Valuating a business

· Accounting & Financial Analysis

· Analyze quarter-to-quarter (Q/Q) performance reflecting the firm’s operating trends.

· Does the firm’s historic financial performance support management’s future goals and strategies for the business?

· Is the firm’s historic financial performance in line with the industry norms?

·  

Template for Fiscal Year Ended	2Q2011	3Q2011	4Q2011	1Q2012	2Q2012	Industry / Peers
Net Revenue
Gross Margin %
Operating Profit
Net Earning
Leverage Ratio
Net Working Capital
Liquidity Ratio
Inventory turnover ratio
ROA, ROE

 

Income Statement Analysis

· Discuss revenue recognition policies.

· Discuss changes in trends; unusual or extraordinary items

· Quality of earning: potential red flags

Balance Sheet Analysis

· Major changes in assets/liabilities

· Significant trends in liquidity, working capital and balance sheet ratios.

· Identify off-balance sheet exposure and identify potential impacts.

Cash Flow Statement Analysis

· Amount of cash generated;

· Source and uses of cash.

· Availability of funds to finance capital expenditures, expansion of business activity, etc.

5). Pro Forma Financial Analysis (Cash Flow Statements)

i). Three sets of financial projections are required (base or most likely case, worst case, best case). Results from all three cases are to be included in the forecast comparison spreadsheet. In each section the student should briefly summarize assumptions, the rationale behind the assumptions.

ii). Valuation using price multiples (comparable companies); Provide reasons why you select certain ratios

9). Conclusion: proposed action (buy, sell, hold, spin-off) and its justification