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Financial Valuation

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71 views5 pages

Financial Valuation

Uploaded by

Karan Jawahar
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Excel

How to use if functions and where to use it


How to use if and functions and where to use them. For and function to work all
the conditions have to be positive
A functions must always start with a equal to symbol (=)
Eg: if function =IF(C7>40,”PASS”,”FAIL)
IF and function =IF(AND(C7>40,D7>40),”PASS”,”FAIL”)
“ “ symbols are always and important and are used to write conditions in it. First
comes the positive condition and then comes the negative condition.
Autosum function and more are used to calculate the sum, average, count, max
and minimum of the necessary columns.
Nested IF is used to calculate multiple conditions and can be really hard to
understand
=IF(B10="A",SUM(C3:D3),IF(B10="B",SUM(C4:D4),IF(B10="C",SUM(C5:D5),IF(B10=
"D",SUM(C6:D6),IF(B10="E",SUM(C7:D7),"N/A")))))  this is an example.

VLOOKUP and HLOOKUP Function- these functions are used to identify a specific
cell in huge data by selecting the data, choosing which row or column and
choosing where it comes exactly and it will show the data which is present there,
only useful while using a huge dataset.
Data  filter function is really helpful when you want to specify certain
conditions like sales more than rs 3000. This helps us keeping a count on the
conditions which meet the requirements.
Conditional Formatting is similar to filter except it colors the data which meets the
requirements. It can also do many other functions which will be discussed later.
COUNTIF, SUMIF and AVERAGEIF can calculate the count, sum or average on any
selected or specific data, a really helpful and a handy function.
COUNTIF eg: =COUNTIF(B:E,2300)
SUMIF eg: =SUMIF(C4:C19,2300,E4:E19)
AVERAGEIF eg =AVERAGEIF(C4:C19,2300,E4:E19)

Review  protect worksheet helps us to protect the workbook and give access
only to people who have password. You can also protect the slides you want by
locking the slides.
WHAT IF analysis – this function helps us to calculate on what we need to
subsidise or what we need to increase to reach our target but you can chose only
one cell to act this function on.

NET PRESENT VALUE


To start your business you need initial capital and you need to get it from
somewhere. So you go to the bank and ask for a sum of 10 lakhs and you need to
pay an interest which might be 10% of the amount you earn which might be huge
because you just started your business and giving of 10@ of what we earn right at
the start might be huge. So you go ask your parents for 10 lakhs so that you don’t
have to pay interest. So when you dad gives it to you he will have to forgo
something as an opportunity cost which if he would have invested the same
amount in mutual funds he would have got a profit of about 12%. So that would
be his opportunity cost and that inturn would be my discount rate.
Time value of money is mainly used to decide whether to spend on the business
or not. It shows the value of money after certain years because value of money
always keeps increasing and the value of 100rs will not have the same value after
10 years. We calculate the future value of the investment by using Future value
Formula = P x (1+r)^n. We can also calculate the Present value by using Future
value, PV = FV/ (1+r) ^n.
There are 2 more ways included in calculating NPV which are IRR ( Initial
Rate of Return) and Payback method. IRR is used when you need to bring your
NPV to 0 by decreasing or increasing the Discount Rate. Payback method is used
when you ignore the concept of future value and calculate. Payback methods
might show increased Profit predictions but you should always calculate future
value when you want to predict the future of your company. It also means you
ignore Discount Factor when calculating in Excel.

Break Even Point is the sales volume at which the total revenue becomes equal to
total cost and any sale beyond that point, the business starts making an overall
profit. Its actually the point where total cost and the total revenue are equal or
even.

Amortization is depreciation on intangible assets like software, copyrights and


patents.
Annual Reports- It starts with Corporate Overview to show how the
year went by followed by Management discussion analysis also called MD&A and
it tells what happened last year and what they think of the future. Then comes
financial statements which consists of income statements, Balance sheet and
Cash flow Statements.
In Cash Flow Statements we require only 2 values and those are Net Cash from
Operating Activities
Horizontal Analysis is analyzing on the basis of different years whereas vertical
analysis is analyzing the same accounting Period.
Net Sales= Revenue/Excise Duty sale of Goods
Sales Growth= this year’s Net Sales/ Previous Years Net Sales- 1
Revenue- Taxes= Net Revenue whereas Revenue- Cost of Goods Sold= Gross
Margin
Ideal Growth Rate of a Good Company should be above 10%.
Current Ratio= Current Assets/ Current Liabilities and it should be atleast 2
You can also calculate own price based on Company’s Financial Performance
and that value is known as Intrinsic Value or Fair Value.
Discounted Cash Flow Approach (DCF)
Value of Company= FCF1/(1+r) + FCF2/(1+r)^2 + FCF3/(1+r)^3………. + FCF/(1+r)^n
Where FCF= Free Cash Flow and the power indicates the year. N is the life of the
company. R stands for the Discount Rate at which the Cash Flows are discounted
to arrive at the Present value.
Working Capital= Accounts Receivable(AR) + Inventory- Accounts Payable(AP)
Cash Conversion Cycle(CCC) refers to how many days it takes for the company to
convert Inventory to Cash
CCC= Days Inventory Outstanding(DIO)+Days Sales Outstanding(DSO)- Days
Payable Outstanding (DPO)
DIO= Inventory / COSG x 365, DSO= AR/ Sales x 365, DPO= AP/ COSG x 365

Weighted Average Cost of Capital(WACC)=


Total Capital= Debt + Equity, (1-t)= Marginal Tax
Valuation  Case Study  lesson 12  from 9min  Very Important

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