Preface
The Wal-Mart Case Study
How this Book is Structured
Section 1: Financial Statements
Chapter 1: The Income Statement
Revenue
Cost of Goods Sold
Operating Expenses
Other Income
Depreciation and Amortization
Interest
Taxes
Non – Recurring Items
Distributions
Net income (as Reported)
Shares
Earnings Per Share (EPS)
Wal-Mart’s Income Statement
Revenue
Getting to EBITDA
Digging up Depreciation
Cost of Goods Sold
Gross Profit
Selling, General, and Administrative Expenses
Other Income
EBITDA
Beyond EBITDA
Depreciation
EBIT
Interest
EBT
Taxes
Net Income
Non Recurring Events
Net Income (after non-recurring events)
Distributions
Net Income (as reported)
Shares and EPS
Income Statement – Making Projections
Revenue
Cost of Goods Sold
Operating Expenses
Depreciation
Interest Income
Taxes
Non-recurring Events
Non-controlling Interest
Shares
Earnings Per Share
Chapter 2: Cash Flow Statement
Cash from Operating Activities
Revenue
Cost of Goods Sold
Operating Expenses
Depreciation
Interest
Tax
Cash from Investing Activities
Cash from Financing Activities
Example 1
Wal-Mart’s Cash Flow Statement
Cash Flow Statement – Making Projections
Cash from Operating Activities
Cash from Investing Activities
Cash Flow from Financing Activities
Dividends
Purchase of Common Stock
Purchase of Redeemable Non-controlling Interest
Payment of Capital Lease Obligations
Other Financing Activities
Effect of Exchange Rate on Cash
Chapter 3: Depreciation Schedule
Straight Line Depreciation
Accelerated Depreciation
Declining Balance
Sum of the Year’s Digits
Modified Accelerated Cost Recovery System (MACRS)
Deferred Taxes
Deferred Tax Asset
Deferred Tax Liability
Projecting Depreciation
Straight Line Depreciation
Anchoring Formula References
Accelerated Depreciation
Chapter 4: Working Capital
Asset
Current Asset
Liability
Current Liability
Operating Working Capital
Wal-Mart’s Operating Working Capital
Projecting Operating Working Capital
Operating Working Capital and the Cash Flow Statement
Changes in Accounts Receivable
Inventory
Prepaid Expenses
Changes in Accounts Payable
Changes in Accrued Liabilities
Changes in Accrued Income Taxes
Chapter 5: Balance Sheet
Assets
Current Assets
Cash and Cash Equivalents
Accounts Receivable
Inventory
Prepaid Expenses
Non-Current Assets
Liabilities
Current liabilities
Non-current liabilities
Long-term debts
Deferred Taxes
Wal-Mart’s Balance Sheet
Current Assets
Non-Current Assets
Current Liabilities
Non-current liabilities
Shareholder’s Equity
Balance Sheet Projections
Cash Flow Drives Balance Sheet vs. Balance Sheet Drives Cash Flow
Assets
Liabilities
Balancing an Unbalanced Balance Sheet
NYSF Balance Sheet Balancing Method
Chapter 6: Debt Schedule, Circular References, and Finalizing the Model
Debt Schedule Structure
Modeling the Debt Schedule
Short Term Debt
Mandatory Issuances / (Retirements) and Non-mandatory Issuances / (Retirements)
Long Term Debt Due Within One Year
Current Portion of Capital Lease Obligations
Long-term Debt
Long Term Obligations Under Capital Leases
Total Issuances / (Retirements)
Total Interest Expense
Cash Available to Pay Down Debt
Circular References
Circular Reference #Value! Errors
Automatic Debt Paydowns
Basic Switches
Finalizing the Model
Section II: Valuation
Chapter 7: What is Value?
Market Value
Enterprise Value
Multiples
Three Core Methods of Valuation
Comparable Company Analysis
Precedent Transactions Analysis
Discounted Cash Flow Analysis
Chapter 8: Discounted Cash Flow Analysis
Mid-Year vs. End-of-Year Convention
Unlevered Free Cash Flow
Weighted Average Cost of Capital
Cost of Debt
Cost of Equity
Market Risk Premium
Beta
Levering and Unlevering Beta
Terminal Value
Multiple Method
Perpetuity Method
Wal-Mart DCF Analysis
WACC
EBITDA Method
Perpetuity Method
Chapter 9: Comparable Company Analysis
Latest Twelve Months (LTM)
Calenderization
Costco as a Comparable Company
Costco Adjusted 2012 Year End
Costco Adjusted LTM Data
Costco Annual Income Statement
Costco Quarterly Income Statement
Backing into Q4
Costco Year End and LTM Adjustments
Costco Projections
Calculating Comparable Metrics
Chapter 10: Precedent Transaction Analysis
Identifying Precedent Transactions
Wal-Mart Precedent Transaction Analysis
Chapter 11: Conclusion
52 Week High / Low
Comparable Company Analysis
Precedent Transactions
Discounted Cash Flow
Appendices
Appendix 1 Model Quick Steps
Appendix 2 Financial Statement Flows
Appendix 3 Excel Hotkeys
About the Author
About the Companion Website
Index
