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2/20/2015 CourseSyllabi

http://w4.stern.nyu.edu/uc/syllabi/syllabus/690 1/6

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NYUSternSchoolofBusiness

UndergraduateCollegeACCTUB.0023.001(C10.0023):FinancialModelingandAnalysis

Fall2011

INSTRUCTORDETAILS

PERKAL,DAVID

[email protected]

6466729433

MW,11:00amto12:00pm

KMC10177

COURSEMEETINGSMW,9:30amto10:45am

TischTLC21

COURSEDESCRIPTIONANDLEARNINGGOALSMakingeducateddecisionstodaybyforecastingoperatingandfinancialperformanceisacriticalexerciseforowners,managers,consultants,investmentbankers,creditors,equityandcreditanalysts,andinvestorssuchasprivateequitygroups,hedgefunds,institutionalinvestorsandindividuals.Asweareineluctablyconstrainedbyourinabilitytopredictthefuture,financialprojectionsarerarelyperfect.Nonetheless,weendeavortomodelseveralscenariospredicatedonhistoricalandanticipatedresultstoderivevariousconclusions.Therearemyriadvariableswhichcancertainlybeincorporatedintoprojections.However,thebestfinancialmodelisalwaystheonethatisstableandrobust,yetsimpleandeasytobuild,navigateandaudit.

Thegoalofthiscourseistoinstructstepbystephowtobuildacomprehensive,multipurposeprojectionmodelinExcelandsubsequentlyinterpretselectiveoperating,creditandequityvaluationdata.Basedonthisinformation,youwilllearnhowtoevaluateacompanysoperatingandfinancialperformancehowtodevelopanappropriatecapitalstructurebystructuringdebtandequitytransactionswhichnotonlyprotectboththecreditorsandshareholders,butalsocreateanappropriateriskandrewardequilibriumandhowtoformulateaneducatedinvestmentopinion.



COURSEPREREQUISITESTheprerequisitesarePrinciplesofFinancialAccountingandFoundationsofFinancialMarkets.Theknowledgeandskillsattainedinthesecoursesareessentialinunderstandinghowtoconstructafinancialmodelandinterpretselectiveoperating,creditandequityvaluationdata.YoushouldalsobeveryproficientinExcelbeforematriculatingasthiscourseisnotdesignedtoteachit.

COURSEOUTLINETheclasslecturesarebasedonaprojectionmodelofafictitiouspubliclytradedcompanycalledVictorySportswear,Inc.Eachlecturewewilldeconstructthefinancialmodelindetailandlearnhowtoreplicateitfromscratch.Astheprocessofbuildingaprojectionmodelisamethodical,sequentialprocess,thetopicsinthecoursewillbecoveredintheorderlistedinthechartbelow.Thereisnospecifiedtimeframeforeachstepintheprocessassomewillbecoveredmorerapidlythanothers.Therefore,itisincumbentuponyoutoattendeachlecturetoensurethatyouextractthemostbenefitfromthecourseandthusareabletobuildafinancialmodelonyourown.

Topic Description

Introductiontothefinancialmodel

1. Brieflyintroducethefinancialmodel.2. Inputthepriorthreeyearsandyeartodatefinancialstatements,andpreparethe

columnsforafiveyearprojectionmodelwiththebalancesheetauditformula(A=L+SE).

3. PreparethecoverpageandintroducetheCHOOSEfunctionasitpertainstoinputtingthedownside,flatandupsidecasescenarios.

Projecttheincomestatement

1. Developtheassumptionsforeachscenariobasedonhistoricalandanticipatedresults.

2. InputthoseassumptionsandlinkthemtotheappropriatecellsintheincomestatementwiththeexceptionofD&Aexpense,interestexpense,rentexpense(ifsignificantenoughtowarrantcapitalizingoperatingleases),otherincome(expenses)andothernoncashexpensessuchasreserves.

3. Discussqualityofearningsandnonrecurringchargessuchasassetimpairments,restructuringandgainsand/orlossesonassetsales.

Projectthebalancesheet

1. Developtheassumptionsforeachscenariobasedonhistoricalandanticipatedresults.

2. Inputthoseassumptionsandlinkthemtotheappropriatecellsinthebalancesheetandincomestatementwiththeexceptionofthecash,PP&Eandintangiblesanddebtaccounts.

3. ConstructaPP&EandintangiblesschedulewithcapexandD&Aexpense.4. Capitalizeoffbalancesheetfinancingssuchassalesofaccountsreceivableand

operatingleases(ifsignificantenoughtowarrantcapitalization).



5. LinkthecellsinthePP&Eandintangiblesandcapitalizedaccountsreceivableandoperatingleaseschedulestotheappropriatecellsinthebalancesheetandincomestatement.

Constructthestatementofcashflows

1. Constructthestatementofcashflowsfromoperatingactivities,investingactivitiesandfinancingactivitieswiththeexceptionofborrowingsandrepaymentsofdebt.

2. ConstructthedebtworksheetwitheachtrancheofdebtandlearnhowtoconstructIFandMINstatements,revolvercashneedsandrepaymentsandcashwaterfallpayments.

3. Linkthecellsinthedebtworksheettotheappropriatecellsinthebalancesheet,incomestatement,andstatementofcashflowsfromfinancingactivities.

4. Linktheendingcashbalanceonthestatementofcashflowswiththeendingcashbalanceonthebalancesheet.

5. Calculateestimatedcashtaxesandcashinterestpaidandlinktotheappropriatecellsinthestatementofcashflows.

Constructthesummarypages

1. Testthefinancialmodeltoensurestabilityandthatthebalancesheetbalances.2. Constructthesummaryoperating,creditandequityvaluationpagesandlinktothe

appropriatecellsintheprojectionmodel.3. Analyzethedataandlearntohowtoevaluatetheoperatingandfinancial

performance,howtodevelopaviablecapitalstructureincludingappropriatelystructuringdebtandequitytransactionsandhowtoformulateaneducatedinvestmentopinion.

4. DiscussSourcesofFundsandUsesofFundsinatransactionalbasedmodelforamerger,acquisition,divestiture,LBOanddebtorequityrecapitalization.

REQUIREDCOURSEMATERIALSThereisnotextbookforthecourse.Duringthelectures,wewillbeutilizingaprojectionmodelinExceltowhichyouwillhaveaccessviathecourseBlackboard.Eachclassyouwillneedtobringyourcompany10K,mostrecent10QandalaptopwithanyversionofExcelwithsufficientbatterypowertolastthreehoursasyouwillberequiredtoreplicatethetechniqueslearnedtobuildyourownfinancialmodel.

ASSESSMENTCOMPONENTSN/A

GRADINGYourgradeisbasedonaclassprojectwhichincludesthreedeliverablesdescribedbelow.Theclassprojectwillprovideyouwiththeopportunitytoapplytheskillsandanalyticaltechniqueslearnedintheclassroomtoanactualcompany.Uponcompletionoftheproject,youshouldhavetheconfidenceandabilitytonotonlybuildastable,robustprojectionmodel,butalsotointerpretselectiveoperating,creditandequityvaluation



data.

Bythesecondlecture,youwillselectapubliclytradedcompanylistedoneithertheNYSEorNASDAQ.AlistofallofthecompaniesintheS&P500IndexispostedonthecourseBlackboardtoassistinyourselection.However,youshouldnotselectafinancialservicescompanytoanalyzeasitcanbedifficulttonavigate.

Youwillprintthemostrecent10K,10QandanyotherrelevantSECfilingssuchasan8Kfromwww.sec.gov.Thesefilingswillserveasprimarysourcedocumentsfortheprojectandprovidetherequisitefoundationforbuildingyourassumptionsembeddedinyourfinancialmodel.Youshouldalsoavailyourselfofrecentpressreleases,newsstoriesandanyotherpertinentinformationwhichwillultimatelydeepenyourknowledgeofthecompany.

YouwillstartbyinputtingintoExcelthreeyearsofhistoricalandyeartodatefinancialinformation,i.e.incomestatements,balancesheetsandstatementsofcashflows.Youwillthenbegintobuildafiveyearprojectionmodelsimilartotheonewewillbeutilizinginclasswhichentailsdevelopingthreecasescenarios,i.e.,downside,flatandupside,andgeneratingsummaryoperating,creditandequityvaluationdata.Thesummaryoperatingdatawillincludeprofitabilityandliquiditystatistics.Thesummarycreditdatawillincludecapitalstructureandsolvencystatistics.Thesummaryequityvaluationdatawillincludeadiscountedcashflow(DCF)valuationandseveralrelativevaluationmultiplessuchasPrice/Earnings,Price/Sales,EnterpriseValue/EBITDAandEnterpriseValue/Sales.

Yourgradecomprisesthefollowingthreedeliverables:

FirstDeliverable(30%)IncomeStatementProjections(Steps141):Uponcompletionoftheincomestatementprojectionswiththeexceptionofdepreciationandamortizationandinterestexpense,youwillsubmitacopyofyourprojectionmodelwhichincludestheincomestatementandassumptionsandappendittoawrittenreportnottoexceedfifteenpagessinglespaced.Thereportshouldbrieflyintroducethecompany,itsproductsand/orservices,locations,competitiveadvantages,majorcustomers,majorsuppliers,seniormanagement,boardofdirectors,auditingfirm,andanymajorchangesincludingacquisitions,divestituresorlawsuits.Theintroductoryportionshouldbenomorethanonepage.Thebalanceofthereportwillincludeadetaileddiscussionofandrationaleforeachassumptioninthethreescenariosembeddedinyourforecastscorroboratedbyhistoricalperformance,recentdevelopmentsandanticipatedresults.SecondDeliverable(30%)BalanceSheetProjectionsandStatementofCashFlows(Steps4279):Uponcompletionofthebalancesheetprojectionsandconstructionofthestatementofcashflows,youwillsubmitacopyofyourprojectionmodelwhichincludesthebalancesheetandassumptionsandstatementofcashflowsandappendittoawrittenreportnottoexceedfifteenpagessinglespaced.Thereportwillincludeadetaileddiscussionofandrationaleforeachassumptioninthethreescenariosembeddedinyourforecastscorroboratedbyhistoricalperformance,recentdevelopmentsandanticipatedresults.ThirdDeliverable(40%)SummaryStatisticsandValuationAnalyses:Youwillsubmitacopyofthesummarystatistics,discountcashflowvaluationandrelativevaluationandappendittoawrittenreportnottoexceedfifteenpagessinglespaced.Thereportwillincludeadetaileddiscussionoftheoperatingdatawithananalysisoftheprofitabilityandliquidityofthecompanyandthecreditdatawithananalysisofthecapitalstructureandsolvencyofthecompany.Thissectionofthereportshouldonlycontainananalysisunderthedownsidescenarioasthegoalistoassessthecompanysabilitytogeneratecashflowandmanageleverageinadifficultoperatingenvironment.ThereportwillalsocontainadetaileddiscussionoftheequityvaluationdatawithananalysisoftheassumptionsembeddedintheDCF,theequityvaluationattainedwiththeDCFversusthemultiplesandyouropinionontheappropriatevalueofthestockpredicatedonyourqualitativeandquantitativeanalysis.Theequityvaluationsectionofthereportshouldonlycontainananalysisunderthescenariothatyoufeelismostlikelyforthecompany.Finally,youwillemailtheprofessoryourprojectionmodelsothathemayconfirmitsstabilityandthatthebalancesheetbalances.



STERNPOLICIESGeneralBehaviorTheSchoolexpectsthatstudentswillconductthemselveswithrespectandprofessionalismtowardfaculty,students,andotherspresentinclassandwillfollowtheruleslaiddownbytheinstructorforclassroombehavior.Studentswhofailtodosomaybeaskedtoleavetheclassroom.

CollaborationonGradedAssignmentsStudentsmaynotworktogetherongradedassignmentunlesstheinstructorgivesexpresspermission.

CourseEvaluationsCourseevaluationsareimportanttousandtostudentswhocomeafteryou.Pleasecompletethemthoughtfully.

ACADEMICINTEGRITYIntegrityiscriticaltothelearningprocessandtoallthatwedohereatNYUStern.Asmembersofourcommunity,allstudentsagreetoabidebytheNYUSternStudentCodeofConduct,whichincludesacommitmentto:

Exerciseintegrityinallaspectsofone'sacademicworkincluding,butnotlimitedto,thepreparationandcompletionofexams,papersandallothercourserequirementsbynotengaginginanymethodormeansthatprovidesanunfairadvantage.Clearlyacknowledgetheworkandeffortsofotherswhensubmittingwrittenworkasonesown.Ideas,data,directquotations(whichshouldbedesignatedwithquotationmarks),paraphrasing,creativeexpression,oranyotherincorporationoftheworkofothersshouldbefullyreferenced.Refrainfrombehavinginwaysthatknowinglysupport,assist,orinanywayattempttoenableanotherpersontoengageinanyviolationoftheCodeofConduct.OursupportalsoincludesreportinganyobservedviolationsofthisCodeofConductorotherSchoolandUniversitypoliciesthataredeemedtoadverselyaffecttheNYUSterncommunity.

TheentireSternStudentCodeofConductappliestoallstudentsenrolledinSterncoursesandcanbefoundhere:

UndergraduateCollege:http://www.stern.nyu.edu/uc/codeofconductGraduatePrograms:http://w4.stern.nyu.edu/studentactivities/involved.cfm?doc_id=102505

Tohelpensuretheintegrityofourlearningcommunity,proseassignmentsyousubmittoBlackboardwillbesubmittedtoTurnitin.TurnitinwillcompareyoursubmissiontoadatabaseofpriorsubmissionstoTurnitin,currentandarchivedWebpages,periodicals,journals,andpublications.Additionally,yourdocumentwillbecomepartoftheTurnitindatabase.

RECORDINGOFCLASSESYourclassmayberecordedforeducationalpurposes

STUDENTSWITHDISABILITIESIfyouhaveaqualifieddisabilityandwillrequireacademicaccommodationofanykindduringthiscourse,youmustnotifymeatthebeginningofthecourseandprovidealetterfromtheMosesCenterforStudentswithDisabilities(CSD,9984980,www.nyu.edu/csd)verifyingyourregistrationandoutliningthe



accommodationstheyrecommend.IfyouwillneedtotakeanexamattheCSD,youmustsubmitacompletedExamAccommodationsFormtothematleastoneweekpriortothescheduledexamtimetobeguaranteedaccommodation.

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