Financial Modelling: Financial Statements & Cash Flow

Session 1 – Modelling Fundamentals

• Optimal Excel Settings & Shortcuts
• Types of models: matrix vs. tower, threaded vs. grouped assumptions
• Presentation formats including positive vs. negative conventions
• Types of assumptions: growth, relative and absolute

Session 2 – Building an Integrated 3-Statement Forecast

• Income statement presentation (sales, cash vs. non-cash expenses, EBIT vs. EBITDA, interest, tax and net income)
• Taxation: Marginal vs. Effective tax rates
• Dividends: growth rate vs. pay-out ratio
• Movement in PP&E
• Modelling operating working capital
• Balancing a balance sheet through the cash flow statement
• Calculation of interest expense and interest income: opening vs. average balance method
• Managing circularities in Excel: circular switches
• Building Scenarios using CHOOSE, INDEX, OFFSET, MATCH and XLOOKUP
• Building Sensitivity analysis using one and two-sided data tables
• During the day we will build two simple generic integrated 3-statement models and a 3-statement model for a public company using research consensus forecasts

Session 3 – Integrity and Error Checking

• Sense Checking techniques
• Checking formulae for column consistency
• Stress testing
• Case studies: reviewing models containing errors and applying techniques on how to identify and correct them

Session 4 – Cash Flow Statement Presentations

• Different approaches to presenting the cash flow
• Direct vs. indirect method
• Unlevered free cashflow and cashflow to equity investors
• Cash flow statements for leveraged businesses: EBITDA, Cash Flow available for Debt Service & Cash Flow available for Debt Repayments

Course Conclusion and Wrap-Up

Please note - a longer two-day version of this course is also available as an in-house option.

After graduating from Cambridge University in 1993, this course trainer worked as an auditor with Arthur Andersen, gaining a comprehensive knowledge of corporate accounting and financial statements. He qualified as a chartered accountant (ACA) and then worked in investment banking in the City of London, initially with HSBC and subsequently at Merrill Lynch. Throughout his time in the city, he was in a front office role, advising companies on several areas including valuation, financing, acquisitions, foreign exchange and derivatives. This breadth of practical experience and his passion for sharing and communicating knowledge naturally led him towards a career in financial training, and an expert in delivering training courses.

He has worked in financial training for the last ten years and delivered training courses on accounting, financial modelling, corporate finance, valuation and capital markets at investment banks, private equity and corporate finance firms throughout the world.

By the end of this course, participants will be able to:

• Apply optimal settings and shortcuts to improve modelling efficiency
• Build an integrated business and cash flow forecasting model including:
  • the three main statements
  • secondary detailed areas of analysis
• Understand the key forecasting and modelling issues for any business modelling situation, which successful financial modelling courses should always cover

• This will be presented by an experienced former accountant and investment banker who has worked in the financial training sector for over 10 years.
• This is hands-on training using Excel and is fully immersive for participants in the building of an operating and financial forecast model.
• Participants will receive instruction material as well as template and solution Excel models.

The core of this course is the building of fully integrated income statements, balance sheets and cash flow statements, with attention also paid to inputs such as working capital requirements, capex, depreciation and debt capacity.