Re: additional adjustments
$42 million lease adjustment: That year, all firms with real estate (so REITs, retailers, etc) had to adjust an accounting entry for the way the FASB and SEC updated guidance on handling useful life of TI (tenant improvements); as such, since EVERY firm had to make this change in accounting princip... $42 million lease adjustment:
That year, all firms with real estate (so REITs, retailers, etc) had to adjust an accounting entry for the way the FASB and SEC updated guidance on handling useful life of TI (tenant improvements); as such, since EVERY firm had to make this change in accounting principles, we didn't adjust for anyone.

In addition, Changes in Accounting Principles are usually below Net Income, rendering it already adjusted. Read More

Re: Marshall's Cash
The $25 million of cash on Marshall Field's Balance Sheet is assumed to be required for working capital purposes. The absolute correct and most strictest definition of TEV is less "Excess Cash" in the Net Debt component, not total cash on the Balance Sheet. How do you know this specifically in th... The $25 million of cash on Marshall Field's Balance Sheet is assumed to be required for working capital purposes. The absolute correct and most strictest definition of TEV is less "Excess Cash" in the Net Debt component, not total cash on the Balance Sheet.

How do you know this specifically in this example? Based on the way the Press Release is worded "$3.24 billion for the company", and also knowing that Marshall's is a subsidiary of Target, the financial statements presented for Marshall's is the bare minimum cash required for working capital purposes and hence we do not have the ability to take extra cash. If Marshall's was a standalone entity and not a subsidiary, we most likely would have included the $25 adjustment for TEV.

Nuanced Explanation:
In the real world, when spreading trading comps, the convention is to just use total cash and not "excess cash" in TEV. However, in the M&A world, when dealing with actual purchase agreements, there is always a working capital requirement, meaning the Seller must present a company with enough working capital (as negotiated, i.e. 30 or 60 days expenses, etc). Otherwise, the purchase price is actually higher as the Acquiror would need to post up additional funds to run the business => which means TEV is higher if there isn't enough working capital handed over.

Therefore, we DO care about total cash vs excess cash in deal comps, whenever it is possible to differentiate and distinguish based on available information at the time. Read More

Re: Color Coding
Good question! You bring up a very good point that will be addressed in the live training class. In short, inputs, including the inputs that are a formula (such as -22-40) should remain blue, but we run a macro that automates hard coded cells (inputs) as blue and formulas as black. The problem i... Good question! You bring up a very good point that will be addressed in the live training class.

In short, inputs, including the inputs that are a formula (such as -22-40) should remain blue, but we run a macro that automates hard coded cells (inputs) as blue and formulas as black. The problem is, anything with an equal sign in front gets read as a formula and hence black, via this macro; hence the discrepancy.

For the grading of your pre-work submissions, just follow whatever the video does and you'll be fine. For your financial modeling exam, follow the trainer's instructions during your upcoming training. Read More

Re: Prior year's assets - Bank Financial Modeling
The logic was to avoid use of circular references. The use of Average balance (vs beginning balance which is the same as sig last year's balance) causes circular references. This is properly modeled out and explained in the Advanced Bank Modeling course.

Re: Cash
Premium should not included because once private, there is a lack of liquidity discount. In addition, if IPO'ing as an exit, the markets are priced without control premium. What is the point of "cash conversation ratio"? To calculate actual cash generated vs Net Income? For sure, we are skeptical... Premium should not included because once private, there is a lack of liquidity discount. In addition, if IPO'ing as an exit, the markets are priced without control premium.

What is the point of "cash conversation ratio"? To calculate actual cash generated vs Net Income? For sure, we are skeptical about using FCFE because it is still accrual concept of accounting; ditto for Operating Profit (whether pre- or post-tax).
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