This 3-Day program, through world class corporate cases, and demonstration of concepts through excel financial models, aims to equip the participants with the conceptual background that is necessary for analyzing and valuing business activities and companies. Participants will be exposed to a comprehensive financial statement analysis and investment decision making framework that integrates strategy, financial reporting and analysis, valuation and forecasting, and behavioral finance that drives decision making.
Participants will be required to bring their laptops for the program. A significant portion of the program concepts will be demonstrated through data and illustrations using excel spreadsheets.
At the end of this program the participants will:
- Learn the latest industry neutral strategic frameworks and choices that enhance a company’s ability to navigate external conditions better.
- Understand sound financial analysis tools- a comprehensive ratio analysis framework where a firm’s operations are separated from its investing and financing activities to better appreciate the true drivers of profitability and risk including the correlation of sales/revenues with capital allocation decisions, maintenance capital expenditure trends and working capital changes.
- Gain sound understanding on valuation/investment appraisalframeworks and their shortcomings. Overcome the inherent limitations in widely used academic methods to calculate ‘cost of capital.’ Appreciate the implicit assumptions of free cash flows and terminal value,and their impact on project outcomes and influence on decisions. Learn the key considerations/factors for forecasting a business’ financial statements and evaluating an investment/project.
- While “hard skills” like knowledge, technical skills and education are (relatively) easy to acquire and replicate, “decision-making edge” is gained from a set of “soft skills” that are more difficult to replicate or imitate. Develop awareness of how various emotional and behavioural biases impact decision making.
Module 1: Framework for Understanding Corporate Strategy
Industry and competitive analysis
Use appropriate frameworks to analyze and evaluate industry attractiveness, competitive intensity and its impact on profitability. Evaluate the impact of enduring competitive advantages or the lack of it on profitability and assessing competitive moats and new bases of competitive advantage,.
Use strategy as a tool to enable business executives to tune their decisions to their strategic environment - an increasing diversity of environments which change faster and less predictably.
The module underscores the need to recognize that different environments require different strategic approaches. Examples of how companies adapted, renewed or took an ambidextrous approach to respond to the dynamic external environments will be covered.
Module 2: Fundamental Analysis and Forecasting Frameworks
Fundamental Analysis Framework.
Breakdown ROE into components to identify the contribution from.
- Operating, investing and financing decisions.
- Evaluating their sustainability.
Analyze and evaluate a company’s financial statements to understand –
- The strategic business choices.
- Drivers of growth and performance.
Use financial statements as an anchor to forecast future performance by linking financial models to corporate strategy, industry and competitive factors and growth prospects.
- Understand the building blocks of forecasting in terms of how components of the income statements combine with components of the balance sheets and link the sales, marketing and operations activities and dovetail into the cash flow statement.
- Differentiate among outcomes, those attributable to external conditions that can’t be extrapolated or influenced v/s strategic decisions and operational performance which can be controlled.
- Overview of the principles essential for sound and effective forecasting and minimizing unrealistic and incompatible assumptions and appreciate the centrality of probabilistic thinking to sound forecasting.
Module 3: Applied Valuation
- Discussion on the various valuation methods and relevance in numerous conditions.
- Factoring the impact of the major constraints of DCF Valuation, particularly in its components- free cash flows, discount rate and terminal value, which could lead to misleading conclusions.
- Discussion on various ways to calculate the discount rate, the pros and cons of those rates and the circumstances they are best suited for.
Module 4: Practical Application of the concepts
Participants will be provided with blocks of information and details and with which they will be encouraged and guided to integrate and apply the concepts covered. Challenges are set throughout the training to enforce the knowledge and skills learnt.
- Using the excel spreadsheets, containing financial statements frameworks that can be used to visualize the outcomes of learning and decisions. Participants will input data into the master sheet and see the impact automatically populated on the corresponding subset sheets (3 financial statements and schedules) and use of NPV and other valuation tools in Excel to arrive at outcomes.
Module 5: Behavioural Finance
This module will provide a broad overview of Behavioural Finance, a topic that is becoming popular even among the top ranked professionals and executives. Behavioural Finance examines the influence of individual emotions and biases and group psychology on economic (both micro and macro) decisions, and how psychology undermines business models that are based on assumptions of rational decision making and efficient markets. Being aware of how emotions and biases impact decision making will enable participants to put efforts to avoid the pitfalls.