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.

  Autorentext

  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.

  Inhalt

  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

  Accrued Liabilities 111

  Short-Term Debts 111

  Non-Current Liabilities 111

  Long-Term Debts 111

  Deferred Taxes 111

  Amazon's Balance Sheet 112

  Current Assets 113

  Non-Current Assets 113

  Operating Leases 114

  Goodwill 114

  Other Assets 114

  Current Liabilities 114

  Short-Term Debt 115

  Non-Current Liabilities 115

  Other Long-Term Liabilities 116

  Shareholders' Equity 116

  Common Stock and Additional Paid-in Capital 117

  Treasury Stock, Accumulated Other Comprehensive

  Loss and Retained Earnings 117

  Chapter 4

  Depreciation Schedule 119

  Straight-Line Depreciation 120

  Accelerated Depreciation 121

  Declining Balance 121

  Sum of the Year's Digits 122

  Modified Accelerated Cost Recovery System (MACRS) 122

  Deferred Taxes 125

  Deferred Tax Asset 125

  NOL Carryback Example 126

  Deferred Tax Liability 127

  Projecting Depreciation 129

  Straight-Line Depreciation 129

  Anchoring Formula References 133

  Projecting Deferred Taxes 152

  Chapter 5

  Working Capital 155

  Operating Working Capital 156

  Amazon's Operating Working Capital 158

  Inventories 160

  Accounts Receivable, Net and Other 162

  Accounts Payable 163

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  Accrued Expenses and Other 165

  Unearned Revenue 166

  Projecting Operating Working Capital 168

  Receivables 168

  Inventories 170

  Accounts Payable 172

  Accrued Expenses 174

  Unearned Revenue 174

  Operating Working Capital and the Cash Flow Statement 176

  Changes in Inventory 178

  Accounts Receivable 179

  Changes in Accounts Payable 181

  Changes in Accrued Expenses 182

  Changes in Unearned Revenue 182

  Chapter 6

  Balance Sheet Projections 183

  Cash Flow Statement Drives Balance Sheet vs.

  Balance Sheet Drives Cash Flow Statement 183

  Assets 185

  Inventories 186

  Accounts Receivable 188

  Liabilities 192

  Shareholders' Equity 195

  Balancing an Unbalanced Balance Sheet 196

  NYSF Balance Sheet Balancing Method 201

  Chapter 7

  The Debt Schedule, Circular References, and Finalizing the Model 205

  Debt Schedule Structure 206

  Modeling the Debt Schedule 206

  Short-Term Debt 206

  Mandatory Issuances/(Retirements) and

  Non-Mandatory Issuances/(Retirements) 210

  Long-Term Debt 214

  Debt Interest 214

  Long-Term Lease Liabilities 216

  Total Issuances/(Retirements) 219

  Total Interest Expense 219

  Cash Availabl…