Posts by: Guest 1| Wall St. Training

How to determine reasonable debt covenants for an LBO deal?
Full Question:
How do you determine reasonable debt covenants for an LBO deal

Go to post

by Guest 1.

added 11 years ago

Re: Estimated Taxes
A saw a sort of rule of thumb while on-line --- in order to determine actual cash taxes (as in the actual amount paid to the government). The reason why I have been asking about this is that, cash taxes are very commonly used in a the FCF calculation in my field that usually goes as follows: (E... A saw a sort of rule of thumb while on-line --- in order to determine actual cash taxes (as in the actual amount paid to the government).

The reason why I have been asking about this is that, cash taxes are very commonly used in a the FCF calculation in my field that usually goes as follows: (EBITDA)-(INTEREST)-(CAPX)-(Change in WORKING CAPITAL)-(CASH TAXES) - (OTHER) = FCF

Their approach below is to......Start with book taxes from the income statement. From there, either add the year over year increase in the company's deferred income tax liability (or subtract increase in the company's deferred tax asset) ... etc...

Anyway, here is the actual blurb.......

"How Do We Calculate a Company's Cash Taxes?"

Advanced Approach. In this approach, we make a number of detailed adjustments.

1. Book taxes. We start with a company's income tax provision found on the income statement.

2. Change in deferred taxes. Next, we add the year-to-year increase in a company's deferred income tax liability (or subtract the increase in a company's deferred tax asset). These line items can be found on a company's balance sheet. However, sometimes, this liability is not separately broken out. In those cases, there are two alternate sources for a company's change in deferred taxes:

"Adjustments to reconcile net income to net cash provided by operating activities" in the "Cash flows from operating activities" section of the Cash Flow Statement. A deferred tax liability occurs when a company pays less in cash taxes than it reports in book taxes. Thus, an increase in a company's deferred tax liability represents a source of cash. Conversely, a deferred tax asset occurs when a company pays more in cash taxes than it reports in book taxes. Thus, an increase in a company's deferred tax asset represents a use of cash.

The Income Taxes section of the Notes to the Consolidated Financial Statements, where the 10-K will list the "components of the provision for income taxes". We subtract the sum of the annual U.S. and Foreign deferred income taxes from a company's income tax provision. When annual U.S. and foreign deferred taxes are positive, the company has increased its net deferred tax liability, which reduces the tax onus. Conversely, when annual U.S. and foreign deferred taxes are negative, the company has increased its net deferred tax asset, which increases the tax onus. (Note: the sum of U.S. and Foreign deferred income taxes should be identical to the number in the Cash Flow Statement.)

Do you agree with this approach or no? Or even partially?

Thanks Read More

Go to post

by Guest 1.

added 11 years ago

Finding the depreciation expense form 10K
Hi I am trying to do some financial modelling and was going to input the annual depreciation expense for the past 5 years. By looking at the consolidated income statement in form 10K (see below), the item "depreciation expense" was not stated. Net revenue Cost of sales Gross margin ... Read More

Go to post

by Guest 1.

added 11 years ago

Re: Modeling 'Names' used in IB/PE - Question
I would suggest you to start preparing for CFA exam. You can go to www.cfainstitute.org and try to understand the exam structure, curriculum etc. It will take 3 years (minimum 2.5 years) and has 3 levels. You would gain i... Read More

Go to post

by Guest 1.

added 11 years ago

What is the rationale for using PIKs in a LBO transaction?
Full Question:
What is the rationale for using PIK instruments in a LBO transaction?

Go to post

by Guest 1.

added 11 years ago

Complex Trading Comps Analysis: Convertibles of COSTCO
Why we are not considering the $22 conversion price? I might be confused about the characteristics of convertible bond. Just to make it clear: Isn't it the case that the holder of the convertible bond/note, in case of conversion gives up his/her claim on the face value in exchange of the ... Read More

Go to post

by Guest 1.

added 11 years ago

Share Based Compensation Forecast
Just wonder if you can help on my question. how should I deal with share based compensation? as they are non-cash item? I'm trying to forecast for share based compensation for a company, let's say it has option plan A, B, C with strike price at 5, 10, 15. if the stock price is now 11. A and... Read More

Go to post

by Guest 1.

added 11 years ago

Revolver, ST. Debt or LT Debt?
Hello, I"m currently looking at a company who places their revolver as Long Term Debt. From the previous financial models that Hamilton built WMT on, Revolver is placed under current liability while Long Term Debt is not. My question is, should revolvers be categorized under current liabilit... Read More

Go to post

by Guest 1.

added 11 years ago

Insurance financial modeling
Hi, I completed the insurance finacial modelling course (self-study). One issue I have found is that in the sweep, based i=on the formulas provided in the video, the minimum cash balance does not actually drive cash equirments. For example you could change the minimum cash balance in row 15 to $50... Read More

Go to post

by Guest 1.

added 11 years ago

Using different debt securities to finance an LBO
Full Question:
What is the rationale for using senior discount notes vs senior notes vs term loan vs credit facility vs cash vs PIK preferred stock

Go to post

by Guest 1.

added 11 years ago