IChallenging Content Questions:

● For personal analysis how can one have access to CapIQ? I want to find out if there is any
reason why I will not have access to the CapIQ? [Unfortunately, CFI cannot provide a trial
subscription to Capital IQ since the cost of a license is very high.]

● What is BIDA? [BIDA is our Business Intelligence and Data Analyst program and certification.
BIDA will teach you how to use the most popular business intelligence tools and
programming languages to explore, understand, and master data. BIDA courses cover both
Business Intelligence and Data Science to help you develop skills in all areas: from data
storage and collection, data transformation, data analysis, and modeling, to data
visualization.]

● In Jenga Inc solution, the transaction "pays tax at 30%" was supplied with 19.8 and 3.6 for
year 1 and year 2 respectively. How were these figures arrived at? [The taxes are calculated
as 30% of Profits Before Taxes on the Income Statement.]

● What does data tables really do? [Data tables are a great way to sensitize an output (for
example a valuation) by changing either one or two model inputs. It is better and quicker
than going into the model and changing the model inputs manually.]

● Whilst doing the advanced financial analysis, under the excel fundamentals I encountered a
SPILL! In an attempt to use name cells to calculate EBITDA. Pls help! When using the name
manager function for a range of cells, I keep getting a #SPILL! error. Why is that? [We would
advise you not to use any dynamic array (spilling) functions. Some examples are SORT,
FILTER, UNIQUE. These are beyond our scope and can be quite advanced. We would also
advise you to not use named cells as these make auditing a model much more difficult.
Instead, we suggest you simply calculate EBITDA as demonstrated in our materials.]

● As a financial analyst, must I be aware and be knowledge (at least a fraction) in law regarding
tax, will it enable me design and evaluate company financial better. [More knowledge is
always good, but tax accounting is so highly specialized that you are probably safe just
understanding some basics like effective tax rate and what causes deferred taxes.]

● Please explain the Exit multiple formula used in calculating Terminal Value. [The Exit Multiple
Method is just an alternative way of estimating terminal value. The traditional method of
estimating terminal value is using the perpetuity growth formula. However, a valuation is
very sensitive to the analyst’s assumption with regards to the perpetuity growth rate.
Therefore, some analysts prefer to use a multiple (typically an EBITDA multiple) to estimate
the terminal value. The calculation is also a little simpler: terminal year EBITDA times the
EBITDA multiple. Of course, the terminal value must then be discounted back to the present
value like the other cash flows.]

● Good-day, please I would like to know how increase in debt affects the turnover ratio and
financial leverage. [An increase in debt mostly affects the financial leverage ratio. If there is
more debt in the capital structure, then a positive return on equity will increase since debt is
 usually a less expensive form of capital. Of course, in reality, this only works up to a point as
a company can become overly levered which would increase the cost of debt. Also, the
company may get to a point where it has too much debt in the capital structure and may
enter financial distress.]

● I would like to understand the relationship capital structure impact and tax ratio have with
net profit margin. [The greater the debt in the capital structure, the lower the taxes paid will
be since interest expense is typically tax deductible. While this will reduce net profit margin,
it will only reduce net profit margin by interest expense times (1-tax rate) due to the tax
savings.]

● When calculating the correlation, how do I know whether to use STDEV or STDV.P? What is
the difference? [This is a change Excel made a few years ago. You should use STDEV.P (the
standard deviation of a population, or STDEV.S (the standard deviation of a sample). Having
said that the Excel CORREL function calculates correlation so you don’t have to use STDEV.]

● There seems to be variations on what net asset is , some videos say total assets minus
current liabilities and some formulas say total assets less total liabilities? Please clarify what
the right formula for net asset is. Is it Total Assets -Total Liabilities or Total Assets - Current
Liabilities. [Net assets is synonymous with equity so it should be total assets less total
liabilities.]

● Please, I am using Excel 2013, and the options for tracing precedents and dependents are
now quite limited. Are there any ways I could use and activate them? [The trace precedents
and trace dependents should be fully usable, even with Excel 2013. Just make sure you are
using the full version of Excel and not a trial version or an online version.]

● I have not mastered sensitivity analysis using Data table. Any tips ? [Just keep trying. We
cover this in several of our courses so you will have many opportunities to practice. Also,
make sure that your Workbook Calculations are set to Automatic in your Excel options.]

● Can you throw more light on the amortization of debt issuance cost? Also how do you use
the effective interest method to amortize debt issuance cost? [This is a bit technical and not
widely used in financial modeling, which is really our goal here. The point is that debt
issuance costs must be amortized over the life of the associated debt instrument. Analysts
typically amortize these costs using straight-line amortization. The effective interest method
is more complex and is really only applicable to accountants, not financial analysts. The
difference between the two is normally immaterial.]

● The assessment on corporate finance fundamentals. I’m totally stuck at Question 3. [Without
giving away the answer, you will need to use enterprise value to calculate market
capitalization.]

● What is the way to measure the number of shares of the company if it’s not listed in stock
market, how it’s possible to make valuation for this company? [You would need to get the
number of shares from the private company (assuming the company is organized with
shareholders.) The way you value a private company is the same as any other company: you
 can look at publicly traded peers or you could perform a discounted cash flow valuation.
However, you would need access to the private company’s financials in order to do so.]

● I heard our expert in the last session use the word corkscrew (the value of end period
becomes the new starting value) please can you help with the correct spelling. [The term is
corkscrew, which we discuss at length in the Financial Modeling Guidelines document that
we distributed last week.]

● I cannot find the Macabacus add-in in my Excel even after installing it, what could be the
cause? [You might have to make sure it is enabled as an Add-in. Go to Excel Options
(shortcut Alt F T), then go down to Add-ins. Select Excel Add-ins at the bottom and press Go.
Make sure Macabacus is checked. Then select COM Add-ins and make sure Macabacus is
also checked there.]

● I would like to know whether using the Macabacus shortcuts in your financial modelling
would have any changes for a client who doesn't have Macabacus? [No you do not need
Macabacus to complete the FMVA requirements.]

● In making a decision on a project, is it always the NPV value that must be considered. Can
other factors be considered and what are some of those factors. [In order to create value for
a company, only NPV-positive projects should be considered. However, there are other
considerations that might cause a firm to not invest in an NPV-positive project like ethical or
environmental considerations. Or a project may be NPV-positive, but too small to have a
material positive impact for the stakeholders.]

● Explain more about accrued expenses and prepaid expenses [Accrued expenses are
expenses that have occurred. So, the company has incurred the expenses but has not yet
paid. These are a liability on the balance sheet. Prepaid expenses are any expenses whereby
the company has already paid (for example, insurance or rent) but the expense has not yet
occurred. Prepaid expenses are an asset on the balance sheet since the vendor/supplier
‘owes’ the company the service that has been prepaid.]

● Does getting CFI's FMVA / BIDA certificate get you a job without any background in finance or
any related fields. As an example, I'm a physics major. [The FMVA and BIDA certifications can
help you learn financial modeling skills, streamline a budgeting and forecasting process, or
improve competency levels across the entire accounting, finance and data analytics
spectrum. These certifications provide all the skills, tools, and techniques required to
become a world-class financial and/or data analytics professional. Our materials are
designed to give you a ‘leg-up’ on other candidates, as well as the confidence to perform very
well in an interview and begin contributing on your first day at work.]

● What are the basis for assumption when forecasting? In building a 3-statement financial
model the assumptions for the forecasting periods were just flipped over. How do I forecast
them on my own from raw data? [We will discuss this in future courses. But, a thorough
understanding of the company’s business is necessary in order to make realistic
assumptions about the future. Often times, we look at historical results to guide us. But past
 results may not be indicative of the future, and that’s why we really need to understand the
business. It is also important to understand any trends which are happening in the
marketplace and how that company will be affected.]

● How to do a financial modelling on startups? [This is probably the most difficult type of
company to model. You would probably start with a ‘top-down’ approach by looking at the
Total Addressable Market and how much market share the company might be able to
capture.]

● What is the difference between net present value and terminal value? [The net present value
of an investment is the present value of all future cash flows less the cost of investment. The
terminal value is the second half of a DCF valuation where we typically assume the company
has reached a ‘steady-state’ and will continue growing in-line with the economy. You can
think of the terminal value as a part of net present value.]

● How do I determine the discount rate for my NPV calculation to aid investment decision. For
eg. investing X amount for N years at Y%. [We will cover this in a future course, but you
would typically use what is called the weighted average cost of capital (WACC) and use this
rate to discount Unlevered Free Cash Flows (UFCF).]

● How comparable is Excel to Google sheets? [Excel has much more functionality than Google
sheets, especially for power users. Google sheets might have a slight advantage when
sharing documents, but this can also be done in Excel.]

● I don't get your workout for capital employed. Why not total asset minus current liabilities?
Will there be any effect if I work with this formula? [Capital employed is typically calculated
as debt plus equity, so we would recommend using this method instead.]

● Why are payments payable and payments receivable not included in an income statement?
[Accounts payable and accounts receivable are balance sheet accounts. Accounts payable is
associated with expenses on the income statement that have yet to be paid in cash.
Accounts receivable is associated with revenue on the income statement where the
company has yet to receive cash.]

● What is a Directors A/C? Please give some examples of transactions that affects the account
and their treatments. Please where does Directors A/C falls under the three key financial
statement. [We are assuming you mean Director’s Current/Loan Account? Basically, the
director of a company interacts with the company on a regular basis. So a company may set
up a Director’s Account to track transactions made with that director. Like any balance sheet
item, it is ‘rolled forward’ each period. The account increases by any funds due to the
director (like salary), less the amounts that are paid to the director. Any director expenses
are recognized as incurred on the balance sheet. Any changes to that balance sheet account
will be reflected on the cash flow statement.]

● Can I work remotely using the skills acquired after the course? [That would really be up to
the company you work for and whether the company prefers office work or remote work.]
● Which depreciation method is best for financial analysis [There’s not really a ‘best’ for
financial analysis. Really the only consideration is that when you are comparing two or more
companies is to ‘attempt’ to convert all of the companies you are analyzing to the same
depreciation method. Having said that, most companies use straight-line depreciation, so
this isn’t a major concern.]

● May you kindly explain WAAC and how it is calculated. Can we use WAAC as a going in
discount rate when carrying out investment appraisals? [WACC is covered in the Corporate
Finance Fundamentals and later on in future courses as well. However, WACC is not always
appropriate depending on appraisals. Stay tuned!]

● What's the difference between Present value and Net present value??? these two terms are a
bit confusing. [Present value is just the literal present value of future cash flows. Net present
value is the present value of future cash flows netted against the original investment (a cash
outflow at time zero. So, NPV is a more comprehensive and specific calculation to determine
whether a company should invest in a project. Present value is just discounting cash flows
back to today.]

● Is the final exam an open book exam? [Yes, it is open book.]

● Hi In XNPV function and the calculation of present value can we use uncompleted periods
like half year? [Yes, absolutely! That’s one of the main reasons it is so much more useful than
the regular NPV function.]

● Could you please shed more light on correlation and the use of regression analysis.
[Correlation just shows how one stock moves with the market, so it only covers direction
(correlation is constrained between -1 and 1). Beta is the primary output of a regression
analysis. It is similar to correlation in that it measures direction but also magnitude (and is
therefore not constrained to be between -1 and 1). Beta is used to calculate the cost of
equity, which is a key component to the weighted average cost of capital.]

● When calculating the NPV of a company, should inflation be factored into the calculation?
[Inflation is indirectly factored into the weighted average cost of capital. In other words,
inflation is taken into account.]