Valuation Part 1 Presented by: Elson ong

1. Valuation Part 1 Presented by: Elson ong 1) Several Key Financial Metrics 2) How to Identify Them in An Annual Report Yale-NUS Investment Masterminds

2. Auditing The Big 4 Auditing Firms: Deloitte & Touche Ernest & Young KPMG PricewaterhouseCoopers (PwC) Yale-NUS Investment Masterminds

3. Types of Financial Statements • Profit and Loss Statement • Summarizes the revenues, costs and expenses incurred during a specific period of time • Also known as Income statement • Balance Sheet • Summarizes the company’s assets, liabilities and company’s equity • Cash Flow Statements • Provides all cash inflows a company receives from both its ongoing operations and external investment sources, as well as all cash outflows that pay for business activities and investments • Helps investors see if a company is having trouble with cash Yale-NUS Investment Masterminds

4. Profit and loss statement • Key Terms: • Revenue • Amount made by the firm (Price of Goods Sold*Unit of Goods Sold) • Operating Profit • Revenue less Expenses (Except Interest and Taxes) • Depreciation • Cost of a tangible asset over its useful life • Also known as Earnings Before Interest and Tax (EBIT) • Profit After Tax • Operating Profit Less Tax • Also known as Net Profit/Loss Yale-NUS Investment Masterminds

5. Balance Sheet Assets = Liabilities + Owners Equity Yale-NUS Investment Masterminds

6. Balance Sheet • Assets • Current Assets • Value of all assets that are reasonably expected to be converted into cash within one year in the normal course of business • Eg: Cash, Accounts Receivables and Prepaid Expenses • Noncurrent Assets • Long-term investments, in the case that the full value will not be realized within the accounting year • Eg: Property, Plant, Equipment and Goodwill Yale-NUS Investment Masterminds

7. Balance Sheet • Liabilities • Current liabilities • A company's debts or obligations that are due within one year • Eg: Short term debt , Accounts Payable and Taxes Payable • Noncurrent liabilities • A business's long-term financial obligations that are not due within the present accounting year • Eg: Long-term borrowing and Bonds payable Yale-NUS Investment Masterminds

8. Balance Sheet • Owners Equity • Also known as Shareholder’s Equity • Share Capital • Amount of funds contributed by Shareholders • Reserves/Retained Earnings • Portion of a company's net income, which is kept by the company instead of being paid out as dividends to equity holders. • Net Profit – Dividends Yale-NUS Investment Masterminds

9. Cash Flow statements • Key Terms: • Cash Flows from Operating Activities • Money a company brings in from ongoing, regular business activities, such as manufacturing and selling goods or providing a service • Cash Flow From Operating Activities = EBIT + Depreciation - Taxes Yale-NUS Investment Masterminds

10. Cash Flow statements • Key Terms: • Cash Flows from Investing Activities • Change in a company's cash position resulting from any gains (or losses) from investments in the financial markets and operating subsidiaries, and changes resulting from amounts spent on investments in capital assets such as plant and equipment Yale-NUS Investment Masterminds

11. Cash Flow statements • Key Terms: • Cash Flows from Financing Activities • Accounts for external activities that allow a firm to raise capital and repay investors, such as issuing cash dividends, adding or changing loans or issuing more stock. • Cash Flows from Financing Activities = Cash Received from Issuing Stock or Debt - Cash Paid as Dividends and Re-Acquisition of Debt/Stock Yale-NUS Investment Masterminds

12. Valuation Part 1 Presented by: Elson ong Any Questions?