Corporate finance

Programme

Key financial performance indicators of a company. Their link to corporate strategy

• What the key financial indicators of business success are. The need to build financial models. Short-term models
• The link between financial indicators and the functional activities of the company's non-financial units

Structure of financial statements

• Basic information on US accounting standards and international accounting standards. Prospects for the development of Russian accounting and financial reporting
• Principles of financial statement analysis. Classic financial analysis. Analysis methods and their comparison. The EBITDA indicator

Calculating and analysing the cash flow indicator

• The significance of the cash flow indicator for financial management. Direct and indirect methods of building the cash flow. Objectives of cash flow analysis. The structure of a corporation's cash flows at different stages of the life cycle. Specifics of the cash flows of companies in new growing markets
• Calculating free cash flow (FCF) as the basis for building an investment project. Specifics of Russian financial statements as a data source for cash flow analysis

Workshop:

• Cash flow structure of a Russian public company
• Cash flow structure of Russian oil companies

Choosing the discount rate

• Methods for determining the discount rate. Main content of the capital asset pricing model. Main assumptions of the model. Ways to calculate beta. The problem of finding the equity risk premium over the risk-free rate. Examples of risk premiums determined by various investment banks
• Problems of using the capital asset pricing model in Russia. Advantages and disadvantages
• Description of the build-up method. Main adjustments taken into account when calculating the discount rate. Limits of application of the build-up method. For what purposes a discount rate calculated using this method can be used
• Methodology for using the build-up method in Russia. Calculating the discount rate

Assignment: Determining the discount rate for evaluating an investment project of a Russian company

The concept of investment and its types. Static methods of project analysis

• The concept of investment. Classification of investments. Investments in real, intangible and financial assets
• Specifics of classifying investments in agriculture: investment projects, investment programmes and off-budget programmes. Specifics of assessing the effectiveness of these three groups
• Ways of classifying investments in processing
• The problem of analysing investments in acquiring control over companies (in mergers and acquisitions)
• Classification of investment project appraisal methods. Scope of static methods of project analysis. Static methods based on the company's accounting model. Dynamic methods based on the company's financial model. Real options as a method of accounting for managerial flexibility in project appraisal

Workshop: In which industries (types of business) is the use of static project appraisal methods most justified under stagnation?

Dynamic methods of investment project analysis

• The discounted cash flow method and the indicators calculated under it: net present value (NPV), internal rate of return (IRR), discounted payback period (DPP), profitability index (PI)
• Methods for determining the discount rate for projects in Kazakhstan. Choosing the risk-free return
• Problems of using discounted investment project performance indicators in a developing economy. Specifics of applying each of the 4 indicators

Workshop:

• Calculate the simple and discounted payback period for a project to build a new workshop
• In which types of projects can the simple and discounted payback periods coincide?

Building the system of assumptions in a financial model: macroeconomic, microeconomic, individual. Their interrelation and impact on the final decision to implement an investment project

• The system of financial models in investment project analysis and company valuation
• The concept of financial models
• The interrelation of the various forecast forms: assumptions section, costs, revenue, investment and financing, forecast financial statements (balance sheet, income statement, cash flow statement), summary project reporting, calculation of discounted investment project performance indicators
• Modelling objectives
• Choosing information sources and tools
• Types of input assumptions and their classification
• Consistency checks
• Problems of price forecasting. Building models in real and nominal prices. Consumer goods prices, producer goods prices and exchange-traded (commodity) prices have different dynamics. How to account for this in financial models?

Workshop: Build a financial model for an equipment replacement project

Sensitivity analysis of an investment project

• What the key success factors are. The concept of project sensitivity as partial elasticity with respect to a specific factor. Ways to calculate this indicator
• Linear and non-linear relationships in the impact of key success factors on the project's net present value. The concept of the tornado diagram as a graphical representation of the results of project sensitivity calculations
• Purpose and limits of application of the tornado diagram

Workshop: 1. Perform a sensitivity analysis for changes in the project's key success factors. 2. Build a tornado diagram for the given task

The essence of business valuation, types of value and their characteristics

• The concept of business and company value
• The role of the value category in modern finance theory. Classification of types of value
• The going concern concept and the liquidation concept. Purposes of valuation
• The development of an internal conflict among professional appraisers and investment banks
• Major court rulings on the culpability of appraisers and investment banks
• The crisis in the development of investment banks as the main participants in the capital market
• Fair and investment value: differences in terms during a financial crisis
• The place and role of investment value in the modern business valuation system, its differences from other types of value
• Factors of investment value

Workshop: discussion question. Why, during a financial crisis, does liquidation value often significantly exceed fundamental or investment value? Is it worth lending against the purchase of such businesses?

Valuation methods: the market, cost and income approaches to business valuation and their characteristics

• The cost approach. Conditions for applying the cost approach to valuing modern Russian companies
• The net asset method
• Specifics of calculating liquidation value
• The excess earnings method, or the Edwards-Bell-Ohlson model

Workshop: Valuing a confectionery company using the excess earnings method

• The income approach
• Calculating free cash flow to the firm (FCFF). Discounting the cash flow
• The discount rate. Methods of determination
• The capital asset pricing model (CAPM)
• The risk-free rate. The β coefficient. Weighted average cost of capital (WACC)
• Calculating value in the post-forecast period

Workshop:

• Valuing an oil company using the DCF method. Factor analysis of value. Building a tornado diagram and analysing it
• The market approach to valuation. The capital market method, the transaction method, financial and industry ratios. The problem of choosing the most representative value multiples
• Manipulating company value by choosing different types of multiples
• Determining the final investment value by weighting the values obtained by individual methods
• Ways to determine the weights for calculating the final value. Aswath Damodaran's classification of valuation methods