The Cash Flow Management Book for Nonprofits or Equity Asset Valuation

The Cash Flow Management Book for Nonprofits: A Step-by-Step Guide for Managers and Boards

Author: Allyson Hayden

The first and only guide of its kind to offer nonprofit executives help with the vital task of cash flow management!

Murray Dropkin--an expert in the field of nonprofit accounting and author of The Budget-Building Book for Nonprofits--reveals how to create an effective plan for cash flow management. This unprecedented guide offers you nuts-and-bolts suggestions for using this plan to develop successful strategies for the day-to-day and long-term financial planning of any nonprofit organization. Filled with to-do lists, sample forms, worksheets, schedules, policies and procedures, and checklists, The Cash Flow Management Book for Nonprofits is a fundamental financial management toolkit for nonprofit managers and board members.

See also: Basic Contract Law or Working Safe

Equity Asset Valuation

Author: Dennis W McLeavey CFA

"Here is an essential tool for the investor: clear, practical, insightful, and concise. This book should have a long, useful life in a professional's library."
—Jeffrey P. Davis, CFA, Chief Investment Officer, Lee Munder Capital Group

"This book provides a clear, comprehensive overview of equity valuation concepts and methods. It is well suited for finance practitioners who want to strengthen their understanding of equity asset valuation and as a supplemental reading in advanced undergraduate and graduate courses addressing security analysis and business valuation."
—Professor Robert Parrino, CFA, PhD, Department of Finance, Red McCombs School of Business, The University of Texas at Austin

"CFA Institute has done it again. This will be a 'must' reference book for anyone serious about the nuances of equity investment valuation."
—Robert D. Arnott, Chairman, Research Affiliates

"Equity Asset Valuation concisely and clearly explains the most widely used approaches to equity evaluation. In addition to thoroughly explaining the implementation of each valuation method, there is sophisticated discussion of the commonsense financial economics and accounting issues underlying the methods."
—David Blackwell, Head and RepublicBank/James W. Aston Professor of Finance, Mays Business School, Texas A&M University

Table of Contents:

Foreword     xi
Acknowledgments     xv
Introduction     xvii
The Equity Valuation Process     1
Learning Outcomes     1
Introduction     2
The Scope of Equity Valuation     3
Valuation and Portfolio Management     5
Valuation Concepts and Models     6
The Valuation Process     6
Understanding the Business     7
Forecasting Company Performance     9
Selecting the Appropriate Valuation Model     15
Performing Valuations: The Analyst's Role and Responsibilities     23
Communicating Valuation Results: The Research Report     26
Contents of a Research Report     26
Format of a Research Report     28
Research Reporting Responsibilities     30
Summary     30
Problems     33
Discounted Dividend Valuation     37
Learning Outcomes     37
Introduction     38
Present Value Models     39
Valuation Based on the Present Value of Future Cash Flows     39
Streams of Expected Cash Flows     42
Discount Rate Determination     47
The Dividend Discount Model     56
The Expression for a Single Holding Period     56
The Expression for Multiple Holding Periods     58
The Gordon Growth Model     61
The Gordon Growth Model Equation     61
The Implied Dividend Growth Rate     67
Estimating the Expected Rate of Return with the Gordon Growth Model     68
The Present Value of Growth Opportunities     70
Gordon Growth Model and the Price-Earnings Ratio     71
Strengths and Weaknesses of the Gordon Growth Model     73
Multistage Dividend Discount Models     74
Two-Stage Dividend Discount Model     75
Valuing a Non-Dividend-Paying Company (First-Stage Dividend = 0)     78
The H-Model     79
Three-Stage Dividend Discount Models     80
Spreadsheet Modeling     83
Finding Rates of Return for Any DDM     84
Strengths and Weaknesses of Multistage DDMs     86
The Financial Determinants of Growth Rates     87
Sustainable Growth Rate     87
Dividend Growth Rate, Retention Rate, and ROE Analysis     89
Financial Models and Dividends     92
Investment Management and DDMs     94
Summary     95
Problems      98
Free Cash Flow Valuation     107
Learning Outcomes     107
Introduction to Free Cash Flows     108
FCFF and FCFE Valuation Approaches     109
Defining Free Cash Flow     109
Present Value of Free Cash Flow     110
Single-Stage FCFF and FCFE Growth Models     112
Forecasting Free Cash Flow     113
Computing FCFF from Net Income     113
Computing FCFF from the Statement of Cash Flows     117
Noncash Charges     118
Computing FCFE from FCFF     122
Finding FCFF and FCFE from EBIT or EBITDA     127
Forecasting FCFF and FCFE     130
Other Issues with Free Cash Flow Analysis     134
Free Cash Flow Model Variations     140
An International Application of the Single-Stage Model     140
Sensitivity Analysis of FCFF and FCFE Valuations     141
Two-Stage Free Cash Flow Models     143
Three-Stage Growth Models     149
Non-Operating Assets and Firm Value     151
Summary     152
Problems     154
Market-Based Valuation: Price Multiples     165
Learning Outcomes     165
Introduction      166
Price Multiples in Valuation     167
Price to Earnings     169
Determining Earnings     170
Valuation Based on Forecasted Fundamentals     178
Valuation Using Comparables     181
Price to Book Value     194
Determining Book Value     197
Valuation Based on Forecasted Fundamentals     201
Valuation Using Comparables     202
Price to Sales     204
Determining Sales     205
Valuation Based on Forecasted Fundamentals     207
Valuation Using Comparables     209
Price to Cash Flow     210
Determining Cash Flow     212
Valuation Based on Forecasted Fundamentals     217
Valuation Using Comparables     218
Enterprise Value to EBITDA     218
Determining EBITDA     219
Valuation Based on Forecasted Fundamentals     224
Valuation Using Comparables     224
Dividend Yield     224
Calculation of Dividend Yield     224
Valuation Based on Forecasted Fundamentals     225
Valuation Using Comparables     225
International Valuation Considerations     226
Momentum Valuation Indicators      227
Valuation Indicators and Investment Management     231
Summary     233
Problems     236
Residual Income Valuation     243
Learning Outcomes     243
Introduction     243
Residual Income     244
Commercial Implementations     247
The Residual Income Valuation Model     248
The General Residual Income Model     253
Fundamental Determinants of Residual Income     257
Residual Income Valuation in Relation to Other Approaches     258
Accounting and International Considerations     259
Violations of the Clean Surplus Relationship     261
Balance Sheet Adjustments for Fair Value     262
Intangible Assets     263
Nonrecurring Items     265
Other Aggressive Accounting Practices     266
International Considerations     266
Single-Stage Residual Income Valuation     267
Multistage Residual Income Valuation     269
Summary     274
Problems     276
References     281
Glossary     287
About the CFA Program     293
About the Authors      295
Index     297