3 ) Tasks and duties during my internship (2)

a)Valuation process


I participated in all the valuation steps of the client Companies. The company belongs to a network of 11 locations in the United States. It is a very well organized Company, and by there a very performing Company. The different positions are Analysts (5 persons), Associates (2 persons), Manager (1 person) and Managing Director (1 person). Team work is very important and communication is encouraged.


The valuation calculation in that company goes through the following process:

-         Filling of the templates of balance sheet and income statement, especially separation of depreciation and interests, organization in EBITDA, EBIT, EBT, net income and cash flow

-         Checking of the numbers by another analyst

-         Calculation of the ratios

current ratio = current assets / current liabilities

quick ratio = (current assets – inventories) / current liabilities

inventory turnover = cost of goods sold / inventories / 2

operating income return on investment = operating income / total assets

operating profit margin = operating income / sales

total assets turnover = sales / total assets

debt ratio = total debt / total assets

return on equity = net income / common equity

return on total assets = net income / total assets

-         Due diligence questions : meeting with the client to get an intimate knowledge of the Company’s history, sales cycle, market, customers, suppliers.

-         Companies guideline and market approach : search of similar public companies which must be actively traded (stock over $5) in proprietary database and public websites. Their SEC filings are filled in the mainmodel, and a discount rate is used to compare the companies (stage of the company, market, organization).

-         Discounted Cash Flows : DCF are calculated on the financial projections of the Company.

-         A weighted average is made with the 3 valuation methods to obtain the fair market value of the Company.

-         Economy and Industry outlook : an analysis of the US and Californian Economy is added to the report as well as the concerned industry forecast. (new analysts start here).

(Appendix at Oral Presentation)


b)      Anglo-Saxon accountancy




        Total Sales

-            COGS

=     Gross Margin

-      Operating Expenses

=     EBITDA

-      Depreciation

=     EBIT

-      Interest Expense

=     EBT



COGS = Cost Of Goods Sold

EBITDA = Earnings Before Interests, Taxes, Depreciation and Amortization

EBIT = Earnings Before Interests and Taxes (= operating income)

EBT = Earnings Before Taxes

LTM : Latest Twelve Months

FYE : Fiscal Year End


Cost of sales: take only into account cost of operations and cost of services (no selling and administrative and no amortization)


The shares can be:       common (class A and B)



There is a number of shares for:           authorized




Book value = total assets - total liabilities (= owner's equity of the balance sheet ? )


Operating distribution = net income + distribution


Net sales = total revenues


Cash Flow = net income + depreciation


Earnings = income


Equity = capital


Working Capital = revenues / (currents assets – current liabilities)


Book value = property and equipment


Net Worth = Total Shareholders Equity


NAV (Net Assets Value) = Total Assets – Liabilities (= Shareholders Equity)


Capital Expenditures = purchase of fixed assets


Debt + Market Capitalization = TIC (Total Invested Capital)


Depreciation = for an asset that lasts several years

Amortization = for intangible assets


Interest bearing debt (= amount of capital) include:

            Capital lease obligation

            Current portion of capital lease obligation

            Current portion of note payable

            Note payable


SEC Filings :

10K = annual report

10Q = quarterly report

Balance sheet

Income Statement

Cash Flow Statement


It is very important to be cautious about the document that you take into account : always before the valuation date (not the filling date but the period of reference), 10K for the FYE, 10Q for the LTM.


If 10K is not available, take 10KSB, or the temporary documents such as 424B


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