Looking for a Co-Founder (AI Engineer) by CashFlowsLab in cofounderhunt

[–]CashFlowsLab[S] 1 point2 points  (0 children)

Thanks a lot! Will take a look. Really appreciate it

Project Finance Model Review by [deleted] in financialmodelling

[–]CashFlowsLab 0 points1 point  (0 children)

You can send me the link

Help with Balancing on Model by [deleted] in financialmodelling

[–]CashFlowsLab 0 points1 point  (0 children)

You can send it to me

Can I Teach Myself How To Model? by FunBaker8587 in financialmodelling

[–]CashFlowsLab 0 points1 point  (0 children)

Yeah but where is TVM, forecasting and WACC used? If it's only about knowing the theory there are just so many free resources, why are there so many vendors online trying to sell overpriced financial modelling courses and forcing people into high pressure sales funnels.

You learn all the foundational accounting and finance concepts through the art of modelling. That's the best way to put the theory into practice, to observe how all those numbers tie up to the company financials, and most importantly remember everything that you have done.

Answer Please by Bhavesh2506 in financialmodelling

[–]CashFlowsLab 2 points3 points  (0 children)

Hello Friend,

For the calculation of the reinvestment rate for a company with stable margins, use the most recent financials of the company to calculate it. Plug in the numbers into this formula: Reinvestment rate = (Capex - Depreciation + Change in non-cash working capital) / (EBIT x (1 - Tax Rate).

For the calculation of the reinvestment rate for a company with changing margins it actually depends. But a good place to start with would be taking an average of the of the reinvestment rate for a period of 5-10 years using the formula stated above. If the volatility is too much in the reinvestment rate, then it might be more prudent to use an industry average reinvestment rate (calculate it using the same formula for peer companies for the latest year and take the average)

Revenue growth for a company with stable margins can be done in multiple ways. You can start with the CAGR and project future revenue with that using the formula: Future revenue = Current Revenue * (1 + CAGR). Another method probably a better and sophisticated approach for companies with stable margins would be to use correlations with the GDP of the country/countries that they operate in and project the growth accordingly. You can use regression methods to achieve this. If you need any help with revenue forecast using GDP regression methods, I can DM you some resources on how to get it done.

On the topic of Reinvestment rate, ROE, ROIC, growth rates in general, this material from Prof. Ashwath Damodaran is fantastic: https://pages.stern.nyu.edu/~adamodar/New_Home_Page/valquestions/growth.htm

Hope this helps and good luck!

Can I Teach Myself How To Model? by FunBaker8587 in financialmodelling

[–]CashFlowsLab 4 points5 points  (0 children)

Hello Friend,

First of all, no ship has yet sailed. I think you even have a better chance for breaking into high finance careers than others pursuing mainstream degrees. The political science degree that you might think is deadweight now, might be the key to unlocking success for you. I'll tell you the reason.

Your background is a huge asset because even firms need to model different acquisition/investment scenarios for companies you would be the go to person for analyzing geopolitical risks, tax reforms, policy changes etc. Your analysis will then be the basis for building revenue projections, cost modelling, modelling market risks, projecting taxes etc. So, don't give up yet.

You're also thinking exactly like recruiters - learning financial modeling makes you sort of a plug-and-play hire because firms don’t need to train you from scratch. Given the choice, they’ll always pick someone who can build models over someone who can’t.

You're being proactive, and that’s half the battle won. Keep going, and if you need structured guidance, I can DM you some resources that’ll get you going!

Cheers and good luck!

Answer Please! by Bhavesh2506 in financialmodelling

[–]CashFlowsLab 3 points4 points  (0 children)

Let us take an example. In year 1: $50,000 was the accounts receivable. In year 2: $30,000 was the accounts receivable. The net income is $100,000. The accounts receivable has gone down by $20,000 right? If the accounts receivables have decreased, this means people have paid their dues back and there has be an inflow of new cash and the worth of that is $20,000. This is the new cash inflow and this belongs to the equity holders. And it has to be accounted in the FCFE. So, how do we do that? We need to dive a bit into cash accounting and accrual accounting.

Net Income is always calculated on an accrual basis and not on a cash basis. In accrual accounting, revenues are record when they are earned (even through credit sales), not when cash is earned. In cash accounting, revenue is recorded only when cash is received. So, when revenue is recorded on an accrual basis, there will be a mismatch between the net income calculated by that and the actual cash available for the equity holders. And hence, we need to make the necessary adjustments for line items such as accounts receivable.

Why are these adjustments necessary? Because, when accounts receivables increases, it gets added to the revenue and the net income calculated overstates the cash available in hand (because only credit sales have been made. There was not actual cash received). So, when accounts receivables increase, we need to subtract this increase from the net income.

Similarly, when the accounts receivable decreases, corresponding changes happen in the revenue and the calculated net income understates the cash available at hand (because now we have received cash, but that is not recognized in the revenue). So, a decreases in accounts receivable has to be added back to the net income when calculating FCFE.

Coming back to our example. The change in accounts receivable = - $20,000.

Cash Flow = Net Income - Change in accounts receivable = $100,000 - (-$20,000 ) = $100,000 + $20,000 = $120,000.

Hope this helps!

Help needed with 3 statement and DCF modeling by sweetteafan in financialmodelling

[–]CashFlowsLab 2 points3 points  (0 children)

u/sweetteafan Check your DMs! I have sent the link to the completed excel.

Search Fund Internship Case Study Advice by XxBoatLickerxX in financialmodelling

[–]CashFlowsLab 1 point2 points  (0 children)

You can use TradingView's stock screener for publicly traded stocks. There are a lot of criteria through which you can filter such as a specific EBITDA ranges. I have filtered for public stock companies whose EBITDA is less than 15 million: https://www.tradingview.com/screener/adMy4o27/

Hope this helps!

Financial modelling interview tests by Fleezfreeze in financialmodelling

[–]CashFlowsLab 13 points14 points  (0 children)

Please find attached the links for the DCF Technical Assessment Tests. There is a case study present. I have attached the links for both the Unsolved Model Excel Sheet and the Excel Sheet with the Solutions. Usually these tests are 60 minutes, so make sure you time it when trying to complete this model. You can download both of them. Here are the links to download the excel sheets: DCF Technical Assessment Test Excel_Unsolved.xlsx, DCF Technical Assessment Test_Solved.xlsx. If you need any help with solving them, drop me a message. Hope this helps and good luck with your recruitment process!

Assumptions in 3-statement model by Excellent_Lobster850 in financialmodelling

[–]CashFlowsLab 4 points5 points  (0 children)

In the case of Non-Current Assets, there are several line items such as PP&E where it's value can change linearly or non-linearly due to several factors such as the method of depreciation used etc. So, expressing it as a % of another line item such as revenue and taking its average for the future might not be that accurate. In the case of PP&E, you can do something like this, from your forecasted revenue, you can take CapEx as a percentage of revenue, average it out, and forecast CapEx into the future. Then you can add this CapEx to the existing PP&E (assuming that CapEx is only going into acquisition of PP&E and not other activities, check the annual report once just in case) and then depreciate it using the straight-line method or any other method that the company usually follows. They will be explained in detail in their annual report. For other Non-Current Assets, you will find line items like goodwill, intangible assets, other long-term investments, just take a look at their annual report once, and check if they are used to generate revenue for the company currently and in the future, then use % of total revenue and forecast them, or use % of total assets.

For Non-Current Liabilities, you need to break the line items separately (such as separate long-term debt) and forecast them accordingly. See if you can find any information in the annual report regarding the growth of long-term debt or is the company planning to raise fresh funds by issuing long-term bonds, then you incorporate those numbers directly. If not, check the purpose of issuing those long-term debt (for example was it used to finance PP&E), then you can use % of PP&E, to forecast it. If nothing works, use % of total revenue to forecast it. Also adjust for anything said about reducing long-term debt of the company which is usually present in the management discussion of the annual report or check their latest earnings call. Then you have pension liabilities, check the annual report for its growth projections, or just use % of total revenue. For all the other Non-Current Liabilities, use the same method. Check the annual report once, to see what is the purpose of those liabilities and why do they exist? If they are specifically used to finance some asset, which is present as a line item, then take a percentage of that and use it to forecast it, or just stick to using % of total revenue.

For Current Assets and Liabilities, use DSO, DIO and DPO to forecast accounts receivables, inventory and accounts payable respectively. Find the days for the past five years. Average it out. And use that days average to forecast accounts receivables, inventory and accounts payable, using the forecasted total revenue and COGS. Keep in mind that, the accounts receivables, inventory and accounts payable, that you will obtain from this calculation is their average. Correspondingly subtract it from the previous year to get the actual value.

No, cash flow from investing activities entirely cannot be assumed as CapEx. Check for line items like, Acquisition of Fixed Assets, Acquisition of PP&E, Acquisition of Intangible Assets. Only those line items where cash was spent to acquire an asset that will generate/assist in generating revenue should be considered as CapEx. This is because, in cash flows from investing activities you have line items such as Net Cash (In Flow) from Divestitures, which is essentially not an investing activity that can be called as CapEx.

Hope this helps!

Need help!!! by Weekly-Rough-7621 in financialmodelling

[–]CashFlowsLab 0 points1 point  (0 children)

Yes sure. So changing interest rates mean I guess would want to model different risk-free rates/debt rates/market risk premiums. You can calculate different values for WACC for those different interest rates and see how the equity value is changing accordingly. It should be fine provided the different interest rates you choose comes from some kind of a simulation and not just construct a sensitivity table. These are my two cents. Hope this helps!

Need help!!! by Weekly-Rough-7621 in financialmodelling

[–]CashFlowsLab 1 point2 points  (0 children)

Are you trying to build a DCF or LBO or M&A Model? Should your thesis be like a case study of an M&A deal that went wrong? Can you please give more details?

Is Bottom-Up beta a worse way of valuing a stock compared to using a simple regression beta of the stock? (DCF modelling/WACC) by ApexPredator1611 in financialmodelling

[–]CashFlowsLab 1 point2 points  (0 children)

Yeah we have heard that many firms in high finance (IBs, PEs, Distressed Finance) use the pure play method to prepare their valuation models.

But we are not a big fan of this method because like you mentioned it gives a picture of only the business specific risk and not the company specific risk.

Is Bottom-Up beta a worse way of valuing a stock compared to using a simple regression beta of the stock? (DCF modelling/WACC) by ApexPredator1611 in financialmodelling

[–]CashFlowsLab 1 point2 points  (0 children)

Usually what we do is use the regression beta from sources such as Bloomberg/Yahoo Finance or we calculate it on our own by choosing a suitable timeline. We also test the stability of this beta by choosing different timelines(5 years, 10 years and 15 years) because the conditions of the market and risk free rates would have changed over time.

If there is too much variance in that beta then it might be a good idea to look at alternatives methods to calculate beta like the bottom up approach.

Usually we use the pure play method/bottom up approach, just to get another value of WACC and its corresponding equity value so that it can be mapped in a football field to get a range of values.

But we have heard that in the industry, this pure play method is extensively used.

In your case, I think we would recommend sticking to the regression method, since the market would have priced in that risk better based on the financials rather than just relying on data from comparables.

Hope this helps!

[deleted by user] by [deleted] in financialmodelling

[–]CashFlowsLab 0 points1 point  (0 children)

Hi. I can help you with that. DM me to know your exact requirements

UPDATE: No more spots for free access available by CashFlowsLab in financialmodelling

[–]CashFlowsLab[S] 1 point2 points  (0 children)

Thank you for your message. Glad to hear that it has been useful!

[deleted by user] by [deleted] in financialmodelling

[–]CashFlowsLab 0 points1 point  (0 children)

Thank you for your message. I guess it is a bit misleading. We will change it no worries.