Corporate Finance Learning®

WACC Building Components Credits to Bojan Radojicic  follow him for more finance insights! ~~~~~~~~~ 𝙏𝙝𝙚 𝙤𝙧𝙞𝙜𝙞𝙣𝙖𝙡 𝙥𝙤𝙨𝙩 𝙞𝙨 𝙝𝙚𝙧𝙚: WACC is a common way to determine required rate of return because it expresses the return that bondholders and shareholders demand to provide the company with capital. If a company's stock is highly volatile or its debt carries considerable risk, its WACC will increase as investors expect higher returns to compensate for the higher risk. Here is the components and adjustment factors Risk free rate Equity premium rate x Adjusted for releveled industry beta Size risk premium Country risk premium Specific risk premium 𝗖𝗼𝘀𝘁 𝗼𝗳 𝗲𝗾𝘂𝗶𝘁𝘆 Cost of debt before tax -Tax effects Cost of debt after tax 𝗖𝗼𝘀𝘁 𝗼𝗳 𝗱𝗲𝗯𝘁 Calculating weighted average 𝗪𝗲𝗶𝗴𝗵𝘁𝗲𝗱 𝗮𝘃𝗲𝗿𝗮𝗴𝗲 𝗰𝗼𝘀𝘁 𝗼𝗳 𝗰𝗮𝗽𝗶𝘁𝗮𝗹 ~~~~~~~~~ 📌 If you want to upgrade your career in finance, start with our Corporate Finance Modeling Masterclass: 💠 40 Lessons 💠 7 Hours of video course 💠 50 Excel modeling sheets 💠 330 pages of PDF modeling tutorial Start here: https://bojanfin.com/ ~~~~~~~~~

Learn EVERYTHING you can do in Excel Credits to Josh Aharonoff, CPA follow him for more finance insights! ~~~~~~~~~ 𝙏𝙝𝙚 𝙤𝙧𝙞𝙜𝙞𝙣𝙖𝙡 𝙥𝙤𝙨𝙩 𝙞𝙨 𝙝𝙚𝙧𝙚: It doesn’t matter what job you are in… Odds are you’ve used Microsoft Excel. And if you work in Finance & Accounting? Odds are you use it everyday. It took a long time, but I’ve gone through every area of excel’s ribbon, and summarized what it means so that you can become a pro… along with a bunch of links for you to take your learnings to the next level. Let’s go through each section 👀 👉 Download this PDF for FREE in High Res: 🔗 https://bit.ly/3S6lZql 📁 File → manage & access key areas of your workbook This is where you’ll most likely start out when you open an excel file… allowing you to create a new file…open an existing file.. and other key options. 🏠 Home → clipboard, font, alignment, number format, cell styles, and filters This is probably the most popular ribbon. Some notable tools are: • Set paste options - values, formatting, picture, and more (learn more here https://lnkd.in/e8ErFKAC) • Control cell styles - fonts, colors, sizing, borders, and more • Change cell format - whether that be as a number, currency, date, or more • Formatting cells - cell styles, insert, or deleting cells, conditional formatting (learn more here: https://lnkd.in/esVBUGrR) ⬆️ Insert → insert different elements into your excel file this is where we get one of my favorite excel tools…. tables (learn more here: https://lnkd.in/ezvEjK9Y) In this ribbon, you can also learn about: • inserting shapes & illustrations • inserting charts • sparklines and much more 📄 Page Layout → format your document for how it will look printed print your file, add a header / footer, and more 🔣Formulas → manage formulas Formulas & Functions are the heart and soul of excel. Learn more about those over here: https://lnkd.in/eHu_QAjg Then, master this section by learning: • Formula auditing →review & debug errors • Watch window → monitor the value of a specific cell • Calculation options → change the way functions are calculated 🔢Data → manage, analyze, and transform your data BIG section…because it introduces my favorite excel feature… POWER QUERY (learn more here: https://lnkd.in/eMYTuXMf) Here you can also: • Set data validation / drop downs • Group / ungroup And more 🧐Review → ensure accuracy, collaboration, and security Protect a range from being edited, utilizing notes / comments.. and more 👀 View → control how the workbook is displayed on the screen Most popular tool is hide gridlines, and duplicate a window on a 2nd monitor 🤖 Developer → write macros, use ActiveX controls, or create applications Add active x / form controls for easy buttons, write VBA, and more 🔍 Bottom menu bar → control tabs, access cell mode indicator and more Check out cell mode indicator, allowing you to understand what will happen when you hit F2 and more

10 Finance Teams Metrics & KPIs Credits to Nicolas Boucher follow him for more finance insights! ~~~~~~~~~ 𝙏𝙝𝙚 𝙤𝙧𝙞𝙜𝙞𝙣𝙖𝙡 𝙥𝙤𝙨𝙩 𝙞𝙨 𝙝𝙚𝙧𝙚: If you have a finance team, this is for you: Why should you benchmark your team? 1. Identify performance gaps: Compare financial performance with competitors to find areas for improvement 2. Set realistic targets: Analyze industry peers to set achievable revenue and profit goals 3.Improve financial processes: Identify and update inefficient financial processes 4.Foster continuous improvement: Cultivate a culture of progress and growth by setting benchmarks and tracking progress But which benchmarks can you use? Here are the top 10 benchmarks for finance team performance: 1. Accounting Payable Efficiency: • Benchmark: Number of Invoices Processed per Employee • Rationale: Measures the efficiency of the Accounts Payable team in handling invoices and vendor payments. 2. Accounts Receivable Turnover: • Benchmark: Days Sales Outstanding (DSO) • Rationale: Evaluates the effectiveness of collecting revenue after a sale. A lower DSO is generally more favorable. 3. Working Capital Management: • Benchmark: Working Capital Ratio • Rationale: Assesses the company's ability to cover short-term obligations. A higher ratio is typically preferred. 4. Financial Reporting Timeliness: • Benchmark: Time to Close Books • Rationale: Gauges the speed at which the finance team completes the financial closing process to provide accurate and timely reports. 5. Budget Variance Analysis: • Benchmark: Percentage of Budget Deviation • Rationale: Measures the variance between actual and budgeted figures to improve cost control and forecasting accuracy. 6. Return on Investment (ROI) Assessment: • Benchmark: ROI for Strategic Investments • Rationale: Compares ROI of strategic investments against industry standards to evaluate capital allocation effectiveness. 7. Expense Management: • Benchmark: Operating Expense Ratio • Rationale: Evaluates cost management efficiency by comparing operating expenses to revenue. 8. Financial Process Automation: • Benchmark: Percentage of Automated Processes • Rationale: Tracks the adoption of automated financial processes to improve efficiency and reduce errors. 9. Debt Management: •Benchmark: Debt-to-Equity Ratio •Rationale: Assesses the balance between debt and equity financing, indicating the company's financial risk level. 10. Forecast Accuracy: • Benchmark: Mean Absolute Percentage Error (MAPE) • Rationale: Measures the accuracy of financial forecasts. A lower MAPE indicates better prediction accuracy. ~~~~~~~~~ 📌 If you want to upgrade your career in finance, start with our Corporate Finance Modeling Masterclass: 💠 40 Lessons 💠 7 Hours of video course 💠 50 Excel modeling sheets 💠 330 pages of PDF modeling tutorial Start here: https://bojanfin.com/ ~~~~~~~~~

HOW TO CREATE SCENARIO PLANNING MODEL? Credits to Bojan Radojicic  follow him for more finance insights! ~~~~~~~~~ 𝙏𝙝𝙚 𝙤𝙧𝙞𝙜𝙞𝙣𝙖𝙡 𝙥𝙤𝙨𝙩 𝙞𝙨 𝙝𝙚𝙧𝙚: 𝗗𝗼𝘄𝗻𝗹𝗼𝗮𝗱 𝗙𝗥𝗘𝗘 𝗘𝘅𝗰𝗲𝗹: https://lnkd.in/dtWkXarc Scenario planning helps you prepare for the unexpected by exploring multiple possible futures, making you more agile and resilient in the face of uncertainty. 𝗧𝗵𝗶𝘀 𝗶𝘀 𝗵𝗼𝘄 𝘁𝗼 𝗯𝘂𝗶𝗹𝗱 𝗶𝘁. 1️⃣ Choose what do you want to manage: • Income statement • Balance sheet • Costs • Sales and margin Build your report layout. 2️⃣ Input historical data as baseline. You can input multiple historical period to have better overview and create patterns where reliable. 3️⃣ Determine forecasting method and calculate actual value of drivers. 4️⃣ Create possible scenarios, like Best, Base, Worst etc... Input values of your drivers for Base case, Best case and Worst case 5️⃣ Create drop list for selection of wished scenario, for easy simulation of outputs 6️⃣ Model will pick up value of selected scenario resulting for IF formula settled here 7️⃣ Model calculate forecast based od selected scenario and related drivers, including forecast of Income statement and profitability ratios

CFA Cheat Sheet An Overview of Essential Formulas Discover the Most Important Formulas:  1. Net Present Value (NPV)  2. Internal Rate of Return (IRR)  3. Weighted Average Cost of Capital (WACC)  4. Capital Asset Pricing Model (CAPM)  5. Sharpe Ratio  6. Modified Duration  7. Dividend Discount Model (DDM)  8. Black-Scholes Model (for option pricing)  9. Fama-French Three-Factor Model 10. Gordon Growth Model (a version of the DDM) Source: Wall Street Notes Wall Street Notes: https://lnkd.in/dhR8pvSm ~~~~~~~~~ 📌 If you want to upgrade your career in finance, start with our Corporate Finance Modeling Masterclass: 💠 40 Lessons 💠 7 Hours of video course 💠 50 Excel modeling sheets 💠 330 pages of PDF modeling tutorial Start here: https://bojanfin.com/ ~~~~~~~~~

10 Accounting KPIs Credits to Nicolas Boucher Boucher  follow him for more finance insights! ~~~~~~~~~ 𝙏𝙝𝙚 𝙤𝙧𝙞𝙜𝙞𝙣𝙖𝙡 𝙥𝙤𝙨𝙩 𝙞𝙨 𝙝𝙚𝙧𝙚: You work in accounting? Bookmark this. Get my top 100 KPIs here: https://lnkd.in/e9HWNYaU These are the 10 KPIs I would recommend you to know: 1/ Accounts Receivable Turnover Description: Measures how quickly a company collects outstanding debts from customers Formula: Net Credit Sales / Average Accounts Receivable 2/ Accounts Payable Turnover Description: Measures how quickly a company pays its suppliers Formula: Total Supplier Purchases / Average Accounts Payable 3/ Working Capital Ratio Description: Measures a company's ability to meet its short-term financial obligations Formula: Current Assets / Current Liabilities 4/ Debt-to-Equity Ratio Description: Measures the proportion of a company's financing that comes from debt versus equity Formula: Total Debt / Total Equity 5/ Gross Profit Margin Description: Measures the percentage of revenue that is left over after deducting the cost of goods sold Formula: (Revenue - Cost of Goods Sold) / Revenue 6/ Net Profit Margin Description: Measures the percentage of revenue that is left over after deducting all expenses, including taxes Formula: Net Income / Revenue 7/ Return on Assets (ROA) Description: Measures how efficiently a company uses its assets to generate profits Formula: Net Income / Total Assets 8/ Return on Equity (ROE) Description: Measures how much profit a company generates with the money shareholders have invested Formula: Net Income / Total Equity 9/ Inventory Turnover Description: Measures the number of times inventory is sold and replaced during a period Formula: Cost of Goods Sold / Average Inventory 10/ Fixed Asset Turnover Description: Measures how effectively a company uses its fixed assets to generate sales Formula: Revenue / Net Fixed Assets ~~~~~~~~~ 💡 Get your guide and learn how you can use ChatGPT: https://lnkd.in/eCQU6y67 ~~~~~~~~~

The Leverage Credits to Bojan Radojicic  follow him for more finance insights! ~~~~~~~~~ 𝙏𝙝𝙚 𝙤𝙧𝙞𝙜𝙞𝙣𝙖𝙡 𝙥𝙤𝙨𝙩 𝙞𝙨 𝙝𝙚𝙧𝙚: Leverage is a powerful concept in finance and business that allows individuals and companies to use borrowed funds, assets, or resources to amplify potential returns. Here are the  main types of leverage: 𝗙𝗜𝗡𝗔𝗡𝗖𝗜𝗔𝗟 𝗟𝗘𝗩𝗘𝗥𝗔𝗚𝗘 ➡️ Definition Financial leverage involves using borrowed money (debt) to finance the acquisition of assets. The goal is to increase the potential return on equity by investing the borrowed funds in productive activities. 📔 Example A company takes out a loan to expand its operations. If the investment generates returns that exceed the cost of the debt, the company's equity holders benefit from higher profits. 𝗢𝗣𝗘𝗥𝗔𝗧𝗜𝗡𝗚 𝗟𝗘𝗩𝗘𝗥𝗔𝗚𝗘 ➡️ Definition Operating leverage occurs when a company has a higher proportion of fixed costs in its cost structure. This type of leverage magnifies the effect of changes in sales on operating income. 📔 Example A manufacturing firm with high fixed costs for machinery and facilities will see a greater increase in operating income from a given increase in sales compared to a firm with lower fixed costs. 𝗖𝗢𝗠𝗕𝗜𝗡𝗘𝗗 𝗟𝗘𝗩𝗘𝗥𝗔𝗚𝗘 ➡️ Definition Combined leverage is the use of both financial and operating leverage together. It measures the impact of both fixed financial and operating costs on the company's earnings. 📔 Example A company with high fixed operating costs and significant debt will have combined leverage. Changes in sales will significantly impact both operating income and net income due to the dual effect of operating and financial leverage.

A brief overview of ratio numbers benchmarking. It is important to note that this analysis is not exhaustive and may not be entirely reliable, as these numbers can vary significantly across different industries. The analysis presented here serves as a general benchmark. 𝗖𝗔𝗣𝗧𝗜𝗔𝗟 𝗘𝗙𝗙𝗜𝗖𝗜𝗘𝗡𝗖𝗬 𝗥𝗲𝘁𝘂𝗿𝗻 𝗼𝗻 𝗜𝗻𝘃𝗲𝘀𝘁𝗲𝗱 𝗖𝗮𝗽𝗶𝘁𝗮𝗹  8% (poor) 8-12% (medium) 12% (good)    𝗥𝗲𝘁𝘂𝗿𝗻 𝗼𝗻 𝗘𝗾𝘂𝗶𝘁𝘆 12% (poor) 12-17% (medium) 17% (good) 𝗥𝗲𝘁𝘂𝗿𝗻 𝗼𝗻 𝗖𝗮𝗽𝗶𝘁𝗮𝗹 𝗘𝗺𝗽𝗹𝗼𝘆𝗲𝗱 10% (poor) 10-14% (medium) 14% (good) 𝗢𝗣𝗘𝗥𝗔𝗧𝗜𝗢𝗡𝗔𝗟 𝗘𝗙𝗙𝗜𝗖𝗘𝗜𝗡𝗖𝗬 𝗗𝗮𝘆𝘀 𝗦𝗮𝗹𝗲𝘀 𝗢𝘂𝘁𝘀𝘁𝗮𝗻𝗱𝗶𝗻𝗴 70 (poor) 50-70 (medium) 50 (good) 𝗗𝗮𝘆𝘀 𝗜𝗻𝘃𝗲𝗻𝘁𝗼𝗿𝘆 𝗢𝘂𝘁𝘀𝘁𝗮𝗻𝗱𝗶𝗻𝗴 60 (poor) 40-60 (medium) 40 (good) 𝗖𝗮𝗽𝗘𝘅 𝘁𝗼 𝗥𝗲𝘃𝗲𝗻𝘂𝗲 12% (poor) 8-12% (medium) 8% (good) 𝗟𝗜𝗤𝗨𝗜𝗗𝗜𝗧𝗬 𝗖𝘂𝗿𝗿𝗲𝗻𝘁 𝗥𝗮𝘁𝗶𝗼 1.5 (poor) 1.5-2.5 (medium) 2.5 (good) 𝗤𝘂𝗶𝗰𝗸 𝗥𝗮𝘁𝗶𝗼 0.8 (poor) 0.8-1.2 (medium) 1.2 (good) 𝗙𝗜𝗡𝗔𝗡𝗖𝗜𝗔𝗟 𝗛𝗘𝗔𝗟𝗧𝗛 𝗗𝗲𝗯𝘁 𝗥𝗮𝘁𝗶𝗼 55% (poor) 35-55% (medium) 35% (good) 𝗜𝗻𝘁𝗮𝗻𝗴𝗶𝗯𝗹𝗲𝘀 𝘁𝗼 𝗧𝗼𝘁𝗮𝗹 𝗔𝘀𝘀𝗲𝘁𝘀 20% (poor) 10-20% (medium) 10% (good) 𝗗𝗲𝗯𝘁 / 𝗘𝗾𝘂𝗶𝘁𝘆 120% (poor) 80-120% (medium) 80% (good) 𝗘𝗕𝗜𝗧𝗗𝗔 / 𝗜𝗻𝘁𝗲𝗿𝗲𝘀𝘁 𝗘𝘅𝗽𝗲𝗻𝘀𝗲 5 (poor) 5-15 (medium) 15 (good) 𝗣𝗥𝗢𝗙𝗜𝗧𝗔𝗕𝗜𝗟𝗜𝗧𝗬 𝗚𝗿𝗼𝘀𝘀 𝗣𝗿𝗼𝗳𝗶𝘁 𝗠𝗮𝗿𝗴𝗶𝗻 40% (poor) 40-50% (medium) 50% (good) 𝗘𝗕𝗜𝗧𝗗𝗔 𝗠𝗮𝗿𝗴𝗶𝗻 10% (poor) 10-20% (medium) 20% (good) 𝗡𝗲𝘁 𝗣𝗿𝗼𝗳𝗶𝘁 𝗠𝗮𝗿𝗴𝗶𝗻 7% (poor) 7-12% (medium) 12% (good) 𝗙𝗿𝗲𝗲 𝗖𝗮𝘀𝗵 𝗙𝗹𝗼𝘄 𝗠𝗮𝗿𝗴𝗶𝗻 8% (poor) 8-15% (medium) 15% (good) ~~~~~~~~ 📌 Follow these 35 finance modeling lessons and 50 spreadsheets and transform your career. https://bojanfin.com/ Happy practicing!

Understanding EBITDA: Key Insights for Financial Mastery 12 EBITDA Facts 𝗘𝗕𝗜𝗧𝗗𝗔 𝗗𝗲𝗳𝗶𝗻𝗶𝘁𝗶𝗼𝗻: EBITDA represents the earnings before interest, tax, depreciation, and amortization. EBITDA = Net income Tax Interest Depreciation Amortization. 𝗜𝗻𝘃𝗲𝘀𝘁𝗼𝗿'𝘀 𝗩𝗶𝗲𝘄𝗽𝗼𝗶𝗻𝘁: Actually, from the investors' point of view, it reflects pure operating profit - net of expenses dependent on financing decisions, taxation, and estimated asset lifetime. 𝗥𝗲𝗰𝗼𝗴𝗻𝗶𝘁𝗶𝗼𝗻 𝗮𝗻𝗱 𝗚𝗔𝗔𝗣/𝗜𝗙𝗥𝗦: EBITDA is not a metric recognized by the generally accepted accounting principles (GAAP – US GAAP, IFRS). Companies that want to track this metric decide what to include in EBITDA on their own. 𝗩𝗮𝗹𝘂𝗮𝘁𝗶𝗼𝗻 𝗜𝗺𝗽𝗼𝗿𝘁𝗮𝗻𝗰𝗲: EBITDA is the most important KPI when it comes to business valuations. Some buyers use valuation models based on EBITDA multiples (e.g., 8x, 12x...). 𝗙𝗼𝘂𝗻𝗱𝗮𝘁𝗶𝗼𝗻 𝗳𝗼𝗿 𝗖𝗮𝘀𝗵 𝗙𝗹𝗼𝘄: EBITDA is the foundation for operating cash flow calculation by indirect method. Adjusting EBITDA with, NWC movement and Capex you can get a quick cash flow approximation. ...and more. ~~~~~~~~~ 📌 If you want to upgrade your career in finance, start with our Corporate Finance Modeling Masterclass: 💠 Planning and forecasting 💠 Cash flow management 💠 Financial statement analysis 💠 Valuations Start here: https://bojanfin.com/ ~~~~~~~~~

Corporate Finance cheat sheet Navigating corporate finance can be complex, but with the right tools, it turns into a rewarding experience. I’m excited to share key insights from Natalie Moore's "Scope of Corporate Finance Cheat Sheet," a resource that offers valuable knowledge for professionals at all levels. 📊 What's Inside? • 𝗙𝗶𝗻𝗮𝗻𝗰𝗶𝗮𝗹 𝗠𝗮𝗻𝗮𝗴𝗲𝗺𝗲𝗻𝘁 𝗦𝘁𝗿𝗮𝘁𝗲𝗴𝗶𝗲𝘀: Learn the fundamentals from budgeting to financial forecasting, and understand how to manage cash flows efficiently. • 𝗥𝗶𝘀𝗸 𝗠𝗮𝗻𝗮𝗴𝗲𝗺𝗲𝗻𝘁: Gain insights into identifying, measuring, and managing various financial risks. • I𝗻𝘃𝗲𝘀𝘁𝗺𝗲𝗻𝘁 𝗮𝗻𝗱 𝗠𝗼𝗻𝗲𝘆 𝗠𝗮𝗻𝗮𝗴𝗲𝗺𝗲𝗻𝘁: Explore the dynamics of investment banking, money management, and the roles of financial intermediaries in today's markets. • 𝗖𝗼𝗿𝗽𝗼𝗿𝗮𝘁𝗲 𝗚𝗼𝘃𝗲𝗿𝗻𝗮𝗻𝗰𝗲 𝗮𝗻𝗱 𝗖𝗼𝗺𝗽𝗹𝗶𝗮𝗻𝗰𝗲: Discover the significance of ethical governance and the role of regulatory frameworks in ensuring business integrity. • 𝗖𝗮𝗽𝗶𝘁𝗮𝗹 𝗦𝘁𝗿𝘂𝗰𝘁𝘂𝗿𝗲 𝗮𝗻𝗱 𝗙𝗶𝗻𝗮𝗻𝗰𝗶𝗻𝗴: Understand the delicate balance of debt and equity and the importance of choosing the right mix for maximizing company value. Whether you're a seasoned finance professional or just starting out, this cheat sheet offers succinct, actionable information that can help steer your financial strategies towards success. ~~~~~~~~~ 📌 If you want to upgrade your career in finance, start with our Corporate Finance Modeling Masterclass: 💠 40 Lessons 💠 7 Hours of video course 💠 50 Excel modeling sheets 💠 330 pages of PDF modeling tutorial Start here: https://bojanfin.com/ ~~~~~~~~~