Budgeting, Financial Strategy & Driving Business Value Training

Budgeting, Financial Strategy & Driving Business Value
17 – 19 Februari 2015, 03 – 05 Maret, 14 – 16 April, 05 – 07, Mei 2015, Juni 2015, Juli 2015 , Agustus 2015, September 2015, Oktober 2015, November 2015, Desember 2015. (Tanggal dan Bulan bisa Request)

Course Background

How much more could your company be worth and how can you help to achieve this? Companies often have enormous potential to increase the intrinsic value of their businesses – and this may often be much greater than management believes or expects. Achieving consistently superior value growth is arguably what distinguishes great companies from all others.

Driving business value as a principle is not new and yet many businesses have failed to grasp that it is something that can be explicitly managed. The process of driving business value, or ‘Managing for Value’, shows how to link long-term goals expressed in the financial strategy with day-to-day management tools, like budgeting. As a process, it requires a fresh look at what each business and function can and should do to unlock new sources of value growth.

This comprehensive 3–day course is designed to help delegates to:

Understand the key challenges in financial strategy, budgeting and driving business value
Understand the critically important and often ignored linkages between financial strategy, budgeting and business value
Develop a value plan framework and link it to the strategy and key performance indicators (KPIs) in the budget
Develop a master budget and calculate financial KPIs relating to conventional profitability criteria and value creating economic profit criteria
Understand revenue budgeting and the importance of variance analysis
Understand capital budgeting and the techniques associated with it
How to apply capital budgeting techniques in financial strategy analysis
Apply the principles of economic profit analysis or alternative value-performance related measures
Understand the importance of non financial budgetary indicators and related frameworks, like the balanced scorecard
Understand value based management and the principles of managing for value

Day 1

Strategy, performance, planning and control in context – the big picture

  • Corporate strategy versus business strategy and difference from operational annual plans and budgeting

  • Link between corporate strategy, financial strategy, planning and budgeting

  • Managing for value and value based management (VBM) – managing for both short-term profit and long-term value

Basics of budgeting and variance analysis

  • Introducing a framework for categorising industry risk across a range of key factors:

  • Linking financial strategy, business unit analysis and budgeting

  • Budgeting – link with financial statements

  • Corporate strategy versus business strategy and difference from operational annual plans and budgeting

  • Income and balance sheet analysis

    – Ratio and key performance indicator (KPI) analysis

         – Pont framework for analysing business performance

         – Classification of ratios

         – Profitability ratios

         – Liquidity ratios

         – Working capital, including the importance of working capital management and the cash conversion cycle

         – Debt ratios

         – Market ratios

         – Capital structure and solvency

         – Cash flow analysis

         – Z-score analysis

    – Variance analysis

         – Basics of variance analysis

         – Flexible budgeting

    – Rolling forecasts

         – What are they and how to prepare

         – Re-forecasting when there are changes in the environment

         – Impact and likelihood analysis

         – Actions required to get back on track and achieve the goals

    – Behavioural aspects

         – Budgeting game

         – Need to link with performance measurement and reward systems

Case study: Developing and analysing a financial plan and applying the DuPont framework.

Economic profit analysis, performance measurement and key performance indicators (KPIs)

  • Performance measurement, income statement analysis and economic profit

  • Understanding and applying economic profit analysis

  • Introduction to alternative approaches – Cash Value Added (CVA), Cash Flow Return On Investment (CFROI), and Value Driver Trees (VDTs)

Day 2

Capital budgeting

Interest and time value of money concept and application

  • Compound interest, the time value of money and discounted cash flow (DCF) methodology

  • Interest rate and inflation relationship – the Fisher effect

Project appraisal/ capital budgeting techniques

  • Payback period

  • Return on investment

  • NPV and (modified) IRR analysis

  • Profitability index

  • Impact of capital rationing

  • Decision-making criteria

  • Importance of sensitivity analysis

  • Quantitative versus qualitative issues

Group work: Applying the capital budgeting techniques in practice.

Cost of capital and hurdle rates

  • Why important

    – Portfolio assessment

    – Valuation – DCF analysis

    – Performance measurement – economic profit

  • Determination of the cost of capital

    – Weighted average cost of capital

    – Cost of equity

    – Different methods, e.g. Capital asset pricing model (CAPM)

    – Understanding components:

         – Risk-free rate

         – Beta

         – Equity risk premium

         – Derivation in developing markets

    – Cost of debt

         – Different methods -including yield to maturity and credit spread

         – Debt:equity mix: book versus market values

    – Hurdle rate: what are they and why used

Case study: Reviewing a cost of capital calculation for a publicly traded company.

Day 3

Using the tools of project appraisal to evaluate strategy in financial terms

  • Using valuation principles to examine financial strategy

  • Valuation components for strategy valuation focussing upon differences from project appraisal and project financing decisions

    – Derivation of cash flows using value driver information and financial statements

    – Time and competitive advantage period

    – Key challenges, e.g. estimating terminal value

    – Value drivers – definition and application

    – Market signals analysis -triangulation and share price


Case studies: Strategic value analysis of a publicly traded company.

Managing for value and value based management (VBM)

  • Definition and principles

  • Managing for both short-term profit and long-term value

  • Link between managing for value and operational plans

  • Value shifts and conglomerate discount

  • Examples, including ‘parenting’ of strategic business units

  • Consolidated versus business perspective – sum of the parts analysis

  • How to use the corporate valuation toolkit to value strategic business units

  • Deriving the strategic business unit cost of capital and the use of competitive analysis to establish required information

  • Managing business units to grow value

    – Importance of value perspective

    – Importance of relative valuation

    – Link with merger and acquisition analysis

Case study: Excel based case study requiring:

  • Calculation of the strategic business unit cost of capital

  • Calculation of strategic business unit value

  • Valuation of the whole company comprising 4 different business units

  • Assessment of the issues in deriving an optimal capital structure

Wrap-up and summary

  • Putting it all together:

  • Interpreting financial strategy in financial terms

  • Converting this to a business unit perspective

  • Linking the strategic perspective to financial planning and budgeting