Financial Management- Terminology and Techniques

Task description:• students should critically analyze financial terminology and techniques. Aset of company accounts profit and loss account cash flow statements. In addition balance sheet financial management inputs, and management accounting information. Students should audit published financial information. Determine the limitations of such information and generate relevant recommendations as well. State financial management problems that the chosen company is facing. Also provide solutions through the use of financial management concepts within a business context. Finally, critically appraise the limitations of financial management figures. Sensitivities for business decision-making by using various financial management and financial valuation techniques outlined above.

The description of the company and the real financial management situation shall be no longer than 25 percent of the paper, 750 words. Students here have to introduce the chosen company from a financial management perspective outlining the industry. The company and the main Financial Reports findings. Tools may include the Five Forces analysis for the industry. SWOT analysis for the company and vertical or horizontal analysis for the Financial Reports. The bottom line is the financial analysis preparing the financial measures and the Discounted Cash Flow analysis (DCF). The complex set of financial techniques shall be no longer than 25 percent of the paper, 750 words. Students should first of all comment on the risk profile of the company . They should also outline its bond rating and debt financing costs. Evaluating the overall riskiness of the industry and the specific company position within the industry.

Further Description

Following the cost of debt, the cost of equity has to be calculated within the CAPM framework. Triangulate the resulting weight average cost of equity (WACC) . With other industry players also reflecting the company’s financial structure and risk level. Where applicable, project NPVs and IRRs need to be calculated additionally to evaluate project investment, capital budgeting and other separate investment decisions. The calculation of the EVA should be contrasted to the total Market Value Added (MVA) as practiced during the seminars.• The introduction of the discounted cash flow analysis techniques shall be no longer than 50 percent of the paper, 1250 words. Students need to choose either the Free Cash Flow to Equity (FCFE) or the Free Cash Flow to Firm (FCFF) valuation models.

The analysis of the Financial Statements is essential to be able to use the percentage-of-sales financial forecasting technique, as practiced during the seminars. The forecasting of the line items such as NOPAT, CAPEX and NWC resulting in the Free Cash Flow should be discounted to current state with the previously calculated WACC or cost of equity. Students are also going to calculate the Beta with regressing stock and market returns for one year. For the Terminal Value (TV) calculation it is essential to double check calculations with scenario and sensitivity analysis and relative valuation methods. The use of the return on net assets (RONA) is key to determine the overall financial efficiency of the firm.

The comparison to other industry players using Enterprise Value (EV), Earnings Before Interest and Taxes (EBIT), Earnings Before Interest and Taxes, Depreciation and Amortization (EBITDA) and Price / Earnings (P/E) ratios is essential to outline the current valuation of the firm.

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