Gode-Ohlson Spreadsheets

Financial Statement Analysis Spreadsheets

• FSA1:
  • Why is it useful to separate enterprise activities from financial activities?
  • What are the drivers of cash needs of a business? How do they affect the value of a business? Specifically, how do sales growth, profit margins, and level of supporting assets needed and liabilities available affect the cash generated or needed by a business?
  • How do the margins and investment needed affect the return on investment generated by the business? How do businesses with stable cash flows leverage the return on invested capital to generate a higher return on equity for their shareholders?
• FSA2: How should one remove past non-recurring items to forecast the future?
• FSA3: How does one measure the return on investment over horizons longer than one year? What are the advantages of doing so? This spreadsheet introduces two new measures of long-term returns -- return on book equity (ROBE) and return on market equity (ROME).
• FSA4: How does one measure the quality of earnings? This spreadsheet introduces a measure of earnings called Adjusted Cash Earnings (ACE).

Valuation Spreadsheets

• VAL1: How does one forecast future cash flows using the cash flow drivers identified in FSA1? What are the additional inputs needed to derive enterprise value? Why does one need to forecast financial activities?
• VAL2: How does one transform the discounted dividends model (DDM) to connect equity value to three bottom-line numbers that investors care about, namely dividends, book values, and earnings. Specifically, VAL2 connects equity value to dividends, book values, and earnings.
• VAL3: How does one adjust analyst forecasts when one considers forecasts of margin expansion to be too optimistic?
• VAL4: How does the return implied by the stock price and earnings forecasts compare to the return one should expect based on risk? VAL4 computes a new metric titled “Excess Implied Return”(EIR). EIR equals implied return less return required based on CAPM.