Forum Search: capital markets
Re: a question about the certificat?ion
For purposes of the WST Certification process, use ending balance as we did in the training.
Normally one should use Average balance for working capital ratios that mix BS and IS, but for simplicity, use ending. When in doubt, do what was done in the training for the certification.
For purposes of the WST Certification process, use ending balance as we did in the training.
Normally one should use Average balance for working capital ratios that mix BS and IS, but for simplicity, use ending. When in doubt, do what was done in the training for the certification.
Questions about total debt & preferred stock
Q1: The section of Company Overview in Package shows how to calculate total debt. In financial summary, cell F34, total debt = commercial paper+current portion of long-term debt +long-term debt. However, in cell L32, total debt/total capitalization, total debt here = F34(total debt) +preferred stock... Read More
Q1: The section of Company Overview in Package shows how to calculate total debt. In financial summary, cell F34, total debt = commercial paper+current portion of long-term debt +long-term debt. However, in cell L32, total debt/total capitalization, total debt here = F34(total debt) +preferred stock... Read More
Re: Questions about total debt & preferred stock
A1) Generally, for credit ratios, we would include all forms of debt (non-equity essentially) as part of debt and capitalization. Whereas, in the slightly more detailed schedule on the left, since we have the breakdown, we said total debt. This blends in to the larger credit analysis course. A2) Pr... Read More
A1) Generally, for credit ratios, we would include all forms of debt (non-equity essentially) as part of debt and capitalization. Whereas, in the slightly more detailed schedule on the left, since we have the breakdown, we said total debt. This blends in to the larger credit analysis course. A2) Pr... Read More
Re: Published M&A and LBO Deal Information
1) Yes, you can go to sources like http://www.thedeal.com that also tracks transactions. Resources like NYTimes Deal Book as well. Or quick frankly, a google search for something like "recent LBO deals". We're sure s... Read More
1) Yes, you can go to sources like http://www.thedeal.com that also tracks transactions. Resources like NYTimes Deal Book as well. Or quick frankly, a google search for something like "recent LBO deals". We're sure s... Read More
Off Balance Sheet Capital Commitment
Hi WST, I am evaluating a company and come across a disclosure on its financial report stating that there is, say, XYZ amount of capital commitment for building construction not included in the financial statements. So my question is should we capitalize that capital commitment on the balance sheet... Read More
Hi WST, I am evaluating a company and come across a disclosure on its financial report stating that there is, say, XYZ amount of capital commitment for building construction not included in the financial statements. So my question is should we capitalize that capital commitment on the balance sheet... Read More
Re: Off Balance Sheet Capital Commitment
For what purpose are you evaluating the company? Assuming the capital commitment is to build a building in the future: 1) for standalone going concern valuation, we don't think that this needs to be capitalized because it seems to be part of operations; if this is not the case, please provide more ... Read More
For what purpose are you evaluating the company? Assuming the capital commitment is to build a building in the future: 1) for standalone going concern valuation, we don't think that this needs to be capitalized because it seems to be part of operations; if this is not the case, please provide more ... Read More
Re: Off Balance Sheet Capital Commitment
It's an ODM technology company contemplating a public new shares issue. The purpose of the exercise is to evaluate the fair market value of the company to decide whether or not to subscribe to the offering. So if to capitalize the off balance sheet building construction commitment, what would the ... Read More
It's an ODM technology company contemplating a public new shares issue. The purpose of the exercise is to evaluate the fair market value of the company to decide whether or not to subscribe to the offering. So if to capitalize the off balance sheet building construction commitment, what would the ... Read More
Re: Off Balance Sheet Capital Commitment
To clarify then, this ODM company's commitment is to construct building/factory in future? Is this a one-time commitment or ongoing? If ongoing, we would question the need to capitalize since again, part of operations. BUT an ODM doesn't construct buildings/factories EVERY year (after growth phas... Read More
To clarify then, this ODM company's commitment is to construct building/factory in future? Is this a one-time commitment or ongoing? If ongoing, we would question the need to capitalize since again, part of operations. BUT an ODM doesn't construct buildings/factories EVERY year (after growth phas... Read More
Re: Off Balance Sheet Capital Commitment
Got it.... I guess if capitalize in PP&E then we don't depreciate it. Since like you said the factory/building is not built yet.
Got it.... I guess if capitalize in PP&E then we don't depreciate it. Since like you said the factory/building is not built yet.
The Balance Sheet must always balance! Formula Asset = Liabilities + Equity, so think of it this way, you have a house, that house is an asset worth $100,000, if you get a mortgage of $80,000 (the debt), the remaining $20,000 has to go where? Well that belongs to you, which is in the form of equity.... The Balance Sheet must always balance! Formula Asset = Liabilities + Equity, so think of it this way, you have a house, that house is an asset worth $100,000, if you get a mortgage of $80,000 (the debt), the remaining $20,000 has to go where? Well that belongs to you, which is in the form of equity. So when theory (Assets (100k) = Liabilities (80k) + Equity (20k) becomes reality is when you sell that house, you will pocket the 20k. Let's say now some time went by, and you paid off 10k on the mortgage. Well let's demonstrate what happens. The asset is still worth 100k, the liability (mortgage) is 70k, now where does that remaining 30k go? Well that's your equity. You see why it must "always" balance.
Now, in the context of the financial model, the revolver balances the model - think of it another way: say you make $100 of income this month. But you spent $120. The $20 difference is charged on your credit card (revolver). Next month, you make another $100, but you only spent $92. You have $8 of excess cash that 2nd month, which you will use to pay off your revolver of $20, leaving a net balance on revolver of $12.
A third way to explain it: As long as every item that changes on the IS and BS is reflected on the CF, you should balance. Why? Back to old school debits and credits and double-entry accounting. There's ALWAYS two entries for every transaction. Now, every item on the IS is reflected via Net Income and Retained Earnings via S/H Equity and Cash Flow Statement. So that takes care of IS integration. Go line by line thru the rest of the BS and you'll see all the working capital items reflected in CFO. Stuff like PPE is connected to CapEx (cash down), etc. Then, the Equity changes are reflected in CFF, leaving debt and revolver to cap off (see above paragraph).
Re: your iterations question - at some point the numbers don't change b/c Excel only calculates 15 decimal places. If Excel were to suddenly chanage that to 30 decimal places, then it would keep going and the numbers would change again. However, that one-gazillionth of a decimal difference has no material impact on our model. We usually observe no more than 30 or so iterations to balance, so a few hundred would be quite a bit actually. Read More