This course gives a comprehensive overview of the basic concepts of corporate finance and firm valuation. After completing the course, you should be able to assess the fair market value of a firm using state-of-the-art valuation methods.
Firm Valuation: Fundamentals is a bundle of courses. In addition to specific course content, this bundle includes subscriptions to the individual modules Financial Analysis for Managers, Relative Valuation, Financial Planning for Managers, Cost of Capital and Valuation, Continuing Value as well as Startup Valuation.
This modules inquires into the relevance of financing decisions in the real world. In particular, it takes a close look at the various costs and benefits of debt financing, including tax effects, distress costs, and potential "agency" problems. We also present a simple yet powerful model to better understand the incentive implications of debt financing as well as the valuation of debt and equity. Finally, the module presents the major capital structure theories and illustrates how firms can solve the various trade-off to find an optimal leverage range.
When valuing firms, the market generally assumes a very long-term perspective. This module shows how to incorporate such a long-term perspective in our firm valuation framework. It also discusses key relations between growth, investment policy, and value creation in the long run. Finally, it presents a simplified model that allows us to assess the value of mature companies with only 5 assumptions.
It turns out that the expected cash flows that arise after the years that are typically covered by the financial plan financial plan often account for 50% or more of firm value. It is therefore crucial to understand and assess this so-called continuing value.
In this course, we learn how financial leverage affect a firm's cost of capital and how we can actually capitalize firm cash flows. After we have discussed in detail the issues of financial planning and cash flow estimation in the course Financial Planning for Managers, this course takes the logical next step towards the estimation of firm value.
We present two conceptual approaches towards the estimation of firm value: the so-called DCF-WACC approach and the DCF-APV approach. We also learn how to estimate the WACC (Weighted Average Cost of Capital) in practice.
The purpose of this module is to learn how to get from the valuation of a company to the actual deal (e.g., acquisition, financing round). This is the topic of financial deal making. The module shows how to use relatively simple finance tools to bridge valuation gaps and bring buyers and sellers together. It discusses the basic principles of financial deal making and shows the main elements of a typical deal structure. The terms of financial deals are usually summarized in the term sheet. We learn how to read or draft such term sheets, what the individual clauses actually mean, and how these clauses determine the allocation of returns, control, and liquidity among the parties of the deal.
In this course, we learn how to read and analyze financial statements. Most importantly, we learn how to quickly assess the financial health and performance of a company and how to interpret the most important financial ratios. Very often, a detailed financial analysis is the starting point for important corporate decisions. Financial analysis also provides very useful information for Financial Planning and Valuation.
Financial planning is one of the key tools of financial management. In this course, we first discuss in detail how to derive cash flows from the firm's balance sheets and income statements. Then we take a closer look at the critical issue of how to project cash flows. The result of these projections will be the firm's financial plan. We look at a comprehensive financial planning case and learn how to use Monte Carlo Simulation to transform financial plans into powerful management tools.
This module introduces you to the most popular valuation approach among practitioners: Relative valuation. Its popularity is based on the fact that relative valuation is fairly simple to conduct and very easy to communicate. However, in order to properly apply this method, we need to take a careful look at what valuation multiples actually are and how we can use them to value firms or their equity. We also take a careful look at the most popular multiple among financial analysts: The P/E ratio.
How to value startup company? The valuation of startups is arguably the most fascinating but also the most daunting valuation challenge. Many investors such as business angels, startup funds, and venture capitalists face this challenge when trying to determine whether a new venture promises to be an attractive investment opportunity.
Firm Valuation has covered in many details the standard techniques to value relatively mature companies. The purpose of this section is to understand the specific challenges we face when valuing startup firms and to see how we can adjust the standard valuation techniques to at least roughly assess the potential financial value of a new venture.