Forecasting and ValuationA CASE STUDY

Forecasting Financial Statements

Introduction to Forecasting

Preparing Financial Statement Forecasts

General Forecasting Principles

Seven-Step Forecasting Game Plan

Practical Tips for Implementing the

Seven-Step Forecasting Game Plan

Using Excel ® to Prepare Forecasted

Financial Statements

Step 1: Projecting Sales and Other Revenues

Projecting Revenues from Sales

Projecting Sales Revenues

Step 2: Projecting Operating Expenses

Projecting Cost of Goods Sold

Projecting Selling, General, and Administrative

Expenses

Projecting Other Operating Expenses

Projecting Nonrecurring Operating Gains and

Losses

Forecasting Financial Statements

Step 3: Projecting Operating Assets and Liabilities on the Balance Sheet

Projecting Cash

Operating Asset and Liability Forecasting Techniques

Projecting Marketable Securities

Projecting Accounts Receivable

Projecting Inventories

Projecting Prepaid Expenses and Other Current Assets

Projecting Investments in Non-controlled Affiliates

Projecting Property, Plant, and Equipment

Projecting Amortizable Intangible Assets

Projecting Goodwill and Non-amortizable Intangible Assets

Projecting Other Noncurrent Assets

Projecting Assets That Vary as a Percentage of Total Assets

Projecting Accounts Payable

Projecting Other Current Accrued Liabilities

Projecting Current Liabilities: Income Taxes Payable

Projecting Other Noncurrent Liabilities

Projecting Deferred Income Taxes

Forecasting Financial Statements

Step 4: Projecting Financial Assets, Financial Leverage, Common Equity Capital, and Financial Income Items

Projecting Financial Assets

Projecting Short-Term Debt and Long-Term Debt

Projecting Interest Expense

Projecting Interest Income

Projecting Bottling Equity Income

Projecting Preferred Stock and Minority Interest

Projecting Common Stock and Capital in Excess of Par Value

Projecting Treasury Stock

Projecting Accumulated Other Comprehensive Loss

Step 5: Projecting Nonrecurring Items, Provisions for Income Tax, and Changes in Retained Earnings

Projecting Nonrecurring Items

Projecting Provisions for Income Taxes

Net Income

Retained Earnings

Forecasting Financial Statements

Step 6: Balancing the Balance Sheet

Balancing a Company’s Balance Sheets

Closing the Loop: Solving for Co-determined Variables

Step 7: Projecting the Statement of Cash Flows

Tips for Forecasting Statements of Cash Flows

Specific Steps for Forecasting Implied Statements of Cash Flows

Shortcut Approaches to Forecasting

Projected Sales and Income Approach

Projected Total Assets Approach

Analyzing Projected Financial Statements

Sensitivity Analysis and Reactions to Announcements

Risk-Adjusted Expected Rates of Return

and the Dividends Valuation Approach

Introduction and Overview

Equivalence among Dividends, Cash Flows, and Earnings Valuation

Risk-Adjusted Expected Rates of Return

Cost of Common Equity Capital

Adjusting Market Equity Beta to Reflect a New Capital Structure

Evaluating the Use of the CAPM to Measure the Cost of Equity Capital

Cost of Debt Capital

Cost of Preferred Equity Capital

Computing the Weighted Average Cost of Capital

Rationale for Dividends-Based Valuation

Dividends-Based Valuation Concepts

The Dividends Valuation Model

Implementing the Dividends Valuation Model

Measuring Dividends

Selecting a Forecast Horizon

Continuing Value of Future Dividends

Using the Dividends Valuation Model to Value a Company

Sensitivity Analysis and Investment Decision Making

Evaluation of the Dividends Valuation Method

Valuation: Cash-Flow-Based Approaches

Introduction and Overview

Rationale for Cash-Flow-Based Valuation

Free-Cash-Flows-Based Valuation Concepts

Risk, Discount Rates, and the Cost of Capital

Free Cash Flows Valuation Examples for a Single-Asset Firm

Cash Flows to the Investor versus Cash Flows to the Firm

Nominal versus Real Cash Flows

Pretax versus After-Tax Free Cash Flows

Selecting a Forecast Horizon

Computing Continuing Value of Future Free Cash Flows

Measuring Periodic Free Cash Flows

A Framework for Free Cash Flows

Free Cash Flows Measurement

Cash-Flow-Based Valuation Models

Valuation Models for Free Cash Flows for

Common Equity Shareholders

Valuation Models for Free Cash Flows for All

Debt and Equity Capital Stakeholders

Valuation: Cash-Flow-Based Approaches

Free Cash Flows Valuation of a Company

A Company’s Discount Rates

Computing Free Cash Flows for a Company

The Company’s’s Free Cash Flows to All Debt and Equity Capital Stakeholders

The Company’s Free Cash Flows to Common Equity

Valuation of a Company Using Free Cash Flows to Common Equity Shareholders

Valuation of a Company Using Free Cash Flows to All Debt and Equity Capital Stakeholders

Sensitivity Analysis and Investment Decision Making

Evaluation of the Free Cash Flows Valuation Method

Valuation: Market-Based Approaches

Introduction and Overview

Market Multiples of Accounting Numbers

Market-to-Book and Value-to-Book Ratios

A Theoretical Model of the Value-to-Book Ratio

The Value-to-Book Model with Finite Horizon Earnings Forecasts and Continuing Value Computation

Application of the Value-to-Book-Model to The Company

Reasons Why VB Ratios and MB Ratios May Differ From 1

Empirical Data on MB Ratios

Empirical Research Results on the Predictive Power of MB Ratios

Price-Earnings and Value-Earnings Ratios

A Model for the Value-Earnings Ratio

Price-Earnings Ratios

Summary of Value-Earnings and Price-Earnings

Ratios

Using Market Multiples of Comparable Firms

Price Differentials

How to compute the price differential

Reverse Engineering

Reverse-Engineering The Company’s Stock Price

Training Desktop

Date : please check it in at “futurum corfinan”

Venue : Hotel at Jakarta Pusat

Notes :

Presentation slides will be distributed in softcopy

Minimum participants = 10 persons

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