Financial Modeling and Valuation: A Practical Guide to Investment Banking and Private Equity (Wiley Finance)

The fully revised new edition of the best-selling guide to using financial models to determine if a stock is over or undervalued Written by the founder and CEO of the world-renowned New York School of Finance, Financial Modeling and Valuation provides clear and systematic guidance on accurately evaluating the soundness of a stock investment. This invaluable handbook equips investors with the tools necessary for understanding the underlying fundamentals of a rational investment and for making smarter investment decisions in any market environment. Built around an in-depth case study of global retail leader Amazon, this fully updated Second Edition shows you how to analyze the financial standing of a company using the methods of Wall Street professionals. Step-by-step, you will learn to build the core three statements--income statement, cash flow statement, and balance sheet--as well as the three major supporting schedules required for complete company valuation and analysis. All line items are explained in clear language and include real-world tips and techniques for using them as tools for valuing and managing a business. This must-have guide: Features new and in-depth case studies based on Amazon that simulate real-world modelling and valuation Explains valuation techniques such as illustrative comparable company analysis, precedent transactions analysis, and discounted cash flow analysis Covers all essential applications of a model, including pricing a stock, raising debt, and raising equity Includes an introductory section describing the recent and dramatic shift of the entire retail industry Provides end-of-chapter questions, downloadable practice models, additional case studies, and common interview questions via a companion website Financial Modeling and Valuation: A Practical Guide to Investment Banking and Private Equity, Second Edition is essential reading for finance professionals, venture capitalists, individual investors, and students in investment banking and related degree programs in finance. Cover Title Page Copyright Page Contents Preface Part One Financial Statements and Projections Chapter 1 The Income Statement Revenue Cost of Goods Sold Gross Profit Operating Expenses Other Income EBITDA Depreciation and Amortization EBIT Interest EBT Taxes Net Income Non-Recurring and Extraordinary Items Distributions Net Income (as Reported) Shares Earnings per Share (EPS) Amazon’s Income Statement Revenue Getting to EBITDA Digging up Depreciation Cost of Goods Sold Gross Profit Fulfillment Technology and Content Marketing, General and Administrative, Other Operating Expense (Income), Net Total Operating Expenses EBITDA Beyond EBITDA Depreciation and Amortization EBIT Other Income Interest EBT Taxes Net Income from Continuing Operations Non-Recurring and Extraordinary Items Net Income (after Non-Recurring Events) Distributions Net Income (as Reported) Shares and EPS Income Statement – Making Projections Revenue Cost of Goods Sold Operating Expenses Depreciation and Amortization Other Income Seven Methods of Projections Interest Income Taxes Non-Recurring Events Distributions Equity Method Investment Activity Dividends Shares Basic Shares Outstanding Diluted Shares Outstanding and the Treasury Method Earnings per Share Chapter 2 The Cash Flow Statement Cash from Operating Activities Revenue Cost of Goods Sold Operating Expenses Depreciation Interest Taxes Cash from Investing Activities Cash from Financing Activities Financial Statement Flows Example Amazon’s Cash Flow Statement Cash from Operating Activities Cash from Investing Activities Cash from Financing Activities Cash Flow Statement – Making Projections Cash from Operating Activities Depreciation and Amortization Stock-Based Compensation Other Operating Expense Other Expense (Income) Deferred Taxes Changes in Operating Working Capital Cash from Investing Activities Proceeds from Property and Equipment Sales and Incentives Items Based on Cash Available Cash Flow from Financing Activities Effect of Exchange Rate on Cash Chapter 3 The Balance Sheet Assets Current Assets Cash and Cash Equivalents Accounts Receivable Inventory Prepaid Expense Non-Current Assets Property, Plant, and Equipment (PP&E) Intangible Assets Liabilities Current Liabilities Accounts Payable Accrued Liabilities Short-Term Debts Non-Current Liabilities Long-Term Debts Deferred Taxes Amazon’s Balance Sheet Current Assets Non-Current Assets Operating Leases Goodwill Other Assets Current Liabilities Short-Term Debt Non-Current Liabilities Other Long-Term Liabilities Shareholders’ Equity Common Stock and Additional Paid-in Capital Treasury Stock, Accumulated Other Comprehensive Loss and Retained Earnings Chapter 4 Depreciation Schedule Straight-Line Depreciation Accelerated Depreciation Declining Balance Sum of the Year’s Digits Modified Accelerated Cost Recovery System (MACRS) Deferred Taxes Deferred Tax Asset Deferred Tax Liability Projecting Depreciation Straight-Line Depreciation Anchoring Formula References Projecting Deferred Taxes Chapter 5 Working Capital Operating Working Capital Amazon’s Operating Working Capital Inventories Accounts Receivable, Net and Other Accounts Payable Accrued Expenses and Other Unearned Revenue Projecting Operating Working Capital Receivables Inventories Accounts Payable Accrued Expenses Unearned Revenue Operating Working Capital and the Cash Flow Statement Changes in Inventory Accounts Receivable Changes in Accounts Payable Changes in Accrued Expenses Changes in Unearned Revenue Chapter 6 Balance Sheet Projections Cash Flow Statement Drives Balance Sheet vs. Balance Sheet Drives Cash Flow Statement Assets Inventories Accounts Receivable Liabilities Shareholders’ Equity Balancing an Unbalanced Balance Sheet NYSF Balance Sheet Balancing Method Chapter 7 The Debt Schedule, Circular References, and Finalizing the Model Debt Schedule Structure Modeling the Debt Schedule Short-Term Debt Mandatory Issuances/(Retirements) and Non-Mandatory Issuances/(Retirements) Long-Term Debt Debt Interest Long-Term Lease Liabilities Total Issuances/(Retirements) Total Interest Expense Cash Available to Pay Down Debt Interest Income Circular References Circular Reference #Value! Errors Automatic Debt Paydowns Basic Switches Finalizing The Model Part Two Valuation Chapter 8 What Is Value? Book Value Market Value Enterprise Value Multiples Three Core Methods of Valuation Comparable Company Analysis Precedent Transactions Analysis Discounted Cash Flow Analysis Chapter 9 Discounted Cash Flow Analysis Midyear vs. End-of-Year Convention Unlevered Free Cash Flow Weighted Average Cost of Capital (WACC) Cost of Debt Cost of Equity Market Risk Premium Beta Levering and Unlevering Beta Terminal Value Multiple Method Perpetuity Method Amazon DCF Analysis WACC Cost of Equity EBITDA Method Perpetuity Method Chapter 10 Comparable Company Analysis Last Twelve Months (LTM) Calendarization Netflix as a Comparable Company Netflix 2020 Year End Revenue Operating Expenses Depreciation Interest Taxes Non-Recurring Events Earnings per Share (EPS) Netflix Quarterly Income Statement Netflix LTM Adjustments Netflix Projections Revenue COGS Depreciation Interest Taxes Non-Recurring Events Shares and Earnings per Share Calculating Comparable Metrics Market Value and Enterprise Value Multiples Chapter 11 Precedent Transactions Analysis Identifying Precedent Transactions Amazon Precedent Transaction Analysis Chapter 12 Conclusion 52-Week High/Low Comparable Company Analysis Precedent Transactions Discounted Cash Flow Football Field Appendix 1 Model Quick Steps Appendix 2 Financial Statement Flows Income Statement to Cash Flow Cash Flow to Balance Sheet Appendix 3 Excel Hotkeys About the Author About the Website Index EULA "The markets are vast and complex not only in the U.S. but globally. Everyone wants to make money. Yet, throughout the past years we have faced tremendous market swings rendering investors (and their money) in a sea of lost hopes, and few investors with a plethora of wealth. Many of these market anomalies and swings are dependent, and in a sense dictated, by the investor -- you. The investor sets the current stock price. The reaction of the investor determines the success of an IPO, an equity offering. Yes, the collective psychology of the market as a whole plays a major role, but if the everyday investor was better equipped with the proper tools to understand the underlying fundamentals of a rational investment, smarter investment decisions would be made, more rational investments will be made, and the markets would be a more efficient environment. This book sets to give any investor the fundamental tools to help determine if a stock investment is a rational one. The new edition of "Financial Modeling and Valuation" will be updated for 2020 and will be based on the new retail leader Amazon as opposed to Wal-Mart. A great introductory "thesis" to best transition from the old version to the new version will be based on the shift of the entire retail industry. There's a connection from old "mom and pop" produce companies of the early 1800s to the Great Atlantic and Pacific Company (A&P) to Wal-Mart, and now to Amazon in the progression of a "Retail Wheel". This is a great segway into the new book and can end with a though piece on where we will go next. Of course the focus of the book is technical but a couple of pages as an intro can give great context to the book. This book will give you the ability to build a financial model soup to nuts. You will not only build the core three statements - income statement, cash flow statement, balance sheet - but the three major supporting schedule necessary for full company valuation and analysis. A core explanation of each line item is included in addition to tips and techniques to use each line item as a tool to value and manage a business. Finally, applications are learned to fully understand a model's use including pricing a stock, raising debt, and raising equity"-- Provided by publisher

The fully revised new edition of the best-selling guide to using financial models to determine if a stock is over or undervalued

Written by the founder and CEO of the world-renowned New York School of Finance, Financial Modeling and Valuation provides clear and systematic guidance on accurately evaluating the soundness of a stock investment. This invaluable handbook equips investors with the tools necessary for understanding the underlying fundamentals of a rational investment and for making smarter investment decisions in any market environment.

Built around an in-depth case study of global retail leader Amazon, this fully updated Second Edition shows you how to analyze the financial standing of a company using the methods of Wall Street professionals. Step-by-step, you will learn to build the core three statements—income statement, cash flow statement, and balance sheet—as well as the three major supporting schedules required for complete company valuation and analysis. All line items are explained in clear language and include real-world tips and techniques for using them as tools for valuing and managing a business. This must-have guide:

• Features new and in-depth case studies based on Amazon that simulate real-world modelling and valuation
• Explains valuation techniques such as illustrative comparable company analysis, precedent transactions analysis, and discounted cash flow analysis
• Covers all essential applications of a model, including pricing a stock, raising debt, and raising equity
• Includes an introductory section describing the recent and dramatic shift of the entire retail industry
• Provides end-of-chapter questions, downloadable practice models, additional case studies, and common interview questions via a companion website

Financial Modeling and Valuation: A Practical Guide to Investment Banking and Private Equity, Second Edition is essential reading for finance professionals, venture capitalists, individual investors, and students in investment banking and related degree programs in finance.