Valuation inputs

Question 1

Which are the valuation inputs?

Answer 1

• Income statement
• Balance sheet
• Cash flows
• Auditor’s report
• Business plan

Question 2

Income statement features

Answer 2

• Accrual accounting: revenues recognized in the period of competence
• Expense’s categorization: Operating (OPEX), Capital (CAPEX), Financing
• Formats: nature, function, contribution margin

Question 3

FORMULA: Income statement

Answer 3

EBITDA 
– D&A
=EBIT
-Financial Exp 
\+/-Nonrecurring items-Taxes
=Net Income 
– Dividends
= Retained earnings

Question 4

Balance sheet formats

Answer 4

• Solvency and liquidity format: splits assets/liabilities by duration
• Capital employed=Invested capital

Question 5

FORMULA: Balance sheet

Answer 5

Capital employed=FA+WC=E+NFP=Invested Capital

Question 6

FORMULA: Working Capital

Answer 6

WC=Inventories+Accounts receivables-Accounts payables

Question 7

FORMULA: Net Debt

Answer 7

Net Debt (NFP)=short/long term debt -marketable securities -Cash and equivalents

Question 8

FORMULA: FCFF/FCFO

Answer 8

FCFF= EBITDA- Delta WC -/+ Inv/Div in fixed assets(CAPEX) – Taxes on EBIT

Question 9

FORMULA: FCFE

Answer 9

FCFE= FCFF (Pre-tax) +/- Net Interest Expenses +/- Delta Net financial debt – Taxes on net income(EBT) (depend on changes in net financial position)

Question 10

Estimates in a valuation

Answer 10

• Macroecon: GDP growth, consumption, exchange rates, inter/inflat rates
• Industry: market growth, competitors policies, tariffs, regulatory changes
• Firm-specific assumption: sales and cost prices, WC evolution, net debt evolution

Question 11

How to test the assumptions in a valuation?

Answer 11

Through ROS and ROI (if grow too much underestimate of fixed assets and marketing and other costs).