FORECAST METHODS TIME PERIODS Balance sheet & Funding options Income statement accounts Pricing (DCF, WACC Ratio DDM, Analysis& Work sheet FCFF, DEBT SCHEDULER FCFE,APV Reports Accounts spread Etc… Sheet Methods) What if analysis (Mergers & acquisitions) Currency translator ConsolidatorTax & valuation options
HSF Select .ALC fileTime period set up wizard Define no of Base Years Forecasting years Fiscal years EXTENDED SET UP Time periods DEAL PERIODS Actual periods Summary information
The Accounts spreadsheet displays accounts in financial models. You enter data, company and account descriptions, scenario names, time period headings, account notes, and subaccount son the Accounts spreadsheet. Financial data consists of historical results and forecast assumptions. If some accounts have similar properties, you bulk manage them with account groups to lower administrative overhead. Input accounts : manually you can enter Historical & forecast periods Calculated accounts : automatically calculated or from formulas ,calculated options EX : EBIT , EBITDA , EBT , PAT With subaccounts, you can create additional accounts aggregating into total accounts, and user defined accounts. You create subaccounts for additional input detail in main accounts We can Add/delete/modify subaccounts in accounts spread sheet. Sub accounts can be subtotaled using subtotal option. Auto numbering :You use Auto number to create multiple subaccounts in batch. Renumbering :We use Renumber Subaccount (single/multiple )to change a subaccount number and all of its references in the model, freeing previous numbers for reuse.
CURRENCY ACCOUNTSCustom ratios & Debt covenant 34 –finance ratios10 –customized ratios- to calculate OWN ratios
Main accounts Total inventories -2040.00.000Related Accounts Total change in inventories-2040.01.000 Sub accounts Raw materials- 2040.00.010 Work-in progress-2040.00.020 Finished goods -2040.00.030
User-defined&Main accounts subaccounts Memo accounts Debt covenant accounts Calculate & store data For formulas other 1) Add/delete/modify Accounts . Financial ratios(34) Subaccounts in accts Means assign relation ship Custom ratios(10)-toEnter input values Spread sheet Calculate ownAccount description Between memo accounts 1)Create multiple & other accounts . (using free form ) ratios Data format accounts in a batchSpecify annotation( Example : annual sales based (auto Numbering) On price (memo account-1)& 2)Debt covenant-establish For reports 2) To change the sub measures , testing an entity’s Quantity Account no & its reference (memo account-2 ) Ability to meet performance Number (renumbering) Create free form sales for sales standards Account groups Data view Access control Data views filter and manipulate the amount of data displayed on the Accounts view, and you select them To manage accounts in a bulk from Data view Three default data views Access Control enables defining group or Example : you want to Access Names, establishing passwords, Standard-displays standard manage all and creating restrictions for local files. accounts. Income statements Input Only—displays input You can copy group and copy access In a group with data accounts. privileges from other groups Output Only—displays output accounts.
As Actual Value Enter data as the actual value as defined by the default currency units.Growth Rate Enter data as an annual growth rate. For example, for Sales growth of 10% per year, enter a 10 for the forecast period input.Growth Rate (Year over Year) Enter data as a growth rate over the same period one year prior. For example, if January 2003 Sales are to be 5% higher than January 2002 Sales, enter 5 in January 2003.Percent of Another Account Enter data for one account as a percent of another account (Associated Account) in the same period. For example, for Cost of Goods Sold as 46% of Sales, enter 46 for the forecast period input.Percent of Prior-Period Account Enter data for one account as a percent of another account in the prior period. For example, Depreciation Expense can be entered as a percent of the prior-period ending balance of Fixed Assets.Percent of Change in Another Account Enter data for one account as a percent of the increase in another account. For example, the Increase in Accounts Receivable can be entered as a percent of the change in Sales.Percent of Average Account : Enter data for an account as a percent of the average value of another account during the current and prior periods. This option can be used to forecast interest based on the average debt balance.
Days Enter data for an account as the number of days (typically of sales or cost of goods sold) which this item represents. It is most commonly used for working capital balances, such as receivables and payables forecasting. Example : Accounts Receivable balance is calculated as follows in each forecast period: (Input for Days / No. of Days in Period) * Sales = Accts. Receivable Balance.Turns Enter data for an account as the number of turns (how often the balance turns over) this item represents. This method is most commonly applied to inventory forecasting.Absolute Multiple of Another Account Enter data for one account as an absolute multiple of another account (Associated Account) in the same period. This method is primarily used for price/quantity forecastingDefault Multiple of Another Account Enter data for one account as a default currency unit multiple of another account (Associated Account) in the same period. This method is also primarily used for price/quantity forecasting.Free Form Forecasting Methods The other forecasting method available to users is the freeform method where the users can model out the forecast methods using formulas that could include accounts, time periods and a slew of other functions Min, Max etc.Forecasting using Grid Pricing You use Grid Pricing to model varying interest rates over time by incrementing/decrementing rates based on company performance against a metric.
Funding options specify the way how to manage cash Surplus/Deficit
Funding options is a sophisticated but easy-to-use feature that helps you optimize your capital structure and treasury strategies, thereby lowering your financing costs. It provides a variety of methods for specifying the way cash surpluses and deficits are treated in your model such as debt borrowing and repayments, dividend payments and share issues or repurchases Funding Options enable you to pay off debt accounts with cash from surplus accounts. You specify which surplus accounts go to which debt accounts, and the order they should be repaid. You can specify fund sources the company should borrow from in paying deficits. You can identify affordable dividends, handling of common and preferred stocks, and issuance or repurchase of shares.
Standard method Target capital Common Method: structure method: Common attributes in funding Standard method with a options surplus :Zero Based :for an account to be set to zero Enter accounts in the Applybefore the funding sequence Cash Surplus to... list to The target capital structure methodbegins—the account starts with a achieve: manages the priority of thezero balance. Increasing Marketable category surpluses and deficits inNo Maximum : Securitiesfor an account to accept or fund Repayment of Debt each of up to three fundingwith no cap or maximum. Reduction in Revolving categories. When using the target Balances capital structure, you specify aSpecify Minimum if an account torequires a time series of Retirement of Preferred Stock target debt capacity and, if needed,assumptions when the balance of Acquisition of Treasury Stock a target preferred capacity for yourthe funding account should not go (Common Shares and Newbelow. Common Shares planning entity. Funding options enable you to specify the order ofIn Minimum change., enter a funding accounts to achieve targetminimum amount that the account Standard method with a deficit category levels.must change to be part of the :funding. If the minimum change is Enter accounts in the Applynot met, the account is not utilized Target capital method with afunding surplus or deficit. The Cash Surplus to... list to surplus :value entered should reflect the achieve:Default Currency of the file—for Decreasing Marketable Affordable dividend.example, if the file is in Thousands Securities Repurchase of stockof Dollars, a 10 would reflect aminimum change of $10,000. Increase in Revolving Balances Target capital with a deficit :From funding options we can Issuance of Preferred Stock Issuing new shares –issuance ofModeling Revolver and Term Issuance of Common StockAccounts Using forecast methods common stocktool . Sale of Treasury Stock Sale of treasury stock
Borrowing Activity: Repayment activity: 1)HSF analyzes the Debt borrowing capacity 2) Then allows you tocreate Fixed & variable Debt instruments 1) Calculates the 3) Calculates Bond amortization schedule premium/discount/issuing 2)Decide no of years to expenses repay 4)Manage cash flows 3) Setting principalinvolved in debt instruments amount/schedule such as Amortization payments/interest rates
Crystal Ball is for the decision-maker, from the businessperson analyzing the potential for new markets to the scientist evaluating experiments and hypotheses. Modeling : A model is a combination of data and logic constructed to predict the behavior and performance of business process or service. Crystal Ball works with spreadsheet models, specifically MS Excel spreadsheet models. Simulation : The application of models to predict future outcomes with known and uncertain inputs.
Perpetuity –method :expects continuous growth Growth in perpetuity : CAGR Value growth duration : stages in Maturity/decline/constant growth P/E & M/B ratios : used for comparable firms approach Liquidation value : estimate the worth at the end of the period
A valuation method used to estimate the attractiveness of an investment opportunity. Discounted cash flow (DCF) analysis uses future free cash flow projections and discounts them (most often using the weighted average cost of capital) to arrive at a present value, which is used to evaluate the potential for investment. If the value arrived at through DCF analysis is higher than the current cost of the investment, the opportunity may be a good one.
Free cash flow to the firm(Net cash flow ) = EBIT (1 – t) + Depreciation&Amortization – Capital expenditure – Change in working capital. DCF FCFE The cash flow to equity model is used to value only the equity FCFE APV stake in the business. The cash flow to firm The adjusted present value approach is used to compute approach is used to value each the value of the entire firm, =Net profit which includes cash flows claim on the firm separately. In this approach, the firm is valued –(capital exp- FCF(1+g) available to all the suppliers of in pieces, beginning with Depreciation)(1-debt capital to the firm like the operations and adding the effects ----------- financing ratio) equity holders, bondholders and preferred stock holders. on value of debt and other equity claim holders. (ke-g) -(changes in net working capital (1-debt Value of the firm =Value of financing ratio) all equity financed firm + PV of tax benefits =FCF – Expected bankruptcy costs Terminal value : - Terminal value:- No terminal (Last year value * g ) (Last year value *g) Terminal Value: value --------------------------- --------------- (EBIT(1-T) (Ke-g)(1+g)^ n (WACC-g)(1+g)^n -------------- (Discount factor –g)Discounted at Discount atWACC & Real Discounted at cost Discounted at cost of capital (WACC) Un -levered cost of rate of equity (Ke) equity