hello welcome to this video on how to
create financial models so I will be a
bit fast so I'm starting from a blank
Excel sheets blank excel file and so
this is my own preferred method of
creating of the template of the
financial model I usually create a cover
or summary sheet then I add table of
contents or index page then the
historical income statement then the
historical balance sheets then the
historic cash flow and then for the
income statement projections I sometimes
you might want to use multiple sheets
but for this demonstration I'm going to
use a a 1 sheet income statement
projection ratio so income statement
projection ratios similarly for the
balance sheets projection ratios for you
when doing financial models you will not
project the cash flow so you're going to
extract the cash flow from the income
statement and balance sheet
so with these income statement
projections and balance sheet
projections I'm going to create the
income statement forecast I'm going to
create the balance sheet forecast
and if you are following the IFRS
standard then you should be aware of the
naming convention so income statement is
going to become statement of profit or
loss balance sheets is a statement of
inertia position where cash flow still
remains cash flow so cash flow forecast
then after doing this is where for if
you need to do the valuation then you
want to have evaluation sheets so
sometimes you might not want to do
valuation maybe you are just wanting to
project do your forecast for internal
planning so your entire financial
statement forecast in that case you will
no need to do valuation but then wind
also in case you need to know how to do
valuations I will get to distill
evaluations and some other times you
will also want to financial issues which
help you to be able to compare different
companies in across an industry or
different industries with giving better
return on asset return on equity all
those performance ratios right okay so
I'll be really fast this is my preferred
way of creating a cover page so I pick a
rectangle make it the name of the
company I want to model for so for this
demonstration purpose I'm going to do
four dangoty cements angled AC mains PLC
and usually I put some information so
maybe by my name
and then maybe last updated today's 9th
September 2019 then any other
information you like to make people see
directly on the cover page so sometimes
I might also want to show things about
the company's financials maybe stuff
like the revenue might want to show the
EBIT might want to show the net income
okay I might want to show the current
assets
I might want to show the current
liability II might want to show total
assets might want to show let's say I
use this approach current assets non
current of fixed assets assets then non
current liabilities total liabilities
then total equity maybe I had three more
three more net
net cash flow free unlevered the cash
flow you FCF which we use in 20 discount
trade model the discounted cash flow
model so maybe these are things I would
like to show and show them for different
years
so I'll come back to this let's just by
the way let me save it so we know call
is a financial model four dangoty cement
so I'm gonna save this in my documents
now as for my table of contents and all
of these other sheets I have an approach
that I use to create a uniform look
across everything so I picked this first
sheet then I hold down the shift key I
picked this last sheet and then I do
some common things I do a lot which is
the name of the company I'm modeling for
so I do this is equal to I come over a I
pick the name of the company I'm
modeling for I also always like to keep
this in italics and also the last time I
updated this model so it makes it easy
for whether is using the Moodle to see
when this was last updated so I can do
this and then I also like to create like
a title on each of the specific sheets
right to let you understand who this is
for the income statement forecast this
is for the whatsoever I teach that on
this sheet so it makes it easy and also
when you print you'll be able to detect
that this is what it is because it will
print out the sheet names don't print
when you send this to printer so with
whatever I'd say that makes it easy for
you to understand where you are so my
approach is I well manager and so I'm
going to use our color so I pick maybe
green he want the font to be white then
I also want to increase the font size
maybe 16 is good enough and make it bold
then one other thing I want is I want
whatsoever title I write to st. our
cross so I'm going to right click and
then go to format cells
I go to alignment I call me I pick st.
cross selection I do okay any other
thing I like to do on these so that his
Hall and then I once I'm done I'm going
to come over to a she tells no part of
what was selected and I'm going to now
go here and start with my work table of
contents and one approach I use for my
table of content is I make it navi
navigable like hyperlinks so again maybe
the antenna and then I start historico
income statement historical balance
sheet historical cash flow income
statement projection ratios balance
sheets for section ratios the income
statement forecasts the balance sheets
forecast the cash flow forecast
the valuation itself and the financial
issues then I make all of this clickable
meaning I'm going to right-click pick
hyperlink or link whichever shows for
you I got to place in this document I
say this you go to the historical is and
I repeat similarly for all of this
income statement projection ratios sheet
projection ratios income statement
forecast balance sheets forecasts cash
flow forecast valuation forecast
financial issues ok another Latin I do a
lot sees whenever I'm done I prefer this
all sheet to not have these busy lines
they are called grid lines these lines
crossing horizontally and vertically
right so to do that I go to view I
disable grid lines I since I'm done also
with these sheets I do likewise so it
makes the model a lot neater ok and so
now we I moved to the income statement
the silica income statement historic
income statement and so usually for any
company modeling for well a company I
exist before now you will have
historical income statement so you just
go copy that and paste in year so that's
what I will do I already have extracted
it from the financial annual reports
four dangoty dangoty is a publicly
listed fame so that makes it that all of
the income statement and financial
statements are publicly available you
just go to their website investor
relations and you can download so I've
already done all of that extraction I'm
going to just copy paste so after
testing to make the size the width BD
weights already easier you notice these
places are not well aligned
I just go on this control yeah and I
pick keep sauce column width so that
auto adjust to have it was where I'm
copying from okay so now brought in the
historical income statement so I see if
that I go also to do likewise for
historical balance sheets so story cover
sheets I also tastes and I tell you to
keep sauce column widths
I do likewise for the cash flows to Riku
cash flow paste
I copy I come here and I paste I tell it
to do keep sauce column widths okay and
like I already explained I prefer to
turn off the grid line so they look a
lot neater with a bit lines don't off so
I do likewise for for this I'd say this
is the historical balance sheets this is
the is to recall cash flow
I also turn off the grid lines okay so
you see they look a lot neater that way
then instead of me having to redo most
of the things I want to show ya right so
I want to show for the next couple of
years so see we went 2019 so the last
actual I have is 2018 so 2018 plus five
more years of five years let's see what
that comes to me so I come to 2023 so
I'm going to want to do these two twenty
two twenty three twenty twenty twenty
three twenty twenty two I can pick this
to secure passwords I hope I have it as
fast at okay so so this is good enough
right then I can let you be aware that
these are for actual yes so one quick
way of doing that is I go to format
cells I go to number I go to custom
format and I say if you put and hey in
front of it so it makes it easier for
you to note that to the actual years and
these are my forecast
yes so to do for my forecast year I also
go here to custom and then I pick this
zero I put an F in front so that way you
can easily know which are the actual
years which are the focus yes and then
I'm going to make this bold I'm going to
make it have a horizontal bottom but ah
okay so we are making progress
I am also I'm also going to make these
have the comma separated for Martin so
right now I'm here at the historical
projection ratios
I'm going to call it that's historical
no no income statements income statement
for Section three shoes and what I want
to make possible is that you should be
able to select scenario so the things
that drive a company's entire financial
performance is usually how much revenue
they make and then how much of it able
to retain as profit mini revenue and
expenses so clearly more like all of the
things in income statement they
ultimately drive the performance of the
company every other thing I usually a
fact of these are now wealthy companies
utilizing their resources so what I'm
going to do right now is our creates a
scenario pic I here so we can create
different scenarios for different
assumptions things like best case was
keys and B's keys so I'm gonna say
select scenario no one knows the future
so whatever a plan we make towards the
future we are at least giving ourselves
so imagine off arrow and see maybe what
we have laid out can best be described
as a best case so what of if things
don't happen the way we expect so a
worst case and then maybe what of if
maybe it is I in between so like if
biscuit there are many ways to to do
this right I'm going to use there's a
way that I use a lot more in class in
the trainings i I do and then there's
another way I use for my commercial
project so in this video I will use both
of them I'll show you how to do both but
then I'm going to leave the one I use in
my commercial work cause that one looks
a lot nicer to to implement so the in my
commercial projects I typically use a
the combobox so you see I have a
developer table yeah you probably won't
have it unless you have enabled it so
you if you don't have it you need to
just go to file you go to options you go
to customize ribbon then on this right
side most likely you also be looking
like this on disabled right so you
enable it and then you - okay and then
you will also be able to have developer
so when I do develop I go to inside I
pick a combo box so when I pick the
combo box it turns into something that
makes it possible for me to draw a box
like this so when I draw this okay so
maybe this is good enough and then I
right-click on it it allows me to be
able to set you know how the things will
work right so for it to work you go to
format controls it we ask you for impute
range to ask you for setting so right
now I can go somewhere that might not be
too visible for my user so I can pick
maybe this set AE and I said I'm going
to put my input links yes oh I want to
give you three options so let's say I
put them yeah
then cell link whatsoever you pick I
want it to be reflected here so I can
say should we make it possible for you
to see three options at at once like
drop-down lines three items so I do okay
and then I can complete that by saying
this is best case this is a base and
this is worst case and from this moment
forward those are the options that will
be here when you pick best case you will
see that this will indicate what you
have picked you pick the first of the
options so this is what I use a lot in
my commercial jobs but then there is the
other option where I do
so there is the other option where I do
data validation which is aim I click
inside here I do data I do data
validation I pick lists and then I I can
type the option so I can type best
common base common words and then I can
also pick right so whichever it is you
want to since I've already typed it in
that order cell in this cells here I
think I should also show you how to pick
so you can pick and then once you do
okay then you have similar experience in
terms of this would be day why I prefer
these for my common edge of the vertices
you see these the drop-down shows all
with this until you come here before the
drop-down will show and so that's why I
have that preference so whichever you do
they will walk right so right now I'm
going to just put this right here so we
use this approach now for the income
statement all the different lines as we
have here we want to do their
projections right so I'm going to pick
starting from the past's
past
yes good
I tell it to expand you notice the years
I've gone they are the king not the way
to go
why here so what I will do is to make it
easy so that whenever a new year's come
you have a new financial year once you
update this right you want the yeast yet
to start also counting from day right so
what I will do is I will say that I want
to pick the last few years so I say this
equals here the last actually and I can
drag these backwards to get me you know
and then I can do this forward plus one
to get me into future yeah and we go two
three four five so typically you want to
forecast five years at least into the
future so that I will go with that
approach of doing just five years into
the future
I mean to just slightly increase this
and I want this to show us future
forecasts so I'm going to come here and
like we did you at that time I'm going
to write and have in front so that we
showing us forecast some other times I
also like to give it a different color
so right mix it kind of easier to spot
that does that forecast and the ones in
black at the historical all right so now
every line on the income statement we
need to forecast so we need to forecast
the revenue we need to forecast our
revenue so let's start with the revenue
from sales and services I'm just going
to call that mean revenue I can simply
copy down pastes and stuff might be
faster
I come here I pissed dance and so how do
I want to forecast forecast it's right
so first of all let's go bring in the
actual so I come in here and say this is
equal to 2012 I drag all the way into
the future I tell you to rethink
e-commerce a pre-test commerce a
pre-test i'll so for revenue if I don't
have it on our records if I don't know
what the plan of the company is one rule
of thumb is to just say when to forecast
the revenue on the year-on-year growth
business so typically when it comes to
forecasting there are two general
approaches you will you will you will
you will take right so when it comes to
forecast you will want to maybe you know
pick from a shadow a an existing shadow
or plan so if I have a revenue share do
that shows all the breakdown of the
product of the company and then maybe
the unit economics how many units of
each product they plan to sell and then
all like that for the next five years
they now want to use that if I don't
have then I want to pick like a racially
forecast ratio
so I will want to use a forecast ratio
to project whenever I do not have I do
not have this so this is like you prefer
this and this is when number two is when
you don't have a plan the company until
tell you - I blew the idea plan for the
future they didn't tell you they didn't
give you what it is they plan to say per
product type and then you can sum them
together and come home - what the
revenue will be then you won't use a
forecast ratio so I do not walk with
dangoty cement I don't have any insider
knowledge I don't have access to the
eyeshadow so I'm going to use the
forecast ratio approach if I have the
shadow what I'll just do is I go and
pick from the shed when I'm pissed
Robert seemed yeah I'll just paste or
link to the shadow directly and are we
it will show whatever it is the company
has planned Powell of this different
line items so for our case I'm going to
do we
yah-yah-yah on here routes percentage
okay and so yeah yeah glut means you
know how well we out the company has
been growing over the last year so it
good that nine do 29 percent in 2012 so
I I tried this forward so I'm going to
remove this anyway this is just to
explain that we will always like to
forecast the crazy forecast using any of
those two approaches and preferable is
you use the shadows with their easy
shatru okay so now how do I make all of
this linked suit and I make all of these
linked to the scenarios okay so I'm
going to say
for the different scenarios fact I can
go copy them yeah
so what will happen in a best-case
scenario what will happen in a
worst-case scenario
say for best case worst case scenario
nothing for the past
you cannot forecast for the past so I'm
going to make it obvious that you cannot
forecast for the past this is my own
preferred way of doing these I
right-click format go to feel go to
patterns died I pick this pattern so
that makes it obvious I are not supposed
to provide anything for that period then
I also or included notes
so whatever assumption I use I make it
pretty obvious for the users of my
Moodle to be able to see okay so
okay I can decide that for the best keys
I'm going to use average of the last
four years so have reach of the last
four years growth one two three four so
this is called moving average so I'm
always going to be using the average of
the last four years so if I do average
of the last four years now it will be DS
[Music]
every DS and this rich these sort of
seats then I go to my note and I see
I've used it for years moving that weed
is transparency in my walk if you do not
agree with my assumption you can go and
change and update the notes and then I
can decide that for the best keys
I do the base case flaws
maybe plus 10% c plus 5% and I can say
what kiss is biscuits minus 5% now if I
want to make it easy for you to use such
that you can enter 5% here and then I'm
linking it into year so that if you
disagree with my assumption you want to
change these to 10% you just call me and
type 10% so we can do that I can see 5%
down downwards by 50 cents
right then I come here I right-click I
go to format cells
I go to custom format and then what I'm
going to do is I'm going to say in M
quotation mark base case plus we need to
copy this cause I'll need it again so
that begins to show here that we wintry
repeats similarly for for this I'm going
to say this case - okay and then I'm
just going to say this Plus this and I
make it absolute so that when I drag
forward I would not have issue so that
way I do for all of this and then I I do
likewise this - these make it absolute
and then I drag forward also so that way
I have done for all of the two scenarios
now what I want to happen is whenever
you pick a scenario here that is what it
should apply for the future for the
future
so how do I do that okay I can use index
and see you know whatever you pick in
this list
whatever you pick which is identified by
this number here right that's what it
should it should use okay so but I don't
want to write the word best base what I
want is the figures so it means I'm
going to do index and this time around
those figures right and then which one
did you pick if you pick biscuits it
will be true here right and because I
intend to dry
these I'm going to link make these
absolutes when I drag these that how it
will walk so if you go here and change
the scenario used if I change it to base
case you'll see difficult the change
right so that's that and so if I have
the forecast for the year ahead I can
calculate what the actual value will be
which is equal to last year times the
growth plus one and I can again ensure
that that is comma separated and I drag
forward so this will do into the future
so not one is done I'm going to do
likewise for order revenue so order
revenue also going to do all of these
economy on a peak what are even new
stands for revenue that the company mix
but not from your core business line so
say maybe you have a head office that is
a ten story building you're a
manufacturing company but then you are
not using the entire ten story building
you rent out to of the floors that is
revenue rental income that rental income
is other revenue it's not from your main
services so you will want to forecast
that differently from your main services
since the formula for the yeon-yi grutas
similar i'm going to just pick this pest
yet now you see comes up with give by
zero error which is understandable I'm
dividing if you know if you go by zero
nothing that exists and so it comes with
that if you don't like that you can wrap
it in an if arrow and see you know if
arrow should come with zero
so you can do that if you very
particular about not important you sure
that defines area right there
likewise I'm going to see in the future
we are not making any forecasts and
since the company doesn't have a diary
venue well I don't think it makes sense
for me to create some forecast ratio for
that to say they grew what they don't
have right so I'm just going to say this
is 0%
all throughout for this so that now we
we are not forecasting them as green I
can copy all of this PCA and it
replicates what we have done and in the
notes I will say taking non-existence
okay so I'm doing with the order of a
new one I go to the next item so the
cost of sales cost of goods oh so I can
copy that
come here cost of goods sold and then oh
we did before I go and provide the story
consult make it to be in commerce
oppression I drag into the future so for
cost of goods sold again if I wish I do
if I know what their unit cost are and
then the volume projected into the
future that pigs mix a better forecast
to use just plug industry goes directly
from the cost of goods sold shadow but
if I do not have then what is a better
rule of thumb is to forecast it as
percentage of revenue so typically
companies are the very sticky gross
margin there is always a percentage of
the revenue that is used to buy the raw
materials so the tannest a is a big
constant and so that way you are able to
do a much more reasonable forecast when
you do not have an insider data when you
do know how they break down by unit cost
and by volume projection so that's what
I'm going to do a - a percentage of
revenue and then I'm going to do all of
this again
so as percentage of revenue means I'm
going to pick the expense
/ - revenue I can make it as percentage
I drag it forwards and then I can use
the same approach of moving average
right so I can copy all of this and
paste yeah maybe the only difference is
I don't think I'll use a whole five
percent up and down right because
typically you can't bring down your cost
of sales as as passenger very
drastically like that without some
really really interesting changes
especially a complainer has been around
for for long so I'm just going to say
maybe up and down by 2% so 2% 2% and
let's see why this is not changing
okay so I'm going to say if you pick
from here right down into cities should
also pick from here and I also drag down
and we can again use that index formula
and for this one is going to be the
percentage times the forecast revenue
and that gets us what it will be for
this particular forecast yet so like
this I am done I go to the other item so
typically it might be more prudent to
bundle a lot of these as operating
expenses so I'm going to say maybe
operating expenses net of dyani
so operating expenses
I knew some two species operating
expenses less journey
and then I go pick the history so the
story car is going to be the summation
of all of this I let it keep that
comma-separated format again I have
liberty of choosing young year growth or
percentage revenue if I do not have any
specific aim data as to what the company
as plan as regarding the our operating
expenses into the future so I think I'll
use as percentage of revenue occurs so
most of the companies have consult
consulted for they typically have this
plan to keep operating expenses are not
more than maybe 20% or 30% of revenue so
this can also be a better way of them
you know making forecast into the future
if you do not have specific aim
breakdown of all of the operating
expenses so I'm going to use that
percentage of revenue approach and what
we did yeah I will redo so as positive
revenue means since I know I'm going to
be doing some things as percentage of
revenue some things as jr. growth I can
make my life a lot easier by doing this
from line such a way that I can copy so
I can go here modify that okay this
should be partially locked you know so
I'll be able to copy this way so that
way I can paste that here without having
to redo the entire formula so dangoty
cement typically spend you know between
10209 to it so far 19% of job revenue as
percentage as us as operating expense so
I'm going to now
use the same approach I can see it goes
up and down by two percents and then
again since I know I'm going to use this
formula of multiplying this by this I
can also look the part I don't want to
change like mixed referencing and I can
paste yeah if you don't know these no
problem
it just means you will spend a little
more time typing the formula in anything
because I'm recording I want to be as
fast as possible so that this video
doesn't get too long that's why I'm
using a lot more of those it doesn't
mean that if you do if you don't do it
this way that won't work and I make
progress into the future
so DeeDee and here the depreciation and
depletion and amortization if you have
the company's capex plan and then you
have the asset register and you have the
a depreciation schedule then you know
this becomes again what you use instead
of using this rule of thumb of having to
do some ratio projections I don't have
any details regarding thank banquet is
operation beyond the fact that I knew
that they'd been aggressively expanding
for the last couple of years and right
now dangoty is in all of the countries
this plan he wants to be in Africa and
so it is now they're ramping up
production they are trying to reach the
effect realization they are no longer
expanding so we expect that maybe the
the capex will not be as high into the
future as it was in the past sometimes
of growth rate so let's again plan for
the DNA I can decide to say it's as
percentage of revenue
because we typically say that a company
uses assets to generate revenue so
that's why we even have assets
efficiency ratios like I said ton of our
return on asset since like that
well maybe no return on assets in that
it relates to profit but definitely
asset turnover you want to know how well
the company's effectively using it as a
to generate revenue
so using that logic you might prefer to
use as percentage of revenue any more
evenly you want to make then maybe the
more expansion you'll have and then also
if you want to keep making the same
revenue may have to keep you know
replenishing your assets cards you use
factories you may have to keep replacing
them in the same coin the same values as
you used to have so I'm going to use as
percentage of revenue but like I did
mention it's always more accurate so you
use a shadow if you have if you have
access to the company's shadow or plan
as you guys keep X and how they do the a
depreciation all right so without
wasting too much time I'm going to begin
copy all of these pastes yeah I'm going
to go and pick these to recall what
they've been doing before now I'm going
to say this should be comma separated I
drag into the future I do as like a can
copy all of this and even copy all of
the distance based yeah I can
and for the right now it's let's try
with the moving average and see the
speakers are really high this is showing
us if they are still expanding into the
future unlike I didn't mention the UH no
longer expanding at at this point they
are trying to bring up all of the
operations in topia Cameroon and bring
them up to factories like they show
never so I am expecting that the D&E as
passenger revenue to be smaller than
than what is currently so I can do that
I can see I expect it to be smaller it
should be I can give a flat figure maybe
I expect it to be 8%
see this is crazy small say nice now
maybe this is reasonable enough then I
again specify what I have done since I
now keep dragging this again and again I
can make my life easier bye-bye
by removing the dollar for non buzz part
so that way the thing is able to copy
and pastes without me having to always
do this every time so for the numbers
part let me just verify if I did for
this case I am the Feliz that's part of
the issues that happen with not doing
that
again this just to make my walk fast not
really like you must tweet this way so
if you have if you don't have to do this
you can always type it afresh like I did
in the first case this is like I said to
make me fast and it video shorter okay I
go on to the next item there is the
financial income / expenses
so financiai income the on expenses some
other times you could see companies
especially those strictly following the
IFRS they split them into two different
lines and do the nets so I just pick the
net here so the financial income
interest hand on financial assets the
company has so maybe the company has
some investments in Treasury bills maybe
borrow some subsidiaries money lend some
other companies money or invested in
some shares and you got dividend that
comes in financial income and then
whenever the company borrows money the
interest they pay on the loan they have
taken the other financial expenses so
you see they typically don't have
anything to do assay the company's
revenue as much as the company's
strategy is the company wanting to
leverage then they borrow money and pay
interest on money to borrow or is the
company wanting not to have any debts or
they're the kind of company that they
can't even cheaply access debt so it's
more of a company's strategy than
companies so enjoy in choosing between
percentage of revenue and and growth
rate our prefer to choose growth rates
but then ultimately if I have the
company's plan if I have their debt
should do and I also know their plan as
regards where they keep their cash what
interest behind Anya Anya Anya on the
accounts where they put most of their
cash right then that makes life easier
mix things a lot more accurate I can
pick specifically for the future from
from those schedules so I do not have
them so I'm going to stick with using
yone growths
percentage okay so I go and pick history
cow I tell it to show us that
comma-separated I drag into the future
and then I do the growth so since I have
done it here I can make things a lot
easier for myself by copying all of this
and pasting here and then for the future
what do I think if I do not have any
plan any knowledge of the company's debt
structure plans and interests the end on
income well
one common thing I do is I just maintain
status quo I say I put us zero percent
growth rate into the future and I write
it in the notes that taking forecasts
yes okay so with that I can replicate
the formula we use whenever we use a
yoghurt so I'm saying the company
maintains that that profile maintains
whatever it is they do often how they
keep the figures the way it is it's not
so much of a worry as to accuracy the
only way you can be accurate beyond this
is if you have insider information you
have plan as regards to the company's
financial debt plan an investment plan
so which is the next after this that is
unusual items so usual items are no
before we do call them
extraordinary I think things that happen
that you do not have control over and
you can't easily forecast so that's how
they are different from order revenue
remember the illustration I gave as
regards an example of what you classify
as order venue so I have it tends to
rebuild in each queue I rent out two of
the floors have control over that I
can't predict how much rivet in comma we
make from from those rental species next
year the litanies I will not forecast
them the way I will forecast my main
business line but for unusual items you
you are not expected to be able to know
upfront all that we happen into the
future regarding them so an example
could be an actuarial gain maybe you
know some of your insurer properties can
you know got involved in in fire
destroyed and then you have to claim
from from from insurance and then what
is your ass pinned you is more than the
book value you have to you know
recognize that UPS as a gain so we
accept you plan to go and get some of
your properties born again next year
it's supposed to be difficult for you to
forecast how much will come from it in
the future and so you have other things
maybe you got fine you own a lawsuit so
there are things that are exceptional
that typically you put you put there so
for us I I'm going to
for this modelling I'm going to use what
we did for the financial income and
expenses I don't have any knowledge of
what will happen into the future
regarding time so I'm going to keep them
as zero right
so typically there is always this
argument of if you don't have a specific
figure should you use percentage of
revenue should you use Yan year growth
and some of the training classes I've
had found that the people who go with
the young yeah I mean with the passenger
revenue as a more compelling explanation
so they say typically you're all those
unpredictable likes trivia games you got
find it has a lot more relation to your
size of business than just them any
other thing so a bigger business will
typically have a larger value in these
things compared to a smaller business so
I buy that explanation and I can decide
to use as percentages of revenue I go
pick the value drag into the future and
I can use as we have been doing for the
ones that are union rules
sorry passenger revenue I then also
maybe pick all of this
now if I do not know what what will
happen in the future then like I did for
financial expenses I'll keep them as
zero okay and then I can see you fold
forecast yes and I can go pick the kind
of formula we use whenever I its
percentage of revenue verify if it's
doing a probability yes okay so this is
done and I'll do four for tax so for
taxes if it's not as straightforward as
all what we've done before now because
for tax you project using the tax rate
okay so I go and pick historical data
has been enjoin a lot of paeonia status
and tax credit and such like so you see
it's only the SDP well the ADA the
Caritas alaska's payment rather and
credit time you see it as negative so
the negative should be Dino menu once
the app tax credits runs out and those
concessions they have run out you will
see it's show more negative into the
future all right so what the tax rate
well the tax rate is going to be you
know what you feel so the effective tax
rate what you paid divided by your
profit before tax
I can do this into the future I mean all
of the past
why can't strictly we just drag it like
that into the future so let's do 44 cast
parts so four dangoty c means they've
been enjoying a lot of tax credit so
that's why the in Nigeria though
statutory tax rate accompany income tax
rates corporate tax rates is 30 percent
and then also it is compulsory education
tax value must be which is a two percent
so typically if there are no timing
differences and all of that you'll be
paying having an effective tax rate of
that two percent on your any before
before tax but then because of tax
credits timing differences in
recognition of assets capital allowances
all those things that happen between
your accounting tax and and what the tax
officials actually estimate as your tax
rates you find that on the in the book
there's always these difference between
the statutory rate on your and what we
eventually P which is now effective tax
rates so I'm going to so I'm going to
make my projection based on the
effective tax rates for when I look at
other companies that have been existing
in tangle tease industry which is the
cement manufacturing industry for a long
time while no longer joining any paeonia
any introductory concessions as dangoty
enjoyed in the first couple of his
existence a couple of years i I feel
more compelled to use that over
historical one because if I Graham
picked historic I want to be assuming
that its concessions are going
indefinitely into the future so I can go
with 16 percent so when you look at the
fire look at a shock a cement look at
some of those other companies who
already exist in that industry what has
been the effective tax rate so in my own
base case I'm going to use this I can
take it up and down two percent like
we've been doing for
so I'm going to see the kinas industry
average
of 16% and then I can yes in fact I will
do this and we do the 16 percent that
are having to go copy everything okay so
like this and then I can
I can copy this and paste yeah for the
future i cannot estimate do the
projection for the future right now
because we do not yet have the income
before tax the ending before tax so this
is where we stop for for income
statement projection ratios okay so done
with this I'm going to go to the balance
sheet projection ratios and like I
already mentioned I like to turn off the
grid lines so it looks a lot neater
right okay so I go to the balance sheet
projection issues sheet section
and for the balance sheet projection
ratios I just to check that this is
record okay so it's reckoning so for the
balance sheet projection ratios similar
thing like we did I can reuse a lot of
what I does that I own to these
scenarios all over to listeners with
dunya will push into the future for the
balance sheet so I'm going to just copy
paste this tell it to then I can say
this should be this and I can track
these quotes so great and for the
balance sheet is that the different
lines that we will be projecting so I
can maybe make my life easier by copying
all of this and pasting them here and
then I will be deleting the ones that we
are not going to like fixed assets no
these are calculations so I'm going to
start spacing them
typically you don't forecast cash cash
and cash equivalents are going to daddy
balancing lines are going to come from
the cash flow forecast so I'm going to
take this out
again written engine is not going to be
forecasted written any is going to be
last year's retain any plus plus net
income so I'm going to take that out of
equity items
so these are the line items I'm going to
to forecast
alright soft spacetime well enough
like I'd mentioned it's always
preferable if you have you should do so
if I have the capital expenditure on
sheduled I can know how much the company
is planning to spend on intangible
accent intangible assets things like
maybe software things that are not
tangible any way that you can hold
physically so software even paint writes
things that the company acquires that
are not tangible but then they have to
depreciate maybe they are material in
terms of the value and then you have a
usable lifespan and then you have to
depreciate them over those usual
lifespan and so if I have the plan of
the company in grits I can put them into
the future if I do not have will again
after the rule of rule of thumb so well
without needing to worry too much we do
real of Tom I do not have any plan in
turn a plan of danged a cement so if I
was doing this what angle a cement now
probably after you know from doing this
for them as a direct project I will have
to sit with the CFO shift with some key
people there and ask what are their
plans into the future and then that will
guide my projection into the future so
for now that I do not have them right I
can see as percentage or revenue okay so
as percentage of revenue
what has been a typical percentage of
revenue these divided by the revenue for
that yeah
as percentage and I drag into the future
so I can use the average of the last
four years so we use that moving average
again so I commend you notes for years
moving average and then I can say these
times the forecasted revenue for that
yay and these times the forecasted
revenue for that
and I drag this forward so maybe this is
it and for the PP&E I'm going to say
again as percentage of revenue if I
don't have the shadow way I'm going to
get the book value of the properties
into the future then this is what I will
do but they are always going to have to
maintain a portion of percentage of to
support the revenue they will keep
having to have similar amount of of
assets fixed assets okay so I go and
pick the PP anyi
drag into the future I compute again the
sinsa I can copy from years just to
ensure that I make some things fixed so
in this case it is the numeric part I
make fixed so that makes my life easy
instead of having to retype the entire
formula I can copy and paste like I
mentioned to you you don't have to
remember to do know how to do that you
can always redo it from scratch this is
to save me time if you remember what I
said that dangly cement has been
aggressively expanding into other
countries in Africa you know Africa like
Zimbabwe topia Cameroon and Senegal and
and such like so they've been having to
spend a lot on assets then you know
because it's a very heavy you know
manufacturing line so you typically
spend a year or some years to build
before you start producing before you
see revenue from the plant and equipment
you've bought so you see that when
deduce the ratio goes up comes down when
the revenue starts Communion goes up
when they expand again and comes down
and Alec I did mention now is when they
are going to be bringing up all of the
factory to capacity and the a no longer
expanding into any other countries
everywhere the only country wants to
move into his new path and I think
because of situations which is refinery
now yes put that on the back burner so
it's been I wouldn't project the future
as this right so I can decide to see
they can just maybe do 100 percent into
the future I do some clarity with using
amount as PP&E but well just to make the
competition a lot easier I can just do
the hundred percent and again for this I
can copy and paste so
instead of going that far back use this
you see taking 100% okay so for the
financial assets financial asset we're
more like investment assets anyway the
company owned they don't do they don't
depreciate they are not appreciated
investment no they're fames trade
reviews and such like and begin I don't
know it depends on the company's plan so
it's really more strategy do you want to
put your money back into production or
you want to put split some of the money
in some investments assets so I can use
young yeah growth instead of passenger
revenue since it's more of a decision
the company takes irregardless of the
revenue position so Union growth this
yeah / last year when this is a faster
way then the other ways you do into
bracket this year may not last year /
last year right but then this can be
faster last year this yet very bad last
year minus one so that's why I use this
a lot more and like we did you that time
anyway you get divided zero if you don't
want it there anymore you can wrap it in
if arrow and I can decide to do likewise
for everything yeah
and then I don't have any of your
mission into the future I can simply say
well
Kyra 0% Groot so taking represent future
forecasts yes and I can do the roots
which is last year times growth rate
plus one and I drag this into the future
so the maintain whatever it is the
maintain as it is for other fixed assets
so Allah fixes it
what have assets that are not in
tangible asset P P onion so you could
have like the fat tax assets long term P
P means so I'm going to use as maybe as
percentage of revenue or you know good
I'm going to use iyanya growth doesn't
matter too much what we use yet because
if you don't have internal information
on the composition of the fixed assets
or the fixed assets the India is no
logic you can use to defend one over the
other
okay I'm going to go and pick historical
other fixed assets
drag into the future to the Union
growths and in fact since I don't have
information I'm going to maintain earth
behind so I'm going to see growth is
going to be on 0% so it just keeps being
maintained when you say are taking us
they represent into the future
okay for inventory you will have to
project that day's inventory outstanding
[Music]
so typically how many days do you does
it take you in converting your inventory
to sales so this is the it's a very
standardized way of forecasting of entry
so I go and pick the existing inventory
drag into the future track for the
existing years so the formula is an
inventory maybe I should just write it
so you can see the formula so d I hope
this inventory understanding is equal to
your inventory Ohio cost of goods sold
because that's what is tied to you when
you sell off when you convert inventory
to sell it is the cost of goods sold
account is the balance inside of the tap
transaction ten times how many days new
year so typically we use 365 days and so
I'm going to do exactly that the
inventory divided by divided by the cost
of goods sold right times how many days
in here
me better cause the decimal point so it
show any negative anyway one minus 121
if you worry too much about that maybe
we can put a negative before it so you
see the EXCI takes down with the owner
and 21 days to combat inventory into
sales and then if I don't have any
information into the future
I expect whatever inventory situation
they have persist into the future except
if I know they're improving their supply
chain they're trying to cut down on on
event rebuilding more efficient they now
maybe I just download into the future
both I do not have any of those
privileged information
just you pick the last actual and drag
into the future so I can see just actual
projected forward
so I just used the last actualities into
the future then so if you remember how
to change subject of formula is a
situation where I know this I know this
it's already in our income statement
this is the one I want to know so it
will be this times this divided by by
365 so and that's what I will do
equal to DD IO times the cogs for the
focused year divided by 365 and because
of the - by needed to show as an expense
the fact that negative and then
so that's done
what I said about my nose who has
expense no the explanation is wrong but
the logic of what I said is correct if
you don't put the my nose right
it's a comments negative because the
cost of goods sold is already showing at
the expense yet so you force the tongue
back the inventory into a positive value
that's why I needed to put the - not we
you get my explanation correctly and
then I do for trade receivable also so
trade receivable
I also compute for the these sales
outstanding so typically how long does
it take us to or does it take down
Goethe to collect sales for revenue that
have been booked so collect the money
and you would collect cash so customers
take 30 days on average to pay you they
take ten days on average so now you say
this takes your sales to be outstanding
and that's what we're using in capturing
the receivable if people take 30 days to
pay you then you always out receivables
what of petty details throughout your
details of standing and that's the logic
I'm going to everything yeah maybe I
just write a formula so that way you can
see
so this sales outstanding is across the
receivable all of our revenue times 365
so it's equal to receivable divided by
revenue revenue is here for me
provided by revenue and then times three
six five so my teen days I'm going to
the future and like we did yeah if I do
not have any information about your
strategy are you guys trying to get your
money faster
are you trying to give people payment
plan they can stretch the payment so if
you give payment plan you straight to
payment in your syllabus will go up your
days it takes you to get back your money
will increase and if you are trying to
cut down on on credit limit and force
people to pay on time more then you
expect it to go down but without that
information I expect that whatsoever
pattern is being exhibited right now
project itself that with into the future
so like we already did you should change
the subject of formula it becomes the
details are standing times the revenue
for that yeah
divided by the number of this yeah so
that helps us to compute for the
receivables into the future so that's
that one then for the other current
assets you who decide to do use the sale
these approach this current assets right
but if I don't know decomposition that's
debatable
so I'm going to use a Union go to put
whenever I don't know the composition
I typically use the iyanya growth and
keep the actual like that into the
future so I'm going to go pick to order
current assets current assets drag for
the future I do the Union good stuff and
I even keep it as zero into the future
and I go
the stage I should take this out it's
locking okay so the companies share
capital and such like I did planning to
raise new capital or not I don't know I
I assume that they will just maintain
status quo but if I know they are
planning to raise capital or or buy back
shares then I can adjust into the future
right now I go and pick this tariqa
and forecaster gifts and I can do the
code treatment in the future we'll keep
it same for the reserve similar to if I
know the composition of the reserve
yes I can be able to focus to the
company Harvey do they typically put a
particular amount in to resolve the
reserves could be things like the
long-term liabilities
I mean employee benefits longtime
employee benefit reserve even you know
could be regulatory so like for the
financial institutions is this law that
says they must always keep a portion of
customer deposit in ERISA so there are
many things that can be the composition
of is i if I do not have any information
I'm not privy leg into the plan to the
future as a ready-made clay I always
leave the past as it is into the future
then other equity items I'm going to use
the same approach I don't even know what
tees that they have in here other equity
items so I'm going to just assume that
the kibbutz as quaint if they even do
not have so that's good
then trade on other people's so this is
going to be days favor outstanding is
that the normal way of forecasting the
working capital items
the formula is payable of cost of goods
sold because people release to your
suppliers the people who supply water
using creating your inventory so it's
much more ice tie to your to your cost
of goods sold so equal to payables
divided by the cost of goods sold times
365 days in yeah again comes in negative
format I'm going to maybe play - to make
it positive so you see the days as
positive number and then like we did if
I do not have information about your
teams of contract with your suppliers
assume that whatever pattern you've been
using in paying them is what will exist
into the future and then if I do change
of Soviet or formula I becomes the days
times the cost of goods sold divided by
365 if I do it this way the man owns
will be there so if I only take out the
miners put a minus in front then I drag
this forward
I can't go against the last actual
projected forward okay so I think we're
making good progress we're almost to the
end then for the short-term loans so the
short-term loans the company or loans
that I do that current financial year
drag into the future and then again if I
do not have the debts share to for the
company in the future I would do another
example where we are going to build one
that we resume we have information about
it did she do the walking carpet Asha
drew the doncha to the touch everyone
who said we are the same equity share to
capita expenditure schedule so the
position shadow even the cost of capital
unit economics so we'll do an attack
I'll try and do another example where we
will have to build these shadows from
scratch so that when we take a longer
time and a lot of we hacked in as if we
interact contact with management and we
have those information but for now let's
say we do not have the schedules so what
that means in same if I do not know what
your plan is
as regards racing font borrowing I will
just say you maintain your current debt
profile whatever you have you keep
refinancing the debt as it is you keep
the same value of debt on your book so
that's what I am doing right now
then the current if a tax is - I do not
have information regarding the timing
difference and all those things to use
to estimate what the the fat tax will be
then I can safely just do likewise and
and and project the past's the last
actual forward
King
likewise forward our current liabilities
I'm going to keep cities on the last
actually a long time dune we introduced
similar if I do not know your death
plans raising money and sort in that
form I'm going to say you keep the same
debt profile you refinance whatsoever
loan you have you keep same file you
have learned on your book
then keep it as a decent last try here
likewise for other non current
liabilities so things like that the far
taxi is default the long term people
will do likewise
okay so I'm done with the income
statement projection ratios and like I
already told you I like to turn off
those busy line so it looks a lot nicer
and then with these we can be able to do
our income statements our financial
statement focus Oh Lester income
statements forecasts and to make my life
easy I can't pick everything as it is
here
bring ya
take out the part that's not
formula-based like this if you remember
we had collapsed these two operating
expenses so I can maybe take this out
call this operating expense you know
less tnk can call it our gross profits
can give it a and give it a top bada and
it's going to be this this well first
because my cost of goods sold is already
negative I've been using this convention
where expenses are penny negative so
that's fine so you don't get to you
don't get confused as to why I did dance
can take this hope what did I do it so
on I want to delete
right so I take this house take these
hearts I'm going to take this house I'm
going to need the tax rate so we had to
bring that one yeah tax rates
okay so grits and then for the future
year so make my life easy going to drag
all of this five years forward and then
I can copy the way I did this paste here
complaining something is referencing
something else let me undo that okay so
we are good to go we I don't need this
so he knew take this out
I don't need for 2011 this is good then
I this is going to be really enjoyable
because I'm just going to come here pick
the Figo and then drag all the way down
if we make this picky note I do likewise
for order if a new come here peak then I
drag all the way down for cost of goods
sold come here my pick
and then I drag all the way down for
pitting expenses
I come here to where we have done it
pick
I Drive all the way down for the DNA I
can come here I pick raise it you this
is it I track all the way down for the
finishing comes large expenses I can
come and pick so you see the work we
have done the mix all of these a lot
easy to do because this is the book off
of the strategic aspect I drag all the
way down
I picked tax rates
as percentage Drago together so for this
one you know the tax is a EBT times the
tax rate and I hope this is correct okay
and I drag into the future so I'm done
with the income statement projections
and just take a look at it in 20 the
last focus he has three point six seven
this ribbon millions so this is billion
trillion so three point six five
trillion right if I go change the
scenario so I changed the scenario from
best to say worst case let's good see if
that we love see it has changed right so
now you see how all what we do yeah
begins to fit into the future so to make
this a lot easy for the users of the
report I can also make it obvious here
what scenario we are ruined
I can see currently running scenario
see see you then I put that index
formula and then whatsoever sneer has
been picked so currently running
scenario let's see best and then
I won that show on haul of the all of
the I wanted to show here yeah so
reverse looking at my walk can easily
know which scenario we are running I
also wanted to show on all of the other
sheets to see the equals then I wanted
to show on the sheets also here so I
pick all those sheets I say they're
equal to DS so that way whenever I
change the scenario right I will be able
to see it everywhere what scenario we
are on so that makes it a lot useful for
the end user
so I'm going to continue let me just go
and change it back one a lot in this
table of content of Dawn makes it easy
for me to jump around maybe I have not
done that for you see and jump around
I can also decide to do me going back to
the table I was in so that the table of
contents so you can go back to the table
of content from wherever I go so I'm
going to do that table of contents I'm
going to say that the link back to table
of contents so are we whenever I click
on this it takes a table of content and
I want that to happen to all of the
other sheets so I'm going to copy this
any fists fists year then I also fists
this one's too
so I appreciate
so I guess that's that makes sense to do
so we continue I am done with the income
statement and as usual I turn off the
grid line so it looks a lot neater then
we proceed to the balance sheets I'm
going to again copy all of these
inclusive of the check I go to balance
sheet forecasts i pastes I ensure that
the column widths respected I say this
is the balance sheets forecasts and like
we did the other time I take out all of
the things that are not calculations
okay so this is good I also make these
to read into the future so one two three
four or five and then I take these parts
and put here okay so we are good to go
I'm going to maybe just slightly
increase the size of this so for the
intangible assets I can come here pick
as it is here and I drag all of the way
into the future what's wrong with I I
need to take out 2011 we don't have 2011
in the forecast I did so I'm going to
take this out and the projection side I
mean I need stuff from 2011 we started
from 2012 okay so we do this now in
balance its projection ratios intangible
assets I pick it and then I take into
the future
and then for the pipian he again
likewise pickets then I drag into the
future for the financial assets and call
me i pickets so you see this is quite
straightforward right dragged into the
future
I picked the other fixed assets I
dragged into the future
my legs are shaking let me sit down be
standing all this way I do for the
inventory I pick its tree and then I
drag into the future for the trade and
other receivables likewise I pick and
then I drag into the future for the
other current assets I pick
and then I dragged into the future for
the cash and equivalents I I'll have to
go and pick for the story car from the
historical balance sheets
and drag into the future but not in the
defocus yes so for the focus he is going
to come from last year opening which
becomes easy as opening cash plus the
net cash flow from the cash flow
statement so we'll have to complete that
when we had only cash flow I continue
with a share capital share capital I
pick I drag into the future
the reserves I pick and then I drag into
the future the return honey so it's
likewise for it in any now allowed to go
and pick from history I drag for up to
the actual but then for the forecast
I will so the focus I we need to compute
it so written enemy's last year's
written any plus net profits for that
yes so net profits for
so that's I drag into the future and
[Music]
other equity items so this is kind of
kind of saying they are not paying
dividend so if you are paying dividend
maybe dividend part of what equity items
net out of retaining or you can take it
out directly from so you will say this
man owes dividend so for a company that
I have their dividend structure and
equity plan typically will have created
an equity share do where I will have
taken out the dividend and if they have
preference shares and all of those
things all of taking them out and then
bring the written hanging from that
sheet which would be net of those
dividends to ordinary shareholders and
if they have any preference she owed us
to also them net of all of those
deductions is what I now I don't bring
you into the written any line but for
this one we don't know of tangle tease
with a dividend plan so if they decide
to pay dividend right great it's still
like your Monica giving back to you as a
equity you know anyway so I do for the
other equity items
that this is it and I drag forwards I do
for the trade and payables and other
payables peak and I drag forward I do
for the short term loom peak and then I
drag forward I do for the defied Corinne
taxes i peak and I drag forward I do for
the other current liabilities my peak
and I drag forward I do for the long
term balloons I click and I drag forward
I do for the default taxes I pick and I
drag forward and it's not balancing so
something is amiss some way so let's see
what have I missed out
okay so I'll go back to the actual and
go see which is correct
we're moving so it's five to seven five
six seven three six seven three so let's
see six seven three so this is correct
this is where I must have picked
something wrong so in Excel whenever
averages like this I typically split my
windows I'm going to do new window then
I'm going to say once you come to the
right door - come - maybe the left okay
so and then I can compare so I can take
this to the historico and then I can
start comparing where things have gone
wrong particularly this line so start
comparing and see we had differences
this is this this this is where things
are different so what did I pick I think
I picked the wrong yeah so did I pick
this okay so once I pick that and I make
the correction to correct it up to here
so I can close this safe walk I can
close this second view we remain remains
that once okay great you will notice
that for the forecast yes it's not the
balance is no it's not checking out you
know this is total ability - total I
said the shoe equality should that's why
squally balance it if you balance out
right so it is not balancing for the
focus yes not not unexpected cause as
you can see we've not done the cash and
cash equivalent for that particular
period so until we do the cash and cash
equivalents
until we do the cash flow and all of
that then I can't say for sure if
something is wrong or not so let's go to
the cash flow for the cash flow by the
way I like to turn this off save so for
the cash flow we are going to use the
indirect approach so the indirect
approach is we're going to extract from
both the income statement and the
balance sheet to just take this out I'm
going to tell you to keep so sweet so
I'm going to break this into cash from
the three categories of cash flow that
you want to extract as a cash cash flow
from operations
so the cash flow from operations is the
net income the net profits and then you
make non-cash adjustments so I'm going
to add back dyani so I'm going to add
factory so you notice I'm pressing a
single apostrophe before the plus if you
don't do that it will not keep it out
way to think you are trying to do a
formula so the N here I'm going to also
add jaws for the non-cash items I'm
going to take out the interests expense
finance explains
so if it's a finance the experience its
plus if its financing com- I'm going to
take that one house I'm going to also
the working capital changes right so the
changes in changes an asset brings down
your cash so typically when you buy a
car which means you now have more assets
because your body car your body line
you've spent cash to acquire them right
so changing inventory so if you have my
inventory I'm most of consumed cash in
get Simoni vendor changing receivable
and I'm going too hard changing maybe if
I got that even changing the current
assay changing the current assets then I
can stop it so when it's a liability huh
if you borrow more money than your money
so if you hold your suppliers which is
payable it means the money should have
given them a penny with yourself
meaning you should have that as an
increase in your money in your hand so
changing payables then generally changin
you're changin hot current liabilities
gelatine of Mattel let me just take a
look at my balance sheets I think this
is capture this is captured just
captured this is captured this is this
are what I was put together as change in
order current liabilities so take this
together maybe should I do them
separately do them together did have
surfaces you can't seem to make up my
mind at least so we keep that
transparency today you know you know
moody okay so all of this is now what
I'm going to put together to get the
cash flow from operations then I'm going
to extract also cash flow from financing
activities
so this will have been written as cash
flow from operating activities before
you want to keep to that convention so
this one deals more with capex no no
changing investing activities so this
deals more we keep X capita expenditure
changing long-term assets changing
long-term liability so does that it is
out drinking yet so things like what you
spend in fact this financed income Allah
brought it here but for now I'm just
going to leave it as since we didn't
separate them out here I'm just going to
put them in the finance explains part of
of financing
okay so capital expenditure capex which
is actually change in changing your
fixed assets and so changing the
appreciable fixed assets so changing
PP&E PPE and intangibles
so I can take both of them as much as
our tippex then also
by the way this would be negative and
when you buy then also any other thing
that falls in our long time let me come
check so for long term my other fixed
assets
so if Africa that goes down financial
state so all of this I'm going to move
them they're changing financial assets
change in other fixed assets so plus
changing financial assets did we buy new
financial so this will happen
investments we meet investment that's
changing financial assets change in
fixed assets other fixed assets so we
dispose of a man changing or fixed
assets so this is capex slash to do this
sale of assets
I've seen
Quebec /c
so that you don't get too much of let me
write it this way so changing our fixed
assets let's see what other line items
yeah so changing long-term
abilities other non current liabilities
okay so that to give me my give us the
cash flow from investing then cash flow
from financing activities so we talk
about finance expense or interest
expense so let's repeat so that rapido
let music increase / decrease that then
check that the company is you yes sure I
just write equities runs
she's usual / by house so this makes
better sense
Dada items yeah I'm just going to bundle
together everything in the same hour
just say changes in order equity items
I'm going to Bonn do all of these all of
these are meant bundle them as deaths so
that we it's faster right so that
becomes my mind my cash flow from
financing and without I'm going to be
able to get the net cash flow so net
cash flow
okay and when we are done we are going
to also extracts we will do it check
anyway so we're going to do a check
opening closing in cash closing cash and
we will check if what we have done is
correct so I'm going to do a check yeah
then after that we are going to extract
the only VAT free cash so to extract
that I'm going to extract the free cash
flow so cash flow from after you've
carried out your missions and investing
activities you know whatsoever I said
you need to replace capita expenditure
then I'm going to remove interest tax
interest cover effect of leverage anyway
so that's why it's called on leave our
free cash flow so to do that I'm going
to need to see what is the obits
anyway finder here he beats then I'm
going to get the tax rates then I'm
going to get what you actually paid as
tax operating tax that you will have
paid if eating have any interest I
started dock table then what you
actually paid tax speed then what is D
I'm going to remove the intro tax
interest cover interest cover they'll
get due to tax due to the interest cover
that you get because of the debts you
have so I'm going to make this port make
this would make this fold make this fold
make this port it increased
all right so I go bring in the income
statement from the income statement of
net income and as usual come style I
Drive all the way into the future
I forgot to include notes here notes and
then I had back the dyani
since the DNA is already showing as an
expense in my income statement we want
to take out the negative so it comes as
it should be so comes us
then they finance explains also since
it's already showing as negative in my
income statement I'm going to also want
to take out that negative part of it so
finance expense
then the change in inventory so for
changing inventory I don't have I have
2011 in that or a site so Miguel just
good - it's indeed historical not to
complicate things was keep for the 2012
or 2013 so I go to balance sheets I do
inventory this year - inventory last
year I tell it to be in common style I
dragged it all the way into the future
for the receivables likewise I'm going
to go here my balance sheets receivables
this year - receivable last year drag it
into the future then for the other
current assets current assets this year
- other current asset last year again I
may keep comma-separated I drag into the
future then tables likewise payables
payable this year - payable last year I
also make its interpreted I drag into
the future and other currently five
taxes so currently for taxes this year -
what it was last year
moved and I track into the future then
changing liabilities in current
liabilities another current liabilities
changing a decorum this year - last year
I dragged into the future so now I'm
going to since I didn't do fold I can
maybe just take this on now so it
doesn't stop it doesn't this destroy the
formulas so this is going to be
summation of all the ones I need to
handle this - right
comma the last ring - the ones I'm going
to take out these for I guess I make it
bold
that part is done and I do for the capex
so for the capex you will have to
remember that capex plant property and
equipment that Dupree they are
depreciated so or amenities if in my
books huh I have fixed assets PP&E in
2018 2019 I have two hundred million air
plant property and equipment right and
then in my DNA account my depreciation
and amortization if in 2019 we take out
20 million for depreciation you will see
that is taller than me
Tony million era the book value we now
be 180 million so for me to correctly
see changes whether we spent more money
to buy new asset when I'm doing the
shading the - in and changing in PP&E it
will be so it's going to be last year
hmm - we end of it
pipi ani in 2018 - PP&E in 2019 plus DNA
in 2019 right so if we bought new if we
bought new assets here so Book value is
240 you will see that this will
correctly tell us that we have to spend
60 million era so we had to spend 60
million era capex right
so that's how the formula works I'm
going to do the formula right now going
to say it's equal to PP an he in fact
the summation of because of the
intangible and and the PP&E together
what I'd appreciated so the submission
of the the two of these two in J before
- the summation of those two now this
year but then we have to add the dyani I
said hard and I put my nose steady P
because the figure of D&E is already
negative here so I need to take out a
negative that's why so this we correctly
gets me whatever capita expenditure was
meat so you just remember the formula
don't worry too much about this one
it is this logic once you apply this as
it should be then you will always get
the right thing so that's what I have
done here okay so I'm going to drag that
forward since we've done for that I'm
going to take all of these that I've
written here take them away so that we
can do other things without without them
covering the screen so investment to do
get any did you make any new financial
investments so it's going to be what was
the book value of financial assets last
year - this year so that's how you see
for an asset asset is last year - this
year to get the correct sign that's why
you notice when we did here we are - -
them and yes is we are not - in anymore
we just have to go ahead and do this
sign now come with the correct a cash
flow direction
so I'm going to drag this into the
future then what a fixed asset a fixed
asset last year - this year and I
dragged into the future or the non
current liabilities so I think him there
are two of them so it's better I chose
to some little sum of these two which is
current differ this is the one - live in
song so this would have been so so here
you have summed the new deferred taxes
current if a territory because those two
are the ones that have the remaining
four the current liabilities that have
not been captured already yes
so this one is not the one with you so I
just remembered I have separated him
house I remember separately so please
don't worry he's correct
we've separated him out so I can
straight away do this now I see why I
separated Emma so we can just do for
these differ taxes - this
and I'm going to straight away some all
of these since we've already gotten them
in deep core correct cache direction
right and then the cash wrong so the
interest expense the interest experience
I can go bring get these from from here
then the increase in debt there are two
debts short term and long term
so I'm going to put of them this minus
this Plus this minus this so now tell us
the increase in booty but short term and
long term debt then to the company issue
new she s so we can do that this seems
they did some share by out there then
other item some we do some damn whole
together these - all of these so there's
going to be a small issue the written
genocide right is also part of these
items so immediately changes in
retaining
resolves and so makes it easy
it looks longer now but then makes it
easy to read so in a company so you're
eating honey in 2018 if it's a hundred
million naira
so in 2019 if you make a profits so net
income if you make a profit of 20
million naira it gets hard on your
previous retaining so it's going to be
these two plus so you will have one
around 20 million era in your written
any so if I really must factor out the
changes in it maybe dividend you paid
out things that actually happen to the
written any outside of the net profit
has been added right
so the formula will be doing this year
so return honey this year
- retain any last year last year plus
net profits net income this year so
that's how you will be able to take out
the if there's any you know things we
have to settle from your retain any or
cost some money that get added to your
retaining so I'm going to have to do
that I'm going to have to take out from
exactly what I've said I'm going to have
to say this year
which is done to see my nose routine any
and all of that for last year plus the
profits for this year net profit for
this year so that's the correct way to
so that is its and then with this I can
compute the the net cash flow cash flow
from financing is going to be the
summation of all of these I make bold I
drag into the future
and then I am going to cut up all of
these cash flow from operations from
investing from financing to get what the
net cash flow is that also a mcpoot and
then I'm going to now check if what I've
done is correct so let's go and pick the
closing cash from the balance sheets so
cash for the cash and cash equivalents
in the balance sheet is a closing cash I
can pick that drag into the future yes
and the opening cash for two this year
is the closing cash of last year so
opening cash for 2013 is closing cash in
2012 and I drag that also yeah so these
are these two are coming directly from
the balance sheet right so if whatever I
have done is correct can see it's
ticking wrong whatever I've done is
correct if I do open in cash plus
closing cash and I say - the closing
cash issue come up to zero okay so I'm
going to so it's not coming up to zero
so I just need to just check out what I
have done whatever there's an issue I
picked it from the right places so
whenever there is easy use again is to
check that I've picked everything from
the right place Lisa I'm going
make this play them side by side and I
verify if I picked everything correctly
so I go to the income statement did I
pick the revenue from the right seat I
think so did I pick the depreciation
from the rights please yes did I pick
the financial income from the right
lives financially I explained to my face
yes okay I think I've seen with injuries
this here is quite inventory so let's go
to the balance sheets
did I pick from the right place be debt
into eat that scene yes this is
inventory yes rapping the receivables
from the right place
check receivables 14 yes did I pick the
current assets from the right place yes
yes
did I pick tables from the right place
payables from the right place
yes looking yes
did I pick coring the fat taxes from the
right place
grind the fat taxes from the right place
let's check the 31 yes
did I pick odd our current liabilities
from the right place yes there is the
correct size
this is wrong the finance explains went
out and so this should be an addition
naughty subtraction so right back to
final expense so this should be addition
not a subtraction I'm going to modify
that part
alright so that was the heat all right
so that's at least you get to see how I
troubleshoot whenever I have use
whenever there's an issue just cool
calmly go through what you've done and
you will see it could be you picked
something wrongly on my case I designs I
missed the sign all right so right now
it's confirming to me that
yeah it's correct now right and then as
expected this will not be correct so I'm
not surprised because if we have not
completed the balance sheets then this
will not be correct so right now we have
what we need to complete the balance
sheets I just come in here and say cash
for this year's going to be cash at the
beginning of the year which is cash at
the end of last year plus net cash flow
for that particular yeah and I can drag
these forwards and that we should so
this is now balancing out and if I check
this out yeah so this is also balanced
yeah so now we don't with the major we
don't if you are just interested in
financial statement forecast this is
probably where you will stop but for us
we need to go further we want to do
valuation so I'm going to have to do
some extra work I'm going to see I want
to extract the only bad free cash
because that's what we use for the DCF
valuation so I'm going to add up the
cash from operations cash from
operations cause cash from investing
okay so no money this is the free cash
flow free cash flow means cash that you
have after you've settled out your from
your you settled out your operating
expenses and an investing expenses
without having to borrow money
money that your business generated and
then you've covered all of your
mandatory obligations so it is careful
without the effect of borrowing and
equity injection so that is ordinarily
the free cash flow but for this EF you
need to get you on leave at Vashem so
without the effect of any leverage and
you know interest expense well not
really interested Springs this time
around sins of Tokina tax taxes tax in
interest expenses tax deductible meaning
a company that has debts so take a look
re the company that as leverage so let's
say there are two companies right so ABC
limited the same ABC limited but this is
version 2 this is version 1 so let's say
version one revenue 200 millionaire so
cogs say 60 millionaire right let's say
operating expenses is a 40 millionaire
right and now a potential plus dyani so
let's see what is it so if it's and him
before interest and tax a hundred
millionaire now the same thing too for
Company B rush onto the same situation
cogs 60 million IRA operating expense
inclusive of Gianni
40 million area now we have the e beats
on red millionaire
now if if fashion he does not have any
interest expense its tax is going to be
said tax of 10% tax is going to be 10
million and the profit is going to be 90
million so that will be the net income
right if version B bhishan - as an
interest expense there's a loan the
company servicing 10 million era because
this is tax-deductible the profit before
tax is going to be 90 and so any pays
tax of the same 10% we're going to be
paying tax of 9 millionaire right and
[Music]
net profit off its 9
it's 1 million okay so the T noun to
focus our attention on ease this is a
fashion without leverage so on divided
on divide new leverage this one has
leverage it has debt and we noticed that
because of that debt the spacing is
paying smaller tops so this version 2 is
paying small attacks compared to this I
need to take it out the effects we've
already taken out the valid back the
interest expense if you remember so in a
cash flow you remember we've had add
back the interest expense so if you had
back the interest expense for this
version 2 which is M 10 million when you
had it back to this this would be 91
million so this changes to 91 million 91
million which is not true it is not the
same as displaces hoon
it should be nineteen million if you
don't have any interest tax cover so we
need to take out that leverage benefits
that's making your cash looks like 91
million we had back the interest
experience as against ninety million for
someone who doesn't even have any loan
at all so that's what we are trying to
adjust for here so we want to get the
cash flow without effect of leverage and
we are going to now to death what I've
just said so I'm going to calculate what
it is that you will have paid if he
didn't are the any interest benefit so
what you laugh it will have been the
EBIT times the tax rate unlike the one
where you have the in the interest
expense that is deductible right where
you would have to remove the interest
before you now do the tax of the PBC so
that's why to get that differences I
need to factor out what you will have
paid no money transform a company that
is like these on the right side the
company will have been on leave at on
the left side so that's what we won't do
I'm going to take your EBIT what you
have paid well what you will have been
taxed on if you didn't have interest
expense for now I don't worry too much
about the final unusual item so what
you'll have paid if you have the
interest expense right then plus C plus
the unusual items anyway so close the
unusual item let's just see
so this then what is the effective tax
rates is this the effective tax rates
okay
then what you will have paid is this x
times this right and then what you
actually paid so what you actually paid
this so the differences between the two
is the core value have so the
differences between the two is EO is now
that interest tax covered I'm trying to
take take out differences between the
two just going to repeat so let's just
City way to after B so the difference
between the two will be the one without
the leverage - the one with the leverage
sorry the what we leverage on the right
when I was born without leverage it
won't leverage leverage because of
design
[Music]
and then I can drag all of this into the
future and then I can do that you free
on live a free cash flow is this - the
effect of the left fridge so I take out
the interest tax cover
okay so this is the cash flow we are
going to use to complete the DCF
valuation so we are going to do
valuation ya know DCF we and for this
DCF valuation
I need the weighted average cost of
capital the perpetuity growth long-term
growth rates and I'm going to want to
get for the different years what the
cash flow has has been
okay hi is it cheering dance
sorry I just okay
I was checking away this coming from so
I'm going to go pick this the yeah
alright so that should fix that part we
don't want to worry ourselves about the
past that much so I can safely take out
can safely take out the pasts because we
are going to start from today forward
right so I can take this out maybe let
me just take out some of them not all of
them at least for effects to create an
effect so I'll say for this ones we are
not going to do anything about them or
walk starts from so what is the only VAT
free cash flow hmm
then what is the discount factor and for
without I can get the present value of
the UFC F okay with this
maybe because I need you to enter
something's here I can deliberately make
them very obvious I can decide to
include some butter that will be white
you know make it white you know maybe
white I can't see what what the colors
are looking like soo let me bring them
back as black and when I'm done putting
the I can now Mickey white
white white white
okay so he makes it looks kind of cool
if you ask me
so for the wack days will come to you
ten you so let's let's to all the main
things we need to do
okay I can go bring in to give out free
cash flow for from 2019 this is it 2019
and then I drag into the future and then
for the discount factor that is this one
we did average cost of capital so work
which is with a average cost of capital
is equity over equity plus debt times
cost of equity then plus the specie a be
enough debt equity plus debt times cost
of debt because of the tax cover you get
with debt
one minus t okay so this is the formula
in achieving it we might need to go and
extract all of these components so you
can get e we can get D we get the e plus
d the tax rates
what the huh
so for the cost of debts that is pretty
straightforward cost of equity you will
have to use anything but CAPM is more
commonly used and this is how the CAPM
is computed so if you see a PM for the
cost of equity it goes as these
risk-free rate plus the beta into a long
time market return minus risk-free rates
so this so first will achieve that then
we need to get the risk-free rates the
beta the market return I think that's
all right so let's get our theta for the
equity that's total equity we can get
out from our balance sheet total equity
for the current year so this is
telepathy for the currents here then
what about that that is well all of the
debt on the books so does for the
current yet short-term debt the
long-term debt shot on that Clause 100
then the addition of the to this the tax
rate I can go even use tax rate using
yeah the effective tax rates
and then the cost of debts for cost of
deaths it's preferable to use the
commercial the corporate bonds so
dangoty just because I can show you my
inbox I have I get emails from a free
invest that it tells me all of the
companies and their commercial paper and
and current rate and I also have the
same investment up we can go and look up
the different stuffs see I'm looking for
dangoty is commercial people
and see what he sees
do you did tous ceux debt still gets any
hang of this stuff well because of time
I'm not going to I just wanted to show
you where I typically get it from but
the last one I got was from my friend
invest and he emailed me all the current
rates of the commercial papers currently
actively been treated and I got it from
there and it was 14% so I'm just going
to plug that here you can also go check
the loans and interest rate DP on them
so this is more research you getting the
cost of debt for this one the CAPM we
are going to have to get the risk-free
rate so in Nigeria the Treasury the
yields on Treasury around the ten eleven
twelve I'm going to say there won't be
sent to the risk-free rate then the beta
so four dangoty cement and pretty much
any company that exists on in Iran Stock
Exchange it's a lot easy to get the beta
just go line and such dangoty maintains
most of all the analysis links that come
up maybe from Bloomberg from Financial
Times when you open them they are these
are one of the freely available
informations they give you the DVD Peter
so let's see if I can see it here okay
blue back in give me let's check what
financial times to stay in financial
times why is it taking useful
so I can see 1.1.1 it's zero so that's
really the fastest we instead of you
having to calculate variance and
covariance and variance so I can just
plug that in the one point it's zero
zero zero because it's up memories then
fall for the marquetry tone you will
have to estimate what the long-term
nature and market returns since we are
doing for a company existing in JIRA
here we have done it before
there is this formula that you can get
what's the NSC so I use the NSE yoshiya
index what is currently now and then
what it was in 1993 when it started if
you dezzy - today I did own it you can
go look that up and then you can use
that to come to compute what has we need
long term market rate of return for the
NSE so when I did he came to about 16%
so I'm going to to put that here without
having to worry us too much about if I
say I should do it right now to take a
lot longer I will have to go and dig up
the BRAF donuts as he as if to Tory a
blog if you follow my blog or you're on
LinkedIn you can go read it read the
steps hope with the things I left
everything the calculation day so with
this now we can compute the CAPM by the
way if you ask what's my blog right you
can easily check on www.hsn
and also my website
www.marykay.co.uk/awilliam visit my blog
and it's on our company blog also so I'm
going to compute this risk-free rate
plus the beta beta times the market
rates - the risk-free rate so it comes
to like sixteen point nine in blah blah
blah four four four dangoty cement so
now that we have all of the pieces I can
complete the walk so the walk which is
what I want to compute right now equals
e divided by E Plus D times the cost of
equity this one all of this I'm going to
put in a bracket and then I'm going to
say gloss in another bracket the D
divided by the a plus D times the cost
of debt then times one minus the tax
rate tax rate then these actors and
gives me the
walk to use okay so that's my discount
factor to make life easy
I can number these ones here and then
since I don't need all of these anymore
I can take them out it was attic desert
so right now the discount factor is 1
divided by divided into bracket 1 plus
the discount rate right then raised to
power how many figures into the future
service rest many fear into the future
so this one year into the future and
gets me these and if I do likewise it's
cool I need to log some things you see
this as screw degree so I'm going to go
back to the original formula I'm going
to lock this one back so it doesn't go
anyway so now I can scroll success and
drag it forward and then the present
value of all those cash flows gonna be
DS times T's and then I drag forward and
now I can see the crash
flew from
PVE of explicit forecast period so
that's five years that we have forecast
data so all of the cash that has come
from that period it's going to be equal
to the summation of all of this but we
also need to get the terminal value so
the terminal value it's now the company
does not just die after five years they
it's going to be in existence after five
years right so there's a you rule to how
you can forecast for it so you expect
that the company can at least keep
growing
so this you FCF and the fifth year the
company should be able to keep growing
it the company should be able to keep
growing these add some long-term growth
rate gee
okay so now when you have money that
keeps coming like this into the future
right you use puppet tweety tweety to
value all of that money and then it has
a formula which is you take all of that
money we divided divided by the discount
rates but then in this case where the
money is growing keeps growing into the
future so the discount rate minus G so
the long-term growth rate so this is
more like a growing puppet sweetie you
might have to read out read up on that
if it's a bit come confusing for you but
that is the formula right so this is how
you estimate the value of
something that keeps growing like into
forever and you want to give us the
value right now in today's value so this
will get us all of the money from a six
for six
so whatever we get here we have to again
x d50 a discount factor so by the fifty
a discount factor okay so that's what we
are going to do out then do you get the
G days no science there's not so much of
a science to eat than just a framework
that says no company grows out beyond
the bounds of the inflation rates and
the long term GDP growth rate so a
company can ever grow beyond the economy
at existing otherwise you get bigger
than any country and you know maybe soon
I began ano that's like saying III
growing into the sky so you will always
have to say between the inflation flesh
and the GDP so for us in Nigeria that
bound the same our long term inflation
so i habits will that we had you know
the tool we created the tool is nature
market data so if you launch it to
install it you would have to go to
inside you go to get add-ins when you go
to get ardennes you see the two in get
add-ins you just crawl a bits you don't
think they've moved it down a bit her so
this is it you click on hat and boom you
will have a permanent in your own exam
like I have yeah so once it comes up I
can use that to show you
so if I click on inflation since we get
for me old inflation and if I pick it
you see our average inflation rate has
been eleven point three six so that
means in this bound here that's kind of
crazy high
anyway that's what it is it is what it
is I can say eleven point three then
what about our GDP so let's go and check
that out on GDP you know GDP growth rate
so if I do that for the last 30
something yes almost 39 years it's four
point two we have problema our inflation
is higher than our GDP growth rate have
four point two so any company ninja
well will have to grow within damn
pounds you can't grow faster than this
bound so if I think what you produce is
something that it's very essential so
you have power to raise prices you're
not going to be disrupted really quick
then I can be more generous in picking
within the bound I can pick maybe 7% 6%
so let's say I pick four dangoty six
percent for the small G so I take this
house and then let me take all of this
out of the view so we can focus on what
it is we are doing
all right so I hope you remembered you
formula anyway taking out the formula it
is a cash flow in the cash flow in the
fifth year maybe I should just bring
back the formula so that makes it easier
for you to see so I need this formula T
well they just say I take out the things
around it alright so this is the formula
I'm going to leave it as it is now so
you can be able to follow along so cash
flow in the 58 times so it's growing you
know and that long-term growth rate
smooth I close the bracket now all of
this I see is divide that by the
discount rate minus the small G so
that's all of this we have toner then
I'm going to multiply all of that by the
discount factor this 58 discount factor
to get me the present value of the
terminal value of the company so all of
this gives me the enterprise value so
the company's enterprise value it's
going to be this Plus this going to say
I want is to have
so this is the enterprise value what if
I need to get the equity value if I need
to get the equity value then I we need
to take out the financial liabilities
take out the depth and you take out the
debts what is due to D because
enterprise value means that can just
quickly shows
so enterprise value huh Evy means what
belongs to both owners of the common
equity owners and the debts
Oona's because every company is a mix of
these two capital structure right so if
I take out what belongs to D if I say
this my not what belongs to be dead they
need to give me what is for the equity
guys so that's what we want to do right
now then typically you have two equity
guys only cash - so I have to have back
the cash at hand and I will give me the
equity fatty give me the equity value
I'm going to go and take out debt
luckily we have it yes I don't know to
go too far I'm going to hand the cash I
can go to the BS cash for the last half
try this and then I can make all of
these have the commas time so it would
be this - these flaws this that gets me
to equity value so I can go and grab all
the XI outstanding of a fountain only
power share capital so she has
outstanding and with that I can be able
to compute the price she value pasha
equity value per share so what's the
right price per share okay let's go and
grab the shares outstanding for four
dangoty estimate so if I may be good
here maybe this is a good opportunity to
market in focus product
I hope they pay me for marketing so if I
go here and I go to dangoty cement you
can also search such it online anyway I
just want to use this opportunity to
tell you about their wonderful to do the
charge body charged reasonable see this
is no equal time for it disappointing
good tangle tea
I say little commands
see I want to do V Smith so he's going
to show me information about done what
this means what I not just want to see
to chat I want to see everything I think
because I didn't complete my schooling
for DISA I think he's cute
my aunt is there so it shows me let's
look for shares outstanding if you see
shares outstanding as oh so this is it
17 it's a lot so 17 points 0 4 0 5 I'm
able to copy these out well no problem
I'll come type it out one after you so
the shares outstanding maybe I'm going
to write it in millions millions 1704
zero points five zero seven five zero
seven four zero five so now if I divide
the market cap or the equity value of
any way by this to get me to
okay I think let's just check out if
I've not omitted anything so far here so
it gets me to value what the company is
what justice looks r3g OSA so whenever
I'm done with the Maddalena I typically
go and check my my financials and see is
there anything as looking very different
from the past
whenever I see then I know I it's a
place for me to see I just meant
something is wrong with E okay so I
figured out the problem
the problem is with this so this is
supposed to be just
suppose the with this Plus this okay
haha violin yeah so and so that's been
the problem it has it there was a
miscalculation in yen so once I
corrected that looking a bit more
reasonable so if I go here let's check
out best case right then I go to
devaluation so used angle this valuation
comes 285 near up five units okay
Basheer so let's go and check out what
is currently selling for selling for 155
so C is our model sees Dan got a is
selling at a discount if you go with the
best nail and if you go with the base
scenario let's check out what that
equals
129 so that is below this and if you go
with the if you go with the worst case
scenario right that comes to its
nightmare of a share and so you see how
what we do here as and it's kind of
close to even the valuation of the
company on the stock market right and
everything you change if you come in
here and you make add adjustments so
like this one we're at the gate I 100
and if you check any time you make
adjustments it fits
always back into the Moodle if I come
back here and I
switching between the the scenarios if I
go to the base case again this laughs so
it see does come to 149 if I go to the
worst case let's see what it does come
to 104 if I go to the best case see it's
210 and so every time you make a change
it feeds back into all of the forecast
side and then right now we can be able
to complete the cover so as patty cover
I can show what the revenue will be for
the different forecasts yes rather than
start from 2014 so after
what the abit star with B
what happened to driving
interesting
I picked the revenue from history so
revenue from forecasts 2014
can slightly increase its then the net
income the net income from 2014 that
also I drag forward the current assets
2014 current assets drive forward the
non current assets
and drag forward to total assets from
2014 drag forward if I want this the
current liability from 20 2014 the
current non current liability the total
ability
blitzie so all of this I can drag
forward to get for the future then the
net cash flow so the net cash flow from
2015 2014
the only bad free cash flow to give are
free cash flow
okay so the only bad free cash flow okay
so and that is it I can put the
sparkline in front of it to make it
easier to visualize how it's been
changing and race back line so you can
be able to see
and what would that be nice to put so at
the end
like I told us I like to turn off the
grid lines like turn off the grid lines
and we see this looks really cool so we
are done with the all financial model
valuation
let's take out all these things and boom
and you can see that it's not too far
off from what the stock is currently
trading out right and for the financial
issues you can decide to put into
financial issues I'm going to skip that
for now if I can point you in the right
in the direction of our to do that so
for the financial issues it's similar
approach but they are not going to be
millions
in some way helps
tell it to have effects so the different
ratios so there are five major different
ratios I like to think out there the
profitability ratios so right there here
you have cross margin ratio
gross profit margin operating profits
margin net profit margin return on
assets return equity so those are the
profitability ratios there is also
valuation ratios so here you have price
to any price to book value
the p/e ratio the EPS book value per
share
value che price to book value dividend
yield so to complete this one's you you
probably we need to get egg the current
price that tango T's shares has been so
that there is also the liquidity ratio
current with you quick ratio cash ratio
so these are the very common liquidity
ratios there is the asset management
ratio indict we have the average
collection period so that D is why
mentioned is the same as this at TSO day
sales outstanding these payable
outstanding so typically a company we
want to have coletti's revenue faster
than it needs to pay them so playoffs so
you don't have your money
honking outside and you have suppliers
draft P and you don't have money to pay
them o you having to borrow from bank to
pay your suppliers out in this event we
are standing inventory turnover of
quickly value
or fasting of you consume your inventory
fixed assets turnover total assets
turnover there is also leverage ratios
so there is the debt ratio there is the
debt to equity ratio there is the times
interest kava times interest end times
interest
and
so times interest and there's these are
the common ones with the manual that
those who are purchased our course have
use the formula to compute all of this
and maybe just one last thing I think
here where roots interest cover it
should be tax the tax cover you get to
tax cover okay so I mean I guess I was
last in to modify so thank you very much
and I hope with this you've been able to
get a very maybe a lots in it in a short
amount of time but then the good thing
it's a video you can pause you can try
and do it long so for those who take our
courses you get the practice files you
can work with we even give you other
practice companies real companies video
data to work on thank you very much