CORPORATE FINANCE

HANDBOOK
ANALYSIS FINANCIAL STATEMENTS FORMULAS

Balance sheet 2022 2023 Profit and Loss Account 2022 2023 Cash flow statement 2023
ROCE
RATIO ANALYSIS
Intangible assets 50 350 Revenues 4,200 4,500 Net income 1,186
EBIT / (long term debt + equity)
Tangible assets 350 380 COGS variable 1,270 1,350
Depreciation and
Profitabililty Fixed assets 400 730 COGS fixed 380 420 amortization 120
Gross profit margin = Gross profit / Revenues
EBITDA margin = EBITDA / Revenues Changes in account Net present value
Net profit margin = Net profit / Revenues COGS 1,650 1,770 receivables -10
Return on equity = Net profit / Equity
Return on capital employed = Net profit /(Equity + Long term debt) Inventories 10 20 Changes in inventories -10
Return on assets = Net profit / Total assets
Revenue per employee = Revenues / Employee number Account Receivable 15 25 Gross profit 2,550 2,730 Changes in trade payables 5 Present value of inflows – Present value
EBITDA per employee = EBITDA / Employee number
Net profit per employee = Net profit/ Employee number Cash 375 1,376 Changes in other liabilities -20 of outflows
Current assets 400 1,421 Overhead – variable 750 780 CF from operating activities 1,271
Overhead - fixed 254 321
Present value - PV
Liquidity Total assets 800 2,151 Overhead costs 1,004 1,101 Sales of capital assets
Net working capital = Account receivable + Inventories – Account Purchase of capital assets 450
payable
Current assets – current liabilities = Current assets - current liabilities Equity 475 1,661 EBITDA / Operating profit 1,546 1,629 CF from investing activities -450 PV = C / (1 + r)
Current ratio = Current assets / current liabilities
Quick ratio = (Current assets – inventories) / current liabilities
Cash ratio = Cash / current liabilities
Working capital turnover = Cash / current liabilities
Depreciation and
C = Future cash flow. r = Discount rate
Long term fin. Liabilities 150 250 amortization 150 120 Changes in share capital 0
n = Number of periods
Interest and financial Changes in financial
expenses 5 28 liabilities 180

Cost of equity
Trade payables 20 25 Financial income 10 15 CF from financing activities 180
Efficiency Financial liabilities 120 200 EBT 1,401 1,496
Other liabilities 35 15 Total cash flow 1,001
DSO = Average account receivables / Revenues * 365
DIO = Average inventories / COGS * 365 Cash at the beginning of
DPO = Average account payables / COGS * 365
CCC days = DSO+DIO-DPO
Current liabilities 175 240 Tax 280 310 period 375 Ke=RFR+BC*ERP+SRP
Assets turnover = Revenues /Average assets Total Equity and liabilities 800 2,151 Net income 1,121 1,186 Cash at the end of period 1,376
Fixed assets turnover = Revenues /Average fixed assets
EBITDA to interest coverage = EBITDA / Interest expenses RFR – Risk free rate, BC – Beta
Total cost per employee = Total costs / Employee number
Overhead costs per employee = Overhead costs / Employee number Coefficient

PLANNING, BUDGETING AND FORECASTING ERP – Equity risk premium, SRP –

Specific risk premium

CASH FLOW KPIS Overhead variable 2023 Assumption Value 2024 2025 2026 2027 2028
Cash flow statement 2024 2025 2026 2027 2028

EVA
Salaries and wages 370 970 1,141 1,216 1,367 1,567 Net income (382) (524) (611) (550) (562)

Taxes 30 % of salaries 5.00% 48 57 61 68 78 Depreciation and amortization 195 375 415 465 495
Impairment of receivables 6 7 8 9 10
Net working capital = Account receivable
Recruitment 39 % of revenues 0.35% 42 46 51 57 63
Impairment of inventories 6 7 8 9 10

+ Inventories – Account payable Education 25 % of revenues 0.23% 27 30 33 37 41 Losses (gains) from sale of non-current assets, net
(Incerease) or decrease of other current assets
100
170
150
(102)
250
(49)
20
(55)
0
(62) EVA = NOPAT - (Invested Capital *
Maintenance 39 % of revenues 0.35% 42 46 51 57 63
WACC)
(Incerease) or decrease in account receivables 47 (18) (20) (23) (25)

Current assets – current liabilities = Miscellaneous 33 % of revenues 0.30% 36 39 44 48 54 (Incerease) or decrease in inventories 126 (39) (46) (53) (61)

Current assets - current liabilities Other overhead variable 39 % of revenues 0.35% 42 46 51 57 63

Increase (decrease) in trade payables
Increase (decrease) in other liabilities
(205)
(53)
16
11
18
12
21
14
23
15
NOPAT – net operating profit after
Total overhead variable 574 1,205 1,406 1,506 1,690 1,928
CF from operating activities 11 (117) (14) (143) (157)
tax
Current ratio = Current assets / current Revenue 2023 Rate 2024 2025 2026 2027 2028 (Purchase) or sales of capital assets (750) (1,050) (450) (150) (150)

liabilities $
Changes in Other investments
CF from investing activities
(50)
(800)
(70)
(1,120)
20
(430)
(50)
(200)
(10)
(160)

Quick ratio = (Current assets – inventories) Customer 1 3,900 10% 4,290 4,719 5,191 5,710 6,281 Increase of share capital 150 250 350 450 550 Internal rate of return
Increase (decrease) other long term liabilities 100 110 110 110 110
/ current liabilities Customer 2 1,210 10% 1,331 1,464 1,611 1,772 1,949
Dividends paid (500) (500) (300) (750) (900)
Customer 3 1,090 10% 1,199 1,319 1,451 1,596 1,755
CF from financing activities (250) (140) 160 (190) (240)

(IRR) = (Future Value ÷ Present

Existing customers 6,200 6,820 7,502 8,252 9,077 9,985
Cash ratio = Cash / current liabilities Lost sales (620) (682) (750) (825) (908) Total cash flow (1,039) (1,377) (284) (533) (557)
Share in total 9% 9% 9% 8% 8% Cash at the beginning of period 1,310 271 (1,106) (1,390) (1,923) Value)^(1 ÷ Number of Periods) – 1
Working capital turnover = (Current assets Existing customers 6,200 6,820 7,502 8,252 9,077
Cash at the end of period 271 (1,106) (1,390) (1,923) (2,481)
Share in total 88% 87% 86% 84% 83%
– current liabilities) / Total assets
Discounted cash flow
INVESTING DCF = (CF/(1+r) ) + (CF/(1+r) ) +
EBITDA KPIS
(CF/(1+r) )
Invest in projects that yield a return greater than the minimum acceptable hurdle rate.
CF = Cash Flow in the Period
EBITDA absolute amount = Net income + The hurdle rate should be higher for riskier projects and reflect the financing mix used -owners’ funds r = the interest rate or discount rate
interest +tax+ depreciation + amortization
(equity) or borrowed money (debt) n = the period number
EBITDA margin = EBITDA / Revenues

EBITDA to Interest coverage = EBITDA / COMPANY VALUATIONS

Interest expenses Cost of equity
EBITDA per employee = EBITDA / Employee
number
DCF VALUATION BY MULTIPLE NET BOOK VALUE
Net book value method: Ke=RFR+BC*ERP+SRP
Applicable when it is possible to Comparable companies/transactions method:
project cash flows in future with applicable when it is possible to identify adequate method when you can
not identify comparable RFR – Risk free rate, BC – Beta
significant level of certainty. E.g. if companies and/or transactions comparable to
Coefficient
VALUATION MULTIPLES company is in financial difficulties, yours. In practice, it is difficult to identify companies/transactions and can
ERP – Equity risk premium, SRP –
it is hard to predict if company will comparable companies/transactions for young not predict cash flows. Especially
good for companies with Specific risk premium
operate in the future and therefore companies and for companies from emerging
DCF method would not be the best markets. significant fixed assets, but
P/E ratio = Market price per to use. without earning power.
share / Earnings per share
TERMINAL VALUE
P/S ratio = Market capitalization
or Valuation / Total revenue M&A PROCESS
CFn * (1 + g)
P/B ratio = Market capitalization TV =
/ Book value Preparation : evaluation Negotiate the terms of the (WACC – g)
7
Sign confidentiality/ NDA
EV/EBITDA ratio = Enterprise
1 business operations,
financials etc.
4 agreements purchase agreement as the
purchase price, representations
value / EBITDA and warranties, closing
• TV – Undiscounted Terminal
Intent (LOI) outlining the conditions
P/CF ratio = Market Initial business valuation by Value
proposed terms of the
capitalization / Cash flow from
operations
2 the most reliable valuation
method and appoint 5 acquisition, including the 8 Legal aspects and
ownership transfer
• CFn – Cash Flow in the last
year of projections
external consultant purchase price, transaction
• g – growth rate
structure, and any contingencies
Dividend yield = Annual • WACC – discount rate
dividend per share / Stock price Initial contacts: Reaching Post transaction actions • n – number of periods for
3 out potential buyer / seller 6 Financial / Tax due diligence
9 integrations, covenants, PPA projections

Bojan Radojicic robojan.gumroad.com Repost