Business Analysis and Valuation Exam Notes

Topic 7:
NOA1=NOA0+OIt – (C1-I1)
NFO1=NFO0+NFE1 – (C1-I1)+d1
NFA1=NFA0+NFI1 - (C1-I1)-d1
CSE1=CSE0+OI1 – NFE1 – d1
NI1=OI1 - NFE1
(C1-I1) = d1+F1 d1=div+ share buyback – share issues
F=net purchases of FAs – interest on FAs – net issue of debt + Interest on debt d=C-I+NFI-NFA d=C-I-NFE+NFO
FCF=OI-NOA (Method 1)
FCF=NFA-NFI+d (Method 2)
FCF=NFO+NFE+d
CSE=NOA+NFA/(-NFO)
CSE1=CSE0+Earnt-dt
Net Operating Accruals
= OI1 – C1 or NOA – I1
If C-I-i > d: lend or buy down debt.
If C-I-i < d: borrow or reduce lending.
The rate of return from investing in a firms’ stock is its holding period return. [(div+P1)/P0].
Topic 8:
Reformulated CSE Statement
CSE0
+Net transactions with s/holders
+Share issues
- Share buy backs
- Dividends
+Comprehensive Income
+NI reported
+/- securities avail. For sale
+/- currency translations
+/- hedging
+/- prior earnings restatements
CSE1
Table 8.1 of Dirty Surplus Items:
OI Items
Changes in accting for contingencies
Additional minimum pension liability
Tax benefits of loss carry-forwards acquires
Tax benefits of dividends paid to ESOPs
Unrealized gains and losses on equity securities avail. For sale
Some adjustments of deferred tax valuation allowances funding status of pension plans
Financing inc (or exp) items
Preferred dividends
Unrealized gains on losses on debt securities avail. For sale
Operating or Financing inc items
F.C. translation gains (losses)
Gains(losses) on derivative instruments for hedging purposes
Restatement of prior years’ income due to accting principles.
Bal/sheet items to be reclassified
Credits to s/holders’ equity for stock compensation exp.
Dividends payable.
Topic 9:
Effective tax rate for operations
Tax on OIOI before tax
ReOI1=OI1 - ( - 1) NOA0
Operating PM from sales
OI from Sales (after tax)Sales
Net CI Margin = CI/Sales
RNOA = OI/Ave. NOA
NBC = NFE/Ave. NFO
RNFA = NFI/Ave. NFA
ROCE = Earn (CI)/Ave. CSE
OLLEV = OL/NOA
Capitalization Ratio =