Managerial Finance and Financial Statements Analysis

Phil H. Latimier, Ph.D. [email protected] CEL # 33.(0)6.63.14.92.97 4 MASTER CLASS

PROFESSOR : PHIL H. LATIMIER, Ph.D.

AN INTEGRATIVE COURSE ON CORPORATE FINANCE & CREDIT RISK MANAGEMENT

30 HOURS

UNDERSTANDING CASH FLOW & FINANCIAL STATEMENTS ANALYSIS, KEY ISSUES IN MANAGERIAL FINANCE & SPECIAL TOPICS IN CORPORATE FINANCE, BEST LENDING PRACTICES AND RISKS MANAGEMENT

. OVERVIEW OBJECTIVES OF THE COURSE IS TO GAIN BEST PRACTICE IN CREDIT RISK MANAGEMENT. THE COURSE CONSISTS OF 15 SESSIONS OF 3 HOURS EACH APPROXIMATIVELY WITH A 15/20 MINUTE BREAK DURING EACH SESSION. CLASS PRESENTATIONS BY DELEGATES WILL HAVE TO BE DELIVERED ON THE VERY LAST DAY OF THE SEMINAR USING METHODOLOGIES DEVELOPED IN CLASS BY INSTRUCTOR AND UNDER THE COACHING OF THE INSTRUCTOR.

 IMPORTANT NOTICE: In order to better involve each delegate the evaluation process to be arranged during the last day of seminar is as follows:

1- An integrative group presentation on cash-flow statement/financial statements analysis including SWOT and PEST analysis and leverage ( DOL, DFL, DTL ) & Cost of Capital ( WACC, WMCC, IOS ) and Shareholder Value Creation benchmarks ( IRR, NPV, DISCOUNTED PAYBACK, PROFITABILITY INDEX ) will have to be formally conducted in class by delegates on the basis of the methodologies developed by the instructor based on real world company cases . 2- Assignment of Real World Case Study to Delegates at the end of the second day of the semianr by Instructor. 3- Presentations will be held on the last day of the seminar( unless otherwise stated ). 4- This homework class assignment will require some internet access by delegates to retrieve relevant data from companies’ websites. 5- Presentations will be made under the supervision of ad-hoc Credit/Investment and Shareholder Committees to search their approvals. [email protected] ®Copyright 2013- 1 * The proposed agenda is offered on a tentative basis subject to time and logistics constraints Phil H. Latimier, Ph.D. [email protected] CEL # 33.(0)6.63.14.92.97 4

SESSION # 1

1. REMINDERS REGARDING RELATIONSHIPS BETWEEN CASH FLOWS, LEVERAGE AND CAPITAL STRUCTURE : .OPERATING LEVERAGE . FINANCIAL LEVERAGE . TOTAL LEVERAGE . APPLICATIONS AND TRUE/FALSE

2. PROFIT PLANNING AND APPLICATIONS

3. INTRODUCTION TO TYPES OF CAPITAL AND CAPITAL STRUCTURE THEORY. SESSION # 2

4. REFRESHMENTS REGARDING RELATIONSHIPS BETWEEN CASH FLOWS, TIME VALUE OF MONEY AND KEY CAPITAL BUDGETING TECHNIQUES :

. PAYBACK PERIOD, NPV, IRR . PROS AND CONS OF PAYBACK PERIOD, NPV AND IRR DECISION CRITERIA. . CALCULATING IRR

5. INTRODUCTION TO RISK IN CAPITAL BUDGETING : . RISK AND CASH INFLOWS . INTERNATIONAL RISK AND FOREIGN DIRECT INVESTMENT CONSIDERATIONS.

. RISK-ADJUSTED DISCOUNT RATES ( RADRs) . CASH FLOWS ASSESSMENTS & CAPITAL BUDGETING REFINEMENTS ( COMPARING PROJECTS WITH UNEQUAL LIVES ). . APPLICATIONS. SESSION # 3

6. CASH FLOWS, CAPITAL RATIONING AND OVERVIEW OF THE COST OF CAPITAL : . DIFFERENCES BETWEEN DEBT AND EQUITY CAPITAL . COST OF LONG-TERM DEBT . COST OF PREFERRED STOCK . COST OF COMMON STOCK ( GORDON MODEL AND CAPM ) . WACC ( WEIGHTED AVERAGE COST OF CAPITAL ) . EVA ( ECONOMIC VALUE ADDED ) . CASH FLOWS AND THE MARGINAL COST OF CAPITAL : . WMCC ( THE WEIGHTED AVERAGE COST OF CAPITAL ) . IOS (THE INVESTMENT OPPORTUNITIES SCHEDULE . USING THE WMCC AND IOS TO MAKE FINANCING/INVESTMENT DECISIONS . WARM-UP APPLICATIONS IN CLASS . PRESENTATIONS OF REAL WORLD CASES ( BOEING, DANONE, L’OREAL, CLUB MED, ALCATEL….) [email protected] ®Copyright 2013- 2 * The proposed agenda is offered on a tentative basis subject to time and logistics constraints Phil H. Latimier, Ph.D. [email protected] CEL # 33.(0)6.63.14.92.97 . CLASS APLLICATIONS 4

SESSION # 4

7. CASH FLOWS AND PROJECT FINANCING AND ASSET-BASED FINANCE CONSIDERATIONS : . PF FUNDAMENTALS . PF, RISKS AND CASH INFLOWS . INTRODUCTION TO PF MODELLING. . COMMENTS ON REAL WORLD EXAMPLES.

8. INTRODUCTION TO CREDIT RISK MANAGEMENT : . THE 5 Cs & 5 PS . PRELEMINARY LOAN SCREENING STEPS IN A TYPICAL LOAN/INVESTMENT APPROVAL PROCESS . UTILIZATION OF A RISK EVALUATION FRAMEWORK. SESSION # 5

a. PREPARING AN INCOME STATEMENT AND A BALANCE SHEET : . COLFAX ANN CASCADE CORP APPLICATIONS.

b. FINANCIAL STATEMENTS AND ANALYSIS : . THE FOUR KEY FINANCIAL STATEMENTS . USING FINANCIAL RATIOS: . INTERESTED PARTIES, CAUTIONS ABOUT USING RATIO ANALYSIS, CATEGORIES OF FINANCIAL RATIOS (LIQUIDITY, ACTIVITY, DEBT, PROFITABILITY AND MARKET ) . A COMPLETE RATIO ANALYSIS . DUPONT SYSTEM OF ANALYSIS

4. THE BARTLETT CASE + THE COMPUTRON CASE

SESSION # 6

5. WARM-UP EXERCICES ( FINANCIAL STATEMENTS ANALYSIS ) + ZACH INDUSTRIES

6. ASSESSING MARTIN MANUFACTURING’S CURRENT FINANCIAL POSITION.

7.CLASS PRESENTATIONS OF MARTIN MANUFACTURING’S FINANCIAL POSITION BY DELEGATES FOLLOWED BY CLASS DISCUSSION & REVIEW QUESTIONS/ COMMENTS FROM COMMITTEES.

 WORKING INSTRUCTIONS : ESG STUDENTS ARE EXPECTED TO USE SPREADSHEET AND POWERPOINT FORMATS FOR THEIR PRESENTATIONS.

[email protected] ®Copyright 2013- 3 * The proposed agenda is offered on a tentative basis subject to time and logistics constraints Phil H. Latimier, Ph.D. [email protected] CEL # 33.(0)6.63.14.92.97 4 SESSION # 7

1. ANALYZING THE FIRM’S CASH FLOW : . DEPRECIATION . SAMPLE PROBLEMS ON DEPRECIATION . DEVELOPING THE STATEMENTS OF CASH FLOW . SAMPLE PROBLEMS ON IDENTIFYING USES AND SOURCES OF CASH AND STATEMENTS OF CASH FLOWS . OPERATING CASH FLOW . FREE CASH FLOW . COMPREHENSION CHECK & WARM –UP APPLICATIONS ON STATEMENTS OF CASH FLOWS . THE BARTLETT CASE

2. INTEGRATIVE PRESENTATION OF FINANCIAL STATEMENTS AND CASH FLOW ANALYSIS : THE US COMPOSITE CORPORATION.

SESSION # 8

1. SPECIAL TOPICS IN CASH FLOW ANALYSIS : . THE LEASE – VERSUS –PURCHASE DECISION . WARM –UP APPLICATIONS. . CLASS SIMULATION. 2. LONG-TERM DEBT (BOND) REFUNDING OPTION, CASH FLOWS AND THE OPTIMAL COST OF CAPITAL. . WARM- UP EXERCICES . CLASS SIMULATION.

SESSION # 9

1. CONVERTIBLE SECURITIES AND INVESTMENT BANKING ISSUES. 2. COMMON STOCK AND DIVIDEND POLICY ISSUES. 3. STOCK-PURCHASE AND WARRANTS ISSUES.

SESSION # 10

MERGERS & ACQUISITIONS AND STRATEGIC MANAGEMENT ISSUES.

[email protected] ®Copyright 2013- 4 * The proposed agenda is offered on a tentative basis subject to time and logistics constraints Phil H. Latimier, Ph.D. [email protected] CEL # 33.(0)6.63.14.92.97 4