1

FLEX Course Material

Familiarized with the
typical structures,
practices, investment
rationales and
financial methods

INTRODUCTION
used by a private
equity investor

TO PRIVATE
EQUITY
 1

Discuss the nature of

private equity.
Determine and INTRODUCTION TO
differentiate the types
and roles of private PRIVATE EQUITY
equity.

2
Private Equity- consists of investors
and funds that make investments
directly into private companies or
conduct buyouts of public companies
that result in a delisting of public
equity.
- Capital for private equity is raised
from retail and institutional investors,
and can be used to fund new
technologies, expand working capital
within an owned company, make
acquisitions, or to strengthen a
balance sheet (cash flows) of a
company.

3
 Participants in Private Equity

•1. Private Equity firm- buy out firm or

financial sponsor.

•2. Investment Banks

•a. introduce potential acquisitions
target to Private Equity firms
•b. help to negotiate acquisition price
•C. Provide loans or arrange bond
financing
•d. arrange exit transactions

4
 Participants in Private Equity

•3. Management
•a. co- invest with the Private Equity
firm: both will de very well if there is
a successful exit
•b. accept lower cash compensation,
but also receive options and other
forms of incentive compensation.

5
 Private Equity VS Hedge Funds

•A. Private Equity

•- Private equity investment groups
are geared towards long-hold,
multiple- year investment strategies
in illiquid assets.
•- Have more control and influence
over operations or asset
management to influence their long-
term returns.

6
 Private Equity VS Hedge Funds

•B. Hedge Funds

•Hedge funds usually focus on short or
medium term liquid securities which
are more quickly convertible to cash,
and they do not have direct control
over the business or asset in which
they are investing.
•Have less control over the assets and
lack in voting power.

7
 Fund of Funds

•- A private equity fund of funds

consolidates investments from many
individual and institutional investors to
make investments in a number of different
private equity funds.
•- This enables investors to access certain
private equity fund managers that they
otherwise may not be able to invest with,
diversifies their private equity investment
portfolio and augments their due diligence
process in an effort to invest in high quality
funds that have a high probability of
achieving their investment objectives.
•- Private equity fund of funds represent
about 15% of committed capital in the
private equity market.

8
 Types of Private Equity

1. Leveraged Buyout- refers to the

purchase of all or most of a
company or a business unit by
using equity from a small group of
investors in combination with a
significant amount of debt.

- The targets are typically mature

companies that generate strong
operating cash flows.

9
 Types of Private Equity

2. Growth Capital- refers to equity

investments, in relatively mature
companies that are looking for capital
to expand or restructure operations,
enter new markets or finance a major
acquisition without a change of
control of the business.
-Because of lack of scale these
companies generally have a few
alternative conduits to secure for
growth.
-The primary owner of the company
may not be willing to take the
financial risk alone.

10
 Role and Importance of Private
Equity
1. They help in growth of the
economy.
2. Helps the companies for expanding
to international markets
3. Life Boat for the companies who
have unfortunately come under
hard times and need a turnaround
4. Expertise to lead them on a new
and sustainable path
5. Greater expansion of business
create more employment

11
 Ways to Exit a Company

1. Initial Public Offering (IPO)- shares of

the company are offered to the
public, typically providing a partial
immediate realization to the financial
sponsor as well as a public market
into which it can later sell additional
shares.
2. Merger or Acquisition- the company
is sold for either cash or shares in
another company
3. Recapitalization- cash is distributed
to the shareholders and its private
equity funds either from cash flow
generated by the company or
through raising debt or other
securities to fund the distribution.

12
 REFERENCES

SUGGESTED READINGS AND REFERENCES

Ramsinghani, Mahendra (2021), The Business of

Venture Capital: The Art of Raising Fund, Structuring
Investment, Portfolio Management, and Exits (Wiley).

Feld, Brad & Mendelson, Jason (2019), Venture

Deals: Be Smarter Than Your Lawyer and Venture
Capitalist (Wiley)

De Vries, Harm F., Van Loon, Menno J., Mol, Sjoerd

(2016), Venture Capital Deal Terms: A Guide of
Negotiating and Structuring Venture Capital
Transactions (HMS Media Vof.)

Hallman, G. Victor, Rosenbloom, Jerry S. (2019),

Personal Financial Planning, Seventh Edition, (Wiley)

Berns, David M. (2020), Modern Asset Allocation for

Wealth Management, (Amazon)

13
 2

FLEX Course Material

Understanding of the
dynamic challenge
faced by
entrepreneurial
ventures in securing
financial backing to
support future

VENTURE CAPITAL
growth and
development
 1

Determine and
differentiate the types
of investors.
VENTURE CAPITAL
Explain the role of
venture capitalist

2
• Venture Capital- is a subset of private
equity and refers to equity
investments made, typically in less mature
companies, for the launch of a seed or
start- up company, early stage
development, or expansion of a business.
• - Venture investment is most often found
in the application of new technology, new
marketing concepts.
- Venture capital is most suitable for
businesses with large up- front capital
requirements which cannot be financed by
cheaper alternatives such as debt.

3
•Private Equity- consists of investors and
funds that make investments directly into
private companies or conduct buyouts of
public companies that result in a
delisting of public equity

•.Venture Capital- is a subset of private

equity and refers to equity
investments made for the launch, early
development, or expansion of a business

4
 Why Companies Need Financing

•For start-ups or growing companies,

as well as those facing major change,
financing is one of the business
issues. New capital is needed for:
•1. financing of product development
•2. financing of market penetration
•3. financing of investments
•4. working capital financing to secure
operative community
•5. maintaining liquidity to be able to
cover daily payments.

5
 Types of Investors

•1. Business Angel or Informal

Investor- is an affluent individual
who provides capital for a business
start up. The capital they provide can
be one-time injection of seed money
or ongoing support to the company
through difficult times.

•2. Venture Capitalist- an investor/

financial institutions which either
provides capital to start up ventures
or supports small companies that
wish to expand but do not have
access to public funding.

6
 Types of Venture Capitals

•1. Type of Companies where

Investment is made:

Investment is made by venture capital

firms to finance the founding or early
growth of new companies that do not
yet have access to the public
securities market or to institutional
lenders such as banks or insurance
companies.

7
 Types of Venture Capitals

•2. Type of Financing:

May include equity or quasi- equity

instruments, and some times debt-
normal or conditional in exchange for
ownership for a predetermined time
period. In particular, the purchase of
convertible securities by the venture
capitalist is the predominant form of
investments.

8
 Role of a Venture Capitalist

The Venture capitalists plays the role

of a resource manager for business
development. Venture capital
business demands skills, attitudes and
systems very different from those of
traditional financial intermediaries
such as banks.

1. Venture capital funds the fill the

gap between an entrepreneur’s
personal resources and funds that
may eventually be raised from credit
institutions or public stock offerings.

9
 Role of a Venture Capitalist

2. Venture capitalist joins

entrepreneur as a co-promoter in
projects and share the risks and
rewards of the enterprise with the
objective of long term capital
appreciation.

3. Venture Capital is not solely an

injection of funds into a new firm, it is
also an input of the skills needed to
set the firm up, design its marketing
strategy, organize and manage it.

10
 Role of a Venture Capitalist

4. Specialized venture capitalists- can

better understand the industry in
which the firm operates and its
technology, through this they can
better control the business risk
associated with early stage investing
by remaining in close contact with the
venture.

5. Venture capitalists take an active

role in the governance of their profile
companies by contributing their
business experience and industry
knowledge gained from helping other
young companies.

11
 Role of a Venture Capitalist

6. Venture capitalists are typically well

connected in the specific industry,
they help to recruit key personnel,
they negotiate with suppliers and
customers, they advise the
entrepreneur on strategic decisions,
play a major role in structuring
mergers, acquisitions, and initial
public offerings and sometimes
engage in the day to day operations in
the firm.

7. Also serves on the Board of the

company.

12
 Stages of Financing

A. Early Stage
1. Seed Financing- usually involves a
small amount of capital provided
to an investor or entrepreneur to
prove a concept.
2. Start-up Financing- Provides funds
to companies for use in product
development and initial marketing.
3. Other Early Stage Financing-
provides funds to companies that
have exhausted their initial capital
and need funds to initiate
commercial manufacturing and
sales.

13
 Stages of Financing

B. Later Stage Financing

1. Mezzanine/ Expansion Financing-
includes working capital for the
initial expansion of a company or
for manor growth expansion and
financing for a company expecting
to go public within six months to a
year.
2. Management/ Leverage Buyout
Financing includes funds to acquire
a product line or business from
either a public or private company,
utilizing a significant amount of
debt and little or no equity.

14
 Stages of Financing

B. Later Stage Financing

3. Acquisition Financing- provides
financing to obtain control, possession
or ownership of a private portfolio
company.

15
 Venture Capitalist Activities

1. Screening
2. Preliminary offers
3. Due diligence
4. Final closing

16
 REFERENCES

SUGGESTED READINGS AND REFERENCES

Ramsinghani, Mahendra (2021), The Business of

Venture Capital: The Art of Raising Fund, Structuring
Investment, Portfolio Management, and Exits (Wiley).

Feld, Brad & Mendelson, Jason (2019), Venture

Deals: Be Smarter Than Your Lawyer and Venture
Capitalist (Wiley)

De Vries, Harm F., Van Loon, Menno J., Mol, Sjoerd

(2016), Venture Capital Deal Terms: A Guide of
Negotiating and Structuring Venture Capital
Transactions (HMS Media Vof.)

Hallman, G. Victor, Rosenbloom, Jerry S. (2019),

Personal Financial Planning, Seventh Edition, (Wiley)

Berns, David M. (2020), Modern Asset Allocation for

Wealth Management, (Amazon

17
 3

FLEX Course Material

:
Identify the types,
nature, needs and
approach to
investors

Discovering
Investors
 1

Discuss the existence,

nature and needs of
the different types of
investors. Discovering
Investors

2
 Types of Investors Exists

•A. Private Investors

•1. Financial Investor- looking for

financial gain. Treats the investment
in a economic matter. Invests in
almost any niche, as long as the
opportunity is good. Not easily
swayed by emotions.
•2. Angels Investors- semi-
professional investors. Often invest
with their gut, and tend to invest in
their professional niche.
•3. Friends, Fools, and Family- usually
not professional, ruled by emotion
and trust, comes with both benefits
and disadvantages.

3
 Types of Investors Exists

•B. Company Investors

•1. Financial Investor- looking for

financial gain, treats the investment in a
economic matter, and includes
investment companies and venture
capital.
•2. Strategic/ Industrial Investors- players
in a certain niche. Often does defensive
investments, and think Facebook buying
Instagram, or Electronic Arts buying
Playfish Trondheim.
•3. Accelerators- takes a small stake,
gives you a small investment. Looking
for a long- term financial gain. Makes a
lot of bets, only of these are successful.

4
 Types of Investors Exists

•C. Government Grants

•- grants
•- loans
•- incubators

•D. Own Funds

•- savings
•- loans

5
 What Do Investors’ Look For?

•1. Not necessarily a good idea, but

good business opportunity.
•2. There are lots of bad ideas out
there, with brilliant execution and
massive profits.
•3. Investors look for return on their
money and the highest possible
certainty of success. The chance of
success in the execution of the idea is
strengthened by a good team.

6
 How To Approach Investors?

•1. Financial Investors like Venture

Capitalists and prominent Angels are
pitched 100 times a day.
•2. Do not cold-call investors
•3. Use your connections. Ask people
for introductions and
recommendations.
•4. Setup an Angel list profile. Send
your pitch deck to your business
partners. Talk with your friends. If
you haven’t got well connected
friends, get new ones.

7
 Do’s In Approaching Investors

•1. Setup an Angellist profile

•2. Make a great pitch deck
•3. Use your network
•4. Go to tech and network events
•5. Go to events related to your
product
•6. If you believe in your product, ask
for money from your friends, fools
and family. If you succeed, they’ll
become rich. If you fail and get mad,
they were never your true friends.
•5. If a potential investor says no, ask
them who they would talk to next.
Perhaps they have a friend interested
in investing in the space.

8
 Dont’s In Approaching Investors

•1. Don’t cold call, it’s a waste of

everybody’s time.
•2. Don’t start approaching investors
until you have a company, it’s
unprofessional
•3. Don’t assume you have a brilliant
idea- there are a million of them.
Execution is everything.
•4. Don’t badger people- if they say
no, ask them if you can contact them
•5. Don’t approach investors outside
of their investment profile.

9
 What Do Investors’ Look For?

•1. Innovative idea

•2. Business model
•3. Big market
•4. Top executive team
•5. Exit strategy

10
 Key Things for Investor

1. The problem
2. The size of the opportunity
3. Strengthen of the team
4. Level of Competition
5. Your competitive advantage
6. Plan of attack
7. Current Status
8. Milestone
9. Financials

11
 What Do Investors’ Look For?

•1. Innovative idea

•2. Business model
•3. Big market
•4. Top executive team
•5. Exit strategy

•Best way to get to the Venture

Capitalist is with the help of your
fellow entrepreneurs or ask for an
advice.

12
 Disadvantages of Venture Capital
Financing
•1. It’s the most expensive sort of
money.
•2. All the share holders have rights
•3. You will rarely hear No
•4. It takes a lot of energy and time
•5. Getting an investor is a hard work.

13
 REFERENCES

SUGGESTED READINGS AND REFERENCES

Ramsinghani, Mahendra (2021), The Business of

Venture Capital: The Art of Raising Fund, Structuring
Investment, Portfolio Management, and Exits (Wiley).

Feld, Brad & Mendelson, Jason (2019), Venture

Deals: Be Smarter Than Your Lawyer and Venture
Capitalist (Wiley)

De Vries, Harm F., Van Loon, Menno J., Mol, Sjoerd

(2016), Venture Capital Deal Terms: A Guide of
Negotiating and Structuring Venture Capital
Transactions (HMS Media Vof.)

Hallman, G. Victor, Rosenbloom, Jerry S. (2019),

Personal Financial Planning, Seventh Edition, (Wiley)

Berns, David M. (2020), Modern Asset Allocation for

Wealth Management, (Amazon)

14
 4

FLEX Course Material

Apply financial
management
concepts and
decisions faced in
investment
decisions.

DUE DILIGENCE
 1

Explain the
process, purpose,
focus, legal issues DUE DILIGENCE
of due diligence in
IPO

2
Due Diligence- it is the process of
carrying out an investigative analysis
of the financial, legal and operating
activities of an entity in connection
with a proposed transaction that
would result in a significant change in
the ownership or the capital structure
of the entity.

Aim of the Due Diligence Process:

- Identify problems within the
business, particularly any issues which
give rise to unexpected liabilities in
the future.

3
 Purpose of Due Diligence

•1. Assess the reasonableness of

historical and projected earnings and
cash flows.
•2. Identify key vulnerabilities, risks
and opportunities.
•3. Understanding the company and
its market.
•4. Setting in motion planning for
post-IPO operations.
•5. Highlight changes required in the
company’s tax, legal, corporate or
shareholding structures.
•6. Check whether the company has
complied with the laws.

4
 Ingredients of A Successful Due
Diligence
•1. Must be unbiased
•2. Should be carried out by
independent professionals.
•3. Requires the management’s
cooperation
•4. Done with a positive attitude.

5
 Need for Due Diligence in IPO’s

1. Going public increases the number

of shareholders.
2. Board performance subject to
closer scrutiny.
3. Institutional investors look for
increases in share prices,
achievement of profit targets and
dividend pay-outs.
4. Investors require assurance of a
system of strategic planning and
budgeting, financial reporting and
management information.
5. The SEBI disclosure requirements
are met through the due diligence
process.

6
 Key Areas of Focus

•1. Financial statements- to ensure their

accuracy.
•2. Assets- confirm their value, condition
existence and legal title.
•3. Employees- identification and
evaluation of the key movers.
•4. Sales Strategy- analyzing the policies
and procedures in place.
•5. Marketing- what is driving the
business and is it effective?
•6. Industry in which the company
operates- understand trends and new
technologies.
•7. Competition- identify threats
•8. Systems- how efficient are they? Are
upgrades required?

7
 Key Areas of Focus

•9. Legal and corporate and tax issues-

is the shareholding structure robust?
Are there any tax issues which need
to be resolved?
10. Contracts and leases- identify
what the risks and obligations.
11. Suppliers- are they expected to
remain around?
12. Intellectual property- protected
and to what extent?

8
 Legal Issues

•1. Licenses and Permissions

•2. Litigation
•3. Real Estate and Movable Property
•4. Company Law
•5. Employees, Consultants, Labour
Relations
•6. Environmental Permissions

9
 Gap Analysis

•The due diligence helps identify areas

where the company exhibits
weaknesses.

Example: It may highlight deficiencies

in the company’s management
structure or an inefficient tax
structure.

Therefore pre-IPO due diligence

process will result in a gap analysis
between the present status of the
company that should be floated.

10
 Filling in the Gaps

Gaps identified assist the directors in:

1. Divesting of non-core, non-
profitable activities.
2. Critical analysis of the control,
accounting and reporting systems
3. Critical appraisal of key personnel
4. Identify the value drivers of the
company.

11
 ANSWER KEY

RUBRIC FOR ESSAY

POIN FOCUS CONTENT ORGANIZATION STYLE CONVENTIONS

TS
The single The presenc e of The order The choice, use and Grammar,
controlling point ideas developed developed and arrangement of mechanics,
made with an though, facts, sustained within words and sentence spelling, usage and
awareness of task examples, details, and across structure sentence formation
of a specific topic opinions, reasons paragraphs
and explanations including
introduction and
conclusion
Sharp, distinct Substantial, specific, Sophisticated Precise, illustrative Evident control of
controlling point and/ or illustrative arrangement of use of a variety of grammar,
4 made about a content content with words and sentence mechanics,
single topic with demonstrating evident and/ or structures spelling, usage and
evident strong development subtle transitions sentence formation
awareness of task and sophisticated
ideas

Apparent point Sufficiently Functional Generic use of Sufficient control of

made about a developed content arrangement of variety of words grammar,
3 single topic with with adequate content that and sentence mechanics,
sufficient elaboration or sustains a logical structures spelling, usage, and
awareness of task explanation order with some sentence formation
evidence of
transitions
No apparent point Limited content Confuses or Limited word choice Limited control of
but with evidence with inadequate inconsistent and control of grammar,
2 of a specific topic elaboration or arrangement of sentence structures mechanics,
explanation content with or spelling, usage, and
superficial and / or without attempts at sentence formation
minimal content transition

Minimal evidence Superficial and/ or Minimal control of Minimal variety in Minimal control of
of a topic minimal content content word choice and grammar,
1 arrangement minimal control of mechanics,
sentence structures spelling, usage and
sentence formation

12
 REFERENCES

SUGGESTED READINGS AND REFERENCES

Ramsinghani, Mahendra (2021), The Business of

Venture Capital: The Art of Raising Fund, Structuring
Investment, Portfolio Management, and Exits (Wiley).

Feld, Brad & Mendelson, Jason (2019), Venture

Deals: Be Smarter Than Your Lawyer and Venture
Capitalist (Wiley)

De Vries, Harm F., Van Loon, Menno J., Mol, Sjoerd

(2016), Venture Capital Deal Terms: A Guide of
Negotiating and Structuring Venture Capital
Transactions (HMS Media Vof.)

Hallman, G. Victor, Rosenbloom, Jerry S. (2019),

Personal Financial Planning, Seventh Edition, (Wiley)

Berns, David M. (2020), Modern Asset Allocation for

Wealth Management, (Amazon)

13
 5

FLEX Course Material

Evaluate
company’s
strategic position
and develop
forecasts using
different
techniques COMPANY
VALUATION
 1

Determine and
discuss the
different COMPANY
methods, and
importance of VALUATION
valuation.

Learn the guide

of ensuring
better valuation

2
Valuation- is the process of determining the
economic value of a business or company

•Valuation of a company reflects the

performance of the company- both its past
performance as well as expectations of tis
future performance.

•Value of a business can be arrived at by

using objective analysis, but the
transaction is finalized at the negotiated
price at the seller is willing to sell and the
buyer is willing to buy.

3
 How is Business Valuation Done?

•There are dozens of valuation

models, but only two valuation
approaches: intrinsic and relative

The intrinsic value- of an asset is

determined by the cash flows that the
asset is expected to generate over its
life, keeping in mind the certainty of
such cash flows. Assets with high and
predictable cash flows should be
worth more than assets with low and
volatile cash flows.

4
 How is Business Valuation Done?

•There are dozens of valuation

models, but only two valuation
approaches: intrinsic and relative

In relative valuation- assets are valued

by looking at how similar assets are
priced by the market and performing
a comparative analysis. When you
determine what to pay for a property ,
you do so by comparing the prices of
similar properties in the market.

5
 Methods of Valuation

•1. Income Based Method

A. Profit Earning Capitalization Value

Method (PECV)

•Capitalization- refers to the return on

investment that is expected by an
investor for taking on the risk of
operating the business (the riskier
the business, the higher the required
return).
•PECV= Future Maintainable Profit
after Tax/ Capitalization Rate

6
 Methods of Valuation

•1. Income Based Method

•The earnings figure to be capitalized

should reflect the true nature of the
business, such as the last three years
average, current year or projected
year excluding the impact of any
extraordinary items not expected to
accrue in future.

7
 Methods of Valuation

•1. Income Based Method

B. Discounted Free Cash Flow

Method- is a method of valuing a
company, typically a going concern by
estimating the cash flows and
adjusting it for the time value of
money.
-In this method, all future cash flows
of the company are estimated and
discounted by an appropriate
discount rate.

8
 Methods of Valuation

•1. Income Based Method

Weighted Average Cost of Capital

(WACC)- is the calculation of a firm’s
cost of capital. Each category of a
capital is proportionately weighted.
The categories include: common
stock, preferred stock, bonds, any
other long term debt.

9
 Methods of Valuation

•2. Asset Based Method

The asset approach to business

valuation is based on the principle of
substitution: no rational investor will
pay more for the business assets than
the cost of procuring assets of similar
economic utility. The value of asset-
based analysis of a business is equal
to the sum of its parts.

10
 Methods of Valuation

•2. Asset Based Method

In considering an asset-based
approach, the valuation professional
must consider whether the
shareholder whose interest is being
valued would have any authority to
access the value of assets directly.
a. NET ASSET VALUE/ BOOK VALUE
METHOD
b. LIQUIDATION VALUE METHOD
c. REPLACEMENT VALUE METHOD

11
 Methods of Valuation

•3. Market Based Method

In this method, value is determined by

comparing the asset with similar
assets. Example- comparing a
company against its peer group
companies which are in the same
industry of the same product line and
scale. This is also known as Relative
Valuation Method

12
 Methods of Valuation

•3. Market Based Method

A. Comparable Company Market Multiple-

uses the valuation ratio of a publicly
traded company and applies that ratio
to the company being valued.

The valuation ratio typically expresses the

valuation as a function of a measure of
financial performance or Book Value:
-Earnings/ Revenue Multiples
- Book Value Multiples
- Industry Specific Multiples

13
 Methods of Valuation

•This technique hinges upon the efficient

market theory which indicates that the
price of exchanged securities reflects all
readily available information, as well as
the supply and demand effects of
educated and rational buyers and
sellers.

•B. Comparable Transactions Multiple

Method- is one of the conventional
methods to value a company for sale.
The main approach of the method is to
look at similar or comparable
transactions where the acquisition
target has a similar business model and
similar client base to the company
being evaluated.

14
 Methods of Valuation

•C. Market Price Method- evaluates

the value on the basis of prices
quoted on the stock exchange.
Average of quoted price is considered
as indicative of the value perception
of the company by investors
operating under free market
conditions.

15
 Why Should Go For Valuations?

1. Determining the consideration for

acquisition/ sale of business or for
purchase/ sale of equity stake.
2. Determining the swap ratio for
merger/ demerger

Merger and Acquisitions

-Accurate business valuation is one of
the most important aspects of M&A as
valuations like these will have a major
impact on the price that a business will
be sold for.
-A valuation will assist the business
owners in determining the value of
their business and even maximizing
value when considering a sale, merger,
acquisition, joint venture or strategic
partnership.

16
 Why Should Go For Valuations?

Swap Ratio- is an exchange rate of the

shares of the companies that would
urdergo a merger. This is calculated
by the valuation of various assets and
liabilities of the merging companies.

In case of a merger valuation, the

emphasis is on arriving at the relative
values of the shares of the merging
companies to facilitate determination
of the swap ratio.

17
 Why Should Go For Valuations?

3. Corporate Restructuring- is the

corporate management term for the
act of reorganizing the legal,
ownership, operational, or other
structures of a company for the
purpose of making it more profitable,
or better organized for its present
needs.
-One of the major aspects of
corporate restructuring deal is to
determine the correct value of the
organization.
4. Sale/ purchase of intangible assets
including brands, patents, copyrights,
trademarks, rights.

18
 Why Should Go For Valuations?

5. Determining the value of family

owned business and assets in case of
family separation
6. Determining the fair value of shares
for listing on the stock exchange/
going public
7. Liquidation of company
- Valuation of a company about to be
liquidated gives a fair picture of the
proceeds that can be generated from
the liquidation. It is determining the
total worth of a company’s physical
assets when it goes out of business or
if it were to go out of business.

19
 Why Should Go For Valuations?

8. Voluntary Assessment
9. Dispute Resolution-
-Valuations are an increasingly
important aspect of many
commercial disputes, Before deciding
on how to manage a dispute, it is
good to understand:
-9.1 The likelihood of a successful
outcome
-9.2 The currency amount involved

10. Regulatory Mandate

20
 Check Points in Valuation

1. Non-recurring Items/ Extraordinary

Items/ Other Income
2. Impact of Seasonal Events
3. Intangible Asset Valuation
4. Corporate Governance &
Transparency
5. Discounts & Premiums
6. Non-operating Assets/ Excess Cash
7. Off Balance Sheet Items
8. Consistency in Accounting
Practices
9. Environmental- Legal and Tax

21
 FOR BETTER VALUATION
CONCLUSION
1. If valuing on control basis, valuer
should prefer methods that reach
control value without having to
start with minority value and
estimate control premium.
2. If valuing minority basis, valuer
should prefer methods that reach
minority value directly without
having to start with control value
and estimate minority discount.

22
 REFERENCES

SUGGESTED READINGS AND REFERENCES

Ramsinghani, Mahendra (2021), The Business of

Venture Capital: The Art of Raising Fund, Structuring
Investment, Portfolio Management, and Exits (Wiley).

Feld, Brad & Mendelson, Jason (2019), Venture

Deals: Be Smarter Than Your Lawyer and Venture
Capitalist (Wiley)

De Vries, Harm F., Van Loon, Menno J., Mol, Sjoerd

(2016), Venture Capital Deal Terms: A Guide of
Negotiating and Structuring Venture Capital
Transactions (HMS Media Vof.)

Hallman, G. Victor, Rosenbloom, Jerry S. (2019),

Personal Financial Planning, Seventh Edition, (Wiley)

Berns, David M. (2020), Modern Asset Allocation for

Wealth Management, (Amazon)

23
 6

FLEX Course Material

Apply financial
management concepts
and decisions faced in
investment decisions.

FINANCIAL
CONCEPTS AND
INVESTMENT
ANALYSIS
 1

Apply financial
concepts and methods FINANCIAL
in investment
decisions CONCEPTS

2
 Business Investment Decision

•1. Price
•2. Risk
•3. Alternatives
•4. Business Objectives

3
 Principal Concepts

•1. Cash Flow

•2. Net Present Value (NPV)
•3. Internal Rate of Return
•4. Payback
•5. Interest Rate or Discount rate

4
 Principal Concepts

1. Cash Flow- refers to the movement

of cash into or out of a business,
project, or a financial product. It is
usually measured during a
specified, finite period of time.
Measurement of cash flow can be
used to determine a project’s rate
of return or value. The time cash
flows into and out of projects are
used as inputs in financial models
such as internal rate of return and
net present value.

5
 Principal Concepts

2. Net Present Value (NPV)- is used in

capital budgeting of an investment or
project.
-NPV compares the value of a cash in
the future, taking inflation and
returns into account.
-If the NPV of a prospective project is
positive, it should be accepted.
-However, if NPV is negative, the
project should probably be rejected
because cash flows will also be
negative.

6
 Principal Concepts

3. Internal Rate of Return (IRR)- of an

investment is the interest rate at
which the costs of the investment
lead to the benefits of the investment.
IRR can be used to rank several
prospective projects a firm is
considering.
- Assuming all other factors are equal
among the various projects, the
project with the highest IRR would
probably be considered the best and
undertaken first.

7
 Principal Concepts

4. Payback Period- in business and

economics refers to the period of time
required for the return on an
investment to repay the sum of the
original investment.
-It is the moment when accumulative
cash flow is positive.

5. Interest Rate

8
 2

Apply investment
concepts in investment INVESTMENT
decisions.
CONCEPT

9
 INVESTMENT

•Investment- commitment of a
person’s funds to derive future
income or appreciation in the value
of their capital.

Future income may be:

-Interest
-Dividend
-Premiums
-Pension benefits

10
 Characteristics of Investment

All investments are characterized by

certain features:
1. Returns
-nature of the investment
-the maturity period
-host of the factors
2. Risk
-loss of capital
-delay in repayment
-non repayment of interest
-variability in return

11
 Characteristics of Investment

Risk of an invest depends on the

following factors:
-Maturity period
-The lower credit worthiness
-Nature of investment

3. Safety
-Every investor expects to get back his
capital on maturity without loss and
without delay
-Safety is another feature which an
investor desires for his investments
-Safety implies the certainty of return
of capital without loss of money or
time.

12
 Characteristics of Investment

All investments are characterized by

certain features:
4. Liquidity
An investment which is easily saleable
or marketable
-Without loss of money
-Without loss of time

Is said to be possess liquidity

13
 Characteristics of Investment

All investments are characterized by

certain features:
5. Tax Shelter
a. Initial Tax Benefit- the tax relief
enjoyed at the time of making
investment.
b. Continuing Tax Benefit- represents
the tax shield associated with the
periodic returns from the
investment.
c. Terminal Tax Benefit- relief from
taxation when an investment or
liquidate.

14
 Objectives of Investment

-Each investor tries to maximize his

welfare by choosing the optimum
combination of risk and expected
return in accordance with his
preference and capacity.

Investors’ Objectives
1. Maximization of return
2. Minimization of risk
3. Hedge against inflation

15
Numerous avenues of investment are
available such as:

-Non marketable financial assets

-Bonds
-Mutual fund schemes
-Real assets
-Equity shares
-Life insurance policies
-Financial derivatives and
-Precious objects

16
 Investment and Gambling

-Gambling is quite the opposite of

investment. Typical examples are
horse races, card games, lotteries,
etc.
-It consists in taking high risks not
only for high returns, but also for
thrill and excitement.
-It is unplanned and non scientific
-In gambling artificial and unnecessary
risks are created from increasing
returns.

17
 ANSWER KEY

RUBRIC FOR ESSAY

POIN FOCUS CONTENT ORGANIZATION STYLE CONVENTIONS

TS
The single The presenc e of The order The choice, use and Grammar,
controlling point ideas developed developed and arrangement of mechanics,
made with an though, facts, sustained within words and sentence spelling, usage and
awareness of task examples, details, and across structure sentence formation
of a specific topic opinions, reasons paragraphs
and explanations including
introduction and
conclusion
Sharp, distinct Substantial, specific, Sophisticated Precise, illustrative Evident control of
controlling point and/ or illustrative arrangement of use of a variety of grammar,
4 made about a content content with words and sentence mechanics,
single topic with demonstrating evident and/ or structures spelling, usage and
evident strong development subtle transitions sentence formation
awareness of task and sophisticated
ideas

Apparent point Sufficiently Functional Generic use of Sufficient control of

made about a developed content arrangement of variety of words grammar,
3 single topic with with adequate content that and sentence mechanics,
sufficient elaboration or sustains a logical structures spelling, usage, and
awareness of task explanation order with some sentence formation
evidence of
transitions
No apparent point Limited content Confuses or Limited word choice Limited control of
but with evidence with inadequate inconsistent and control of grammar,
2 of a specific topic elaboration or arrangement of sentence structures mechanics,
explanation content with or spelling, usage, and
superficial and / or without attempts at sentence formation
minimal content transition

Minimal evidence Superficial and/ or Minimal control of Minimal variety in Minimal control of
of a topic minimal content content word choice and grammar,
1 arrangement minimal control of mechanics,
sentence structures spelling, usage and
sentence formation

18
 REFERENCES

SUGGESTED READINGS AND REFERENCES

Fabozzi, F. (2015). Capital Markets: Institutions, Instruments & Risk Management.

Cambridge, Massachusetts: The MIT Press

Lopez-Mariano, N. (2017). Capital Market. LRC Annex Filipiniana. Rex Bookstore

Brandl, M. (2017). Money, Banking, Financial Markets & Institution. Australia: Cengage
Learning

Fabozzi, F. (2015). Capital Market. Cambridge, Massachusetts: The MIT Press

Gali, J. (2015). Monetary Policy, Inflation, & the Business Cycle. Princeton, Oxford:
Princeton University Press

JOURNAL ARTICLES

Xianhong, X., Tian, C., & Jinnuo, Z. (2016). Influence Effect of International Capital Flow
on China's Economic Growth. Retrieved December 2016 from
https://www.computer.org/csdl/proceedings/acit-csi/2016/4871/00/index.html

Wang, Z., Zhou, Y., Tang, J., & Luo, J. (2016). The Prediction of Venture Capital Co-
Investment Based on Structural Balance Theory. Retrieved December 2016 from
https://www.computer.org/csdl/trans/tk/index.html

Alharbi, A. & Abdulwahab, M. (2016). Best fit Energy Market Model for Kingdom of
Saudi Arabia. Retrieved November 2016 from
https://www.computer.org/csdl/proceedings/ems/2016/4971/00/index.html

Takakazu, I., Yusuke, I., Lei, C., Syunya, D., Takehito U., & Yasuhide, K. (2016). An
Empirical Study on Optimal Correlation between Market Share and Concerns on
Companies Measured through Search Engine Suggests. Retrieved March 2016 from
https://www.computer.org/csdl/proceedings/waina/2016/2461/00/index.html

19
 7

FLEX Course Material

Examine personal
habits, strength,
weaknesses, and
values of money

SAVINGS AND
WEALTH
ACCUMULATION
 1

Understand and apply

the importance of SAVINGS AND
savings and
investment. Learn the INVESTMENT
tips that will help in
accumulating wealth

2
Savings- are part of our income that we do
not spend.

•S = Y – C

-Depositing cash in a safe place

- Having minimal return and less risk
- Short term needs and emergencies

3
 People Save for Many Reasons

•1. To have money available to buy

something in the future.
•2. To have money available for
unexpected bills.
•3. To have an income when retire

4
 Types of Savings

A. Private Saving- is the amount of

income that households have left
after their taxes and paying for
their consumption.

Y-T–C

B. Public Saving- is the amount of tax

revenue that the government has left
after paying for its spending.

T-G

5
 Factors Affecting Level of Saving

1. Financial Independence
2. Status in Society
3. Business Motive
4. Unforeseen Emergencies
5. Income Level

6
 Investment

Investment- means sacrificing some

money value in the present with the
expectation of making gains in the
future. It is also known as capital
formation.

Investing means:
1. Purchase an assets or investment
2. Having a potential of high return
and high risk
3. Long term

7
People invest their money in
different ways:
1. Buying property
2. Buying stock and shares
3. Setting up a new business

Before we invest our money we

should ask the following questions:
1. How much money do we need for
the investment?
2. Is there a risk, could we lose our
money?
3. How easy is it to turn our
investment back into cash?
4. How much can we earn from our
investment and is it worth the risk?

8
 Importance of Investment

1. Increase in employment
2. Economic welfare
3. Creation of infrastructure
4. Technical progress
5. Increase in demand and supply
6. Increase in economic development

9
 Factors Affecting Investment

1. Rate of interest
2. Government policies
3. Government spending on
infrastructure
4. Research and technological
advancements
5. Banking facilities
6. Tax incentives on saving

10
Simple money habits that will help
you build your wealth:
1. Automate your finances
2. Invest your spare change
3. Ditch the small, daily purchases,
such as your morning coffee
4. Come up with specific money goals
5. Save, don’t spend unexpected cash
6. Tell yourself you deserve to be rich
7. Spend 30 minutes a day reading
8. Surround yourself with successful,
high-earners.

11
 ASSESSMENT TASK

QUIZ- 25 pts
INSTRUCTION: Explain the questions properly

1. Discuss the concept, culture, and practices on savings and

investment of the Filipino generation of today. (15 pts)
2. In you will start an investment, are you going to borrow your start
up capital or from your savings? Explain. (10 pts)

12
 ANSWER KEY

RUBRIC FOR ESSAY

POIN FOCUS CONTENT ORGANIZATION STYLE CONVENTIONS

TS
The single The presenc e of The order The choice, use and Grammar,
controlling point ideas developed developed and arrangement of mechanics,
made with an though, facts, sustained within words and sentence spelling, usage and
awareness of task examples, details, and across structure sentence formation
of a specific topic opinions, reasons paragraphs
and explanations including
introduction and
conclusion
Sharp, distinct Substantial, specific, Sophisticated Precise, illustrative Evident control of
controlling point and/ or illustrative arrangement of use of a variety of grammar,
4 made about a content content with words and sentence mechanics,
single topic with demonstrating evident and/ or structures spelling, usage and
evident strong development subtle transitions sentence formation
awareness of task and sophisticated
ideas

Apparent point Sufficiently Functional Generic use of Sufficient control of

made about a developed content arrangement of variety of words grammar,
3 single topic with with adequate content that and sentence mechanics,
sufficient elaboration or sustains a logical structures spelling, usage, and
awareness of task explanation order with some sentence formation
evidence of
transitions
No apparent point Limited content Confuses or Limited word choice Limited control of
but with evidence with inadequate inconsistent and control of grammar,
2 of a specific topic elaboration or arrangement of sentence structures mechanics,
explanation content with or spelling, usage, and
superficial and / or without attempts at sentence formation
minimal content transition

Minimal evidence Superficial and/ or Minimal control of Minimal variety in Minimal control of
of a topic minimal content content word choice and grammar,
1 arrangement minimal control of mechanics,
sentence structures spelling, usage and
sentence formation

13
 REFERENCES

SUGGESTED READINGS AND REFERENCES

Ramsinghani, Mahendra (2021), The Business of

Venture Capital: The Art of Raising Fund, Structuring
Investment, Portfolio Management, and Exits (Wiley).

Feld, Brad & Mendelson, Jason (2019), Venture

Deals: Be Smarter Than Your Lawyer and Venture
Capitalist (Wiley)

De Vries, Harm F., Van Loon, Menno J., Mol, Sjoerd

(2016), Venture Capital Deal Terms: A Guide of
Negotiating and Structuring Venture Capital
Transactions (HMS Media Vof.)

Hallman, G. Victor, Rosenbloom, Jerry S. (2019),

Personal Financial Planning, Seventh Edition, (Wiley)

Berns, David M. (2020), Modern Asset Allocation for

Wealth Management, (Amazon)

14
 8

FLEX Course Material

Develop a financial
plan for future needs

RETIREMENT
PLANNING
 1

Create a financial plan

RETIREMENT
PLANNING

2
 What Come First?

•- Plan for child education

•- Plan for child higher education
•- Buying a new house property
•- Foreign tour
•- Plan for child marriage
•- Retirement planning

3
What is Retirement?

Retirement- is when a person resigns from

work as he/ she has reached the age of 60
years or even more.

After working hard and slogging, just to

make ends meet for their families and give
them a comfortable life, retirement is what
most people wait for.

To live a happy retired life, you have to

make your hard earned money work for
you.

4
 Why We Need to Plan for
Retirement?
-Generation gap
-Changes in life style
-Increasing inflation
-Increase of medical expenses
-Absence of Social Security System

5
 How Should You Plan For
Retirement?
•- Retirement planning is nothing but
using your money earned, to provide
funds for you at retirement.

•- At retirement, you may have

specific goals that you need to
achieve.

•- You may want to take an expensive

vacation after retirement.

6
Have You Planned For Your Retirement?

•You’ll be shocked to know the corpus,

you’ll require at retirement. People
think that as they get older, their
salary will increase too, so they do
not need to plan for retirement.

•-What they don’t realize is that, after

retirement, they won’t be working.

•- Inflation and living longer are the 2

main factors that you need to keep in
mind, because it affect your
retirement corpus majority.

7
Process of Planning for Retirement

•1 Identify your goals and retirement

lifestyle expenses
•2 Inventory your assets and income
sources
•3 Analyse the likelihood of reaching
those goals
•4 Create an action plan
•5 Monitor your plan to ensure you
stay in your confidence zone

8
 Retirement Corpus

A corpus you need to build in your

accumulation phase (30 years to 65
years) so that you enjoy your
distribution phase (after 65 years till
you live)

Future is always unpredictable….

We never know what comes next.
So always be cautious and updates
about latest happenings.

9
 Final Note

• Plan today for better tomorrow

•The best age to start your retirement
is either 20 or now
•Stick to basic, basic is always
beautiful
•Always educate your kids about our
inheritance values, culture and roots.
•Don’t forget to prepare your Will.

10
 ASSESSMENT TASK

SEATWORK
INSTRUCTION: Limit your discussion in 5 sentences only and explain
legibly.

1. Discuss the Filipino culture and practice of retirement.

2. Create your financial and retirement plan.

11
 ANSWER KEY

RUBRIC FOR ESSAY

POIN FOCUS CONTENT ORGANIZATION STYLE CONVENTIONS

TS
The single The presenc e of The order The choice, use and Grammar,
controlling point ideas developed developed and arrangement of mechanics,
made with an though, facts, sustained within words and sentence spelling, usage and
awareness of task examples, details, and across structure sentence formation
of a specific topic opinions, reasons paragraphs
and explanations including
introduction and
conclusion
Sharp, distinct Substantial, specific, Sophisticated Precise, illustrative Evident control of
controlling point and/ or illustrative arrangement of use of a variety of grammar,
4 made about a content content with words and sentence mechanics,
single topic with demonstrating evident and/ or structures spelling, usage and
evident strong development subtle transitions sentence formation
awareness of task and sophisticated
ideas

Apparent point Sufficiently Functional Generic use of Sufficient control of

made about a developed content arrangement of variety of words grammar,
3 single topic with with adequate content that and sentence mechanics,
sufficient elaboration or sustains a logical structures spelling, usage, and
awareness of task explanation order with some sentence formation
evidence of
transitions
No apparent point Limited content Confuses or Limited word choice Limited control of
but with evidence with inadequate inconsistent and control of grammar,
2 of a specific topic elaboration or arrangement of sentence structures mechanics,
explanation content with or spelling, usage, and
superficial and / or without attempts at sentence formation
minimal content transition

Minimal evidence Superficial and/ or Minimal control of Minimal variety in Minimal control of
of a topic minimal content content word choice and grammar,
1 arrangement minimal control of mechanics,
sentence structures spelling, usage and
sentence formation

12
 REFERENCES

SUGGESTED READINGS AND REFERENCES

Ramsinghani, Mahendra (2021), The Business of

Venture Capital: The Art of Raising Fund, Structuring
Investment, Portfolio Management, and Exits (Wiley).

Feld, Brad & Mendelson, Jason (2019), Venture

Deals: Be Smarter Than Your Lawyer and Venture
Capitalist (Wiley)

De Vries, Harm F., Van Loon, Menno J., Mol, Sjoerd

(2016), Venture Capital Deal Terms: A Guide of
Negotiating and Structuring Venture Capital
Transactions (HMS Media Vof.)

Hallman, G. Victor, Rosenbloom, Jerry S. (2019),

Personal Financial Planning, Seventh Edition, (Wiley)

Berns, David M. (2020), Modern Asset Allocation for

Wealth Management, (Amazon

13
 9

FLEX Course Material

Develop a financial
plan for future needs

ESTATE
PLANNING
 1

Determine and discuss

the types of Will
Explain the role of
legal of an attorney
ESTATE
Appreciate the
benefits of estate
PLANNING
planning

2
What is Estate Planning?

•Estate Planning- is a process of anticipating

and arranging, during a person’s life, for
the disposal of their estate (wealth from all
assets) by legalizing and documenting
various aspects of the aspects of the
assets, including how it is to be distributed
and who will be the care taker.

•- it can be used to eliminate uncertainties

over the administration of one’s estate and
to maximize the value of the estate and
other legal expenses.

3
 Reasons Why We Need Estate
Planning
•1. Secure the future of the family
•2. Protect the owner from losing his
properties
•3. To make your estate grow even
after passing away
•4. Protect state from depletion due
to taxes
•5. For proper and legal positioning of
properties

4
 Legal Ways to Transfer an Asset

•1. Deed- a legal document that is

signed and delivered, especially one
regarding the ownership of property
or legal rights.
-Convey or transfer (property or
rights) by legal deed.
2. Donation-transfers property from
the owner to another person
3. Succession- the orderly passage of
power, assets or other property from
one entity to another
- Legal rules, documents govern with
regard to the assets of estates after a
person dies.

5
 Benefits Of Estate Planning

1. It makes sure your assets go to the

person you intend it to benefit,
and not to the legal heirs who will
not respect your legacy.
2. Provides guardian to minor
children or provides for a trust for
some individual or task
3. Controls your assets while you are
alive but incapacitated to manage
4. Controls your assets after demise
5. Minimizes disagreements,
arguments and claims by heirs on
property.

6
 An Estate is any asset of value:

Fixed Assets:
-House
-Lots
-Condos
-Rights
-Paintings
-Furniture
-Antiques
-Jewelries
-Cars

7
 An Estate is any asset of value:

Liquid Assets:
-Savings
-Current Accounts
-Certificates of Deposits
-Security Investments (mutual funds,
UITF, revocable single premium
variable life policies)

8
 An Estate is any asset of value:

Business Assets:
-Proprietorship
-Partnership Shares
-Shares of Stocks in a Corporation
-Franchises Owned

Tax- Sheltered Assets:

-Properly Arranged/ Irrevocable Single
Premium
-Variable Life Policy

9
 Common Problems in Estate
Planning
•1. No proper distribution of assets
•2. High cost of transferring assets
•3. Liquidity problem
•4. Retirement income falling short
•5. Inadequate disability income.

10
 ANSWER KEY

RUBRIC FOR ESSAY

POIN FOCUS CONTENT ORGANIZATION STYLE CONVENTIONS

TS
The single The presenc e of The order The choice, use and Grammar,
controlling point ideas developed developed and arrangement of mechanics,
made with an though, facts, sustained within words and sentence spelling, usage and
awareness of task examples, details, and across structure sentence formation
of a specific topic opinions, reasons paragraphs
and explanations including
introduction and
conclusion
Sharp, distinct Substantial, specific, Sophisticated Precise, illustrative Evident control of
controlling point and/ or illustrative arrangement of use of a variety of grammar,
4 made about a content content with words and sentence mechanics,
single topic with demonstrating evident and/ or structures spelling, usage and
evident strong development subtle transitions sentence formation
awareness of task and sophisticated
ideas

Apparent point Sufficiently Functional Generic use of Sufficient control of

made about a developed content arrangement of variety of words grammar,
3 single topic with with adequate content that and sentence mechanics,
sufficient elaboration or sustains a logical structures spelling, usage, and
awareness of task explanation order with some sentence formation
evidence of
transitions
No apparent point Limited content Confuses or Limited word choice Limited control of
but with evidence with inadequate inconsistent and control of grammar,
2 of a specific topic elaboration or arrangement of sentence structures mechanics,
explanation content with or spelling, usage, and
superficial and / or without attempts at sentence formation
minimal content transition

Minimal evidence Superficial and/ or Minimal control of Minimal variety in Minimal control of
of a topic minimal content content word choice and grammar,
1 arrangement minimal control of mechanics,
sentence structures spelling, usage and
sentence formation

11
 REFERENCES

SUGGESTED READINGS AND REFERENCES

Ramsinghani, Mahendra (2021), The Business of

Venture Capital: The Art of Raising Fund, Structuring
Investment, Portfolio Management, and Exits (Wiley).

Feld, Brad & Mendelson, Jason (2019), Venture

Deals: Be Smarter Than Your Lawyer and Venture
Capitalist (Wiley)

De Vries, Harm F., Van Loon, Menno J., Mol, Sjoerd

(2016), Venture Capital Deal Terms: A Guide of
Negotiating and Structuring Venture Capital
Transactions (HMS Media Vof.)

Hallman, G. Victor, Rosenbloom, Jerry S. (2019),

Personal Financial Planning, Seventh Edition, (Wiley)

Berns, David M. (2020), Modern Asset Allocation for

Wealth Management, (Amazon)

12