The Body of Knowledge of the Program has been carefully developed in order to equip participants with techniques to improve the quality of financial model that he/she produces. The aim of the goal is to enable participants to prepare complex financial model by using Excel. Hence, this program is practice intensive and can be directly implemented in day to day work.
The curriculum covers topics based on five basic pillars:
1. Forecasting Techniques: predicting assumptions by using time series statistics. The forecasting methods used are linear and non-linear models. There will be session on how to develop Monte Carlo Model by using Excel.
2. Financial Projection: preparing future financial statements of a company. Covers complex topics such as modelling production and trading Cost of Goods Sold and Inventories, Modelling projects with Interest During Construction, Modelling FX Gain Loss, Continuous Capex and Continuous Loans, Modelling Intangibles, Estimating Working Capital. Discuss about consolidation on the projection of a group of companies.
3. Corporate and Project Valuation: by using 6 internationally recognized valuation methods, PFM Program will enable you to value company by using various methods and understand the strength and weakness of each model. The capability to employ those models on realistic setting will enable you to have many valuation arsenals which will help you find the more accurate valuation.
Those models are: a. Discounted Cash Flows
b. Enterprise Value Based Discounted Cash Flow
c. Dividend Discount Model
d. Residual Income
e. Enterprise Value Multiples
f. Price Multiples
The discounted based valuation can be conducted by using single or multiple interest rates,
4. Risk Analysis: consists of Sensitivity Analysis and Scenario Analysis by using methods such as: various types of Ratios, various types of Duration, Assumption Sensitivities and many others. Participant will also learn to develop risk analysis (including Probability of Default) from Monte Carlo based model.
5. Project Modelling and Analysis: Helping you understand how to model a project and conduct various feasibility analysis tools. Discuss about weaknesses in popular tools such as Net Present Value and how it can be gamed to have an artificially feasible project. There will also be discussion about NPV and IRR Sensitivity for project risk analysis.
PFM curriculum is built in line with Chartered Financial Analyst (CFA) and Financial Risk Model (FRM) PFM Curriculum. Hence, for participants who are enthusiasts of those programs, PFM curriculum will provide strong practical understanding on how to apply the concepts taught in those programs and increase the probability of passing exams in those programs.
PFM Program consists of 4 day training session and 1 whole day exam consists of two exams:
1. Multiple Choice Exam
2. Computer Practice Exam by Using Excel
In order to obtain PFM Designation, you need to pass both exams.
PFM program is developed based on thorough study to find the best method to predict the future of a company or project. Some applicable proprietary methods which are not or rarely taught in modelling classes elsewhere are also part of the curriculum,
- Discounted Cash Flow and other discounted based valuation models by using multiple interest rates
- Conducting NPV and other feasibility analyses by using multiple discount rates
- Modelling Delta ratios
- Equity Duration, Cross Duration Matrix and Assumption Sensitivity risk analysis
- Company and project valuation connectivity with other asset classes (bonds, forex, derivatives) by using financial model
- NPV Resurface and NPV sensitivity to measure the risk of project demise
Preparation Program is detailed below:
Understand Financial Report and Learning about Forecasting Techniques
Training begins by conducting review on accounts in profit & loss statement and balance sheet, continued by learning simple technique to prepare a balanced model by developing its cash flow statement. A case study will be furnished to enhance study.
Participants will also learn about important quantitative forecasting techniques by using regression and time series for linear and non-linear forecast. Participants will also learn how to create Monte Carlo prediction by using Excel. Discussion on how to apply Monte Carlo simulation in preparing the assumptions will be prominent.
Preparing Assumptions and Preparing Financial Model
Participants will study various financial projection assumptions which are commonly used in financial projections, both macroeconomic and firm specific projections, accompanied by a case study. Some specific topics are discussed such as modelling FX rate and inflation. Participant will also learn to derive interest rate from bond yields.
Participant will also learn to prepare assumptions in order to derive sustainable modelling by studying about how to model continuous fixed asset investments, continuous long term loan balance and others.
Then participants will learn to prepare a financial projection of a company by following the instruction line by line. There will be specific topics covered such as calculating COGS for trading and manufacturing based products, modelling FX Gain Loss, modelling project with capitalized interest (Interest During Construction) loan, preparing depreciation and amortization table, loan model, modelling intangibles, goodwill, investment in subsidiaries etc.
Understand How to Value a Company by Using Various Models and Conducting Analysis on the Model
Participants learn to develop Required Rate of Return by using single interest rate and multiple interest rates. Also learn to calculate firm and equity value by using various discounted models, such as Discounted Cash Flow (DCF) model, Enterprise Value based DCF models, Dividend Discount Model and Residual Income Models. Participants will also learn to value company by using price multiples, on both M&A and capital market multiples. This session will be followed by case study.
Participant will learn about sustainable modelling to understand various highly common flaws done by financial modeller which causes valuation to be inflated. There will be analysis by using common size and index analysis. There will also be discussion on sensitivity risk analysis techniques by using sensitivity ratios such as equity duration and also, inflation, commodity and loan interest spread change effect to change in valuation. There is discussion on determining the most influential (risky) assumptions. Methods to conduct scenario analysis will also be discussed. Another case study will be given to enable participants grasp the materials effectively.
Conducting Ratio Analysis Understand How to Prepare Financial Projection on Certain Projects
Participant learn to use various financial ratio analysis including leverage level to determine the health level of a company and whether the company is resilient to face challenges in the future. There will be discussion on Delta Ratios, which will be used to determine whether the company (or at least the model) is sustainable in the long run. Participant will learn about financial model on a specific project, the important aspects that a participant will need to know when preparing the model. Participants will also learn how to differ between financial projection for a corporate and for a specific project. Also feasibility analysis of a project by using methods such as NPV, IRR, Discounted Payback, Profitability Index. A case study will accompany the study.
There will be special discussion on NPV Profile, Multi IRR Projects, aggressive technique called NPV Resurfacing, NPV sensitivity risk analysis by using Distance to Zero NPV measurement, The discussion will be followed by a case study.
Participants will face two session examination: multiple choice examination in two and half hour followed by computer practice examination where participants will need to prepare a corporate financial projection in Excel which must be completed in five hours.