tests on a model
- Presenting sector-wise modeling

ASSIGNEMENT:
End of the course all the trainees will be given an assignment from a practical scenario. Grading will be shown in their certificate.

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