Financial Modeling and Valuation - A Practical Guide to Investment Banking and Private Equity

The fully revised new edition of the best-selling guide to using financial models to determine if a stock is over or undervalued
 
Written by the founder and CEO of the world-renowned New York School of Finance, Financial Modeling and Valuation provides clear and systematic guidance on accurately evaluating the soundness of a stock investment. This invaluable handbook equips investors with the tools necessary for understanding the underlying fundamentals of a rational investment and for making smarter investment decisions in any market environment.
 
Built around an in-depth case study of global retail leader Amazon, this fully updated Second Edition shows you how to analyze the financial standing of a company using the methods of Wall Street professionals. Step-by-step, you will learn to build the core three statements--income statement, cash flow statement, and balance sheet--as well as the three major supporting schedules required for complete company valuation and analysis. All line items are explained in clear language and include real-world tips and techniques for using them as tools for valuing and managing a business. This must-have guide:
* Features new and in-depth case studies based on Amazon that simulate real-world modelling and valuation
* Explains valuation techniques such as illustrative comparable company analysis, precedent transactions analysis, and discounted cash flow analysis
* Covers all essential applications of a model, including pricing a stock, raising debt, and raising equity
* Includes an introductory section describing the recent and dramatic shift of the entire retail industry
* Provides end-of-chapter questions, downloadable practice models, additional case studies, and common interview questions via a companion website
 
Financial Modeling and Valuation: A Practical Guide to Investment Banking and Private Equity, Second Edition is essential reading for finance professionals, venture capitalists, individual investors, and students in investment banking and related degree programs in finance.

List of contents

Preface xv
 
The Amazon Case Study xvi
 
How This Book Is Structured xvii
 
Part One
 
Financial Statements and Projections 1
 
Chapter 1
 
The Income Statement 3
 
Revenue 4
 
Cost of Goods Sold 4
 
Gross Profit 4
 
Operating Expenses 5
 
Other Income 6
 
EBITDA 6
 
Depreciation and Amortization 8
 
EBIT 8
 
Interest 9
 
EBT 9
 
Taxes 9
 
Net Income 10
 
Non-Recurring and Extraordinary Items 10
 
Distributions 11
 
Net Income (as Reported) 11
 
Shares 11
 
Earnings per Share (EPS) 12
 
Amazon's Income Statement 12
 
Revenue 14
 
Getting to EBITDA 20
 
Digging up Depreciation 20
 
Cost of Goods Sold 23
 
Gross Profit 23
 
Fulfillment 25
 
Technology and Content 25
 
Marketing, General and Administrative,
 
Other Operating Expense (Income), Net 27
 
Total Operating Expenses 27
 
EBITDA 27
 
Beyond EBITDA 28
 
Depreciation and Amortization 28
 
EBIT 29
 
Other Income 30
 
Interest 31
 
EBT 31
 
Taxes 31
 
Net Income from Continuing Operations 32
 
Non-Recurring and Extraordinary Items 32
 
Net Income (after Non-Recurring Events) 33
 
Distributions 33
 
Net Income (as Reported) 33
 
Shares and EPS 34
 
Income Statement - Making Projections 35
 
Revenue 35
 
Cost of Goods Sold 40
 
Operating Expenses 45
 
Depreciation and Amortization 46
 
Other Income 49
 
Seven Methods of Projections 49
 
Interest Income 53
 
Taxes 53
 
Non-Recurring Events 55
 
Distributions 55
 
Equity Method Investment Activity 55
 
Dividends 57
 
Shares 57
 
Basic Shares Outstanding 57
 
Diluted Shares Outstanding and the Treasury Method 57
 
Earnings per Share 60
 
Chapter 2
 
The Cash Flow Statement 67
 
Cash from Operating Activities 67
 
Revenue 69
 
Cost of Goods Sold 69
 
Operating Expenses 69
 
Depreciation 69
 
Interest 69
 
Taxes 70
 
Cash from Investing Activities 71
 
Cash from Financing Activities 71
 
Financial Statement Flows Example 72
 
Amazon's Cash Flow Statement 78
 
Cash from Operating Activities 78
 
Cash from Investing Activities 81
 
Cash from Financing Activities 82
 
Cash Flow Statement - Making Projections 84
 
Cash from Operating Activities 85
 
Depreciation and Amortization 85
 
Stock-Based Compensation 85
 
Other Operating Expense 88
 
Other Expense (Income) 90
 
Deferred Taxes 91
 
Changes in Operating Working Capital 91
 
Cash from Investing Activities 92
 
Proceeds from Property and Equipment Sales and Incentives 98
 
Items Based on Cash Available 98
 
Cash Flow from Financing Activities 101
 
Effect of Exchange Rate on Cash 101
 
Chapter 3
 
The Balance Sheet 107
 
Assets 107
 
Current Assets 107
 
Cash and Cash Equivalents 107
 
Accounts Receivable 107
 
Inventory 108
 
Prepaid Expense 109
 
Non-Current Assets 110
 
Property, Plant, and Equipment (PP&E) 110
 
Intangible Assets 110
 
Liabilities 110
 
Current Liabilities 110
 
Accounts Payable 110
 

About the author

PAUL PIGNATARO is Founder of the New York School of Finance, a world leader in providing finance education to banks, firms, and universities throughout the world. He is also Managing Partner of Caterson Consulting, a consulting firm providing merger, acquisition, and private equity services. He is the author of the Investment Banking and Private Equity in Practice series of books. Previously, Paul worked at TH Lee Putnam Ventures, a $1 billion private equity firm affiliated with buyout giant Thomas H. Lee Partners, and at Morgan Stanley, where he worked on various transactions in the technology, energy, transportation, and business services industries.

Summary

The fully revised new edition of the best-selling guide to using financial models to determine if a stock is over or undervalued

Written by the founder and CEO of the world-renowned New York School of Finance, Financial Modeling and Valuation provides clear and systematic guidance on accurately evaluating the soundness of a stock investment. This invaluable handbook equips investors with the tools necessary for understanding the underlying fundamentals of a rational investment and for making smarter investment decisions in any market environment.

Built around an in-depth case study of global retail leader Amazon, this fully updated Second Edition shows you how to analyze the financial standing of a company using the methods of Wall Street professionals. Step-by-step, you will learn to build the core three statements--income statement, cash flow statement, and balance sheet--as well as the three major supporting schedules required for complete company valuation and analysis. All line items are explained in clear language and include real-world tips and techniques for using them as tools for valuing and managing a business. This must-have guide:
* Features new and in-depth case studies based on Amazon that simulate real-world modelling and valuation
* Explains valuation techniques such as illustrative comparable company analysis, precedent transactions analysis, and discounted cash flow analysis
* Covers all essential applications of a model, including pricing a stock, raising debt, and raising equity
* Includes an introductory section describing the recent and dramatic shift of the entire retail industry
* Provides end-of-chapter questions, downloadable practice models, additional case studies, and common interview questions via a companion website

Financial Modeling and Valuation: A Practical Guide to Investment Banking and Private Equity, Second Edition is essential reading for finance professionals, venture capitalists, individual investors, and students in investment banking and related degree programs in finance.

Product details

• Authors: P Pignataro, Paul Pignataro, Pignataro Paul
• Publisher: Wiley, John and Sons Ltd
• Languages: English
• Product format: Hardback
• Released: 31.05.2022
• EAN: 9781119808893
• ISBN: 978-1-119-80889-3
• No. of pages: 432
• Series: Wiley Finance; Wiley Finance Editions
• Subjects: Social sciences, law, business > Business > Business administration; Rechnungswesen, Bewertung, Accounting, Valuation, Corporate Finance, Finance & Investments, Finanz- u. Anlagewesen, Institutionelle Finanzplanung, Institutional & Corporate Finance