Intrinsic Valuation

Initial Meeting Questionnaire

Information Required 
to 
Undertake the Intrinsic Valuation

Overview
The Intrinsic Value Assessment is used to assist the owners of the business in gaining insight into the underlying value of the business.

Valuation
The value of any business is its future cash flows discounted back to present value at its risk adjusted rate. All companies of note value their projects and capital expenditure (Capex) decisions on this basis.

We use this method in calculating the intrinsic value of a business, whilst using a number of assumptions which are always listed in the report.

Method of Calculation
Future free cash flows (FFCF) are discounted back to present value at a risk adjusted rate, being the weighted average cost of capital.

Free cash flow is defined as net operating profit after tax and before interest (NOPAT) less the change in capital. The change in capital is the aggregate of the changes in working capital and fixed capital.

The cost of capital, or WACC, as it is commonly referred to, is the weighted average cost of capital (debt & equity). 

Confidential Information
The confidential information recorded in this questionnaire will be used to help assess the intrinsic value of your business.

Copyright
This document is Copyright © 2007 Economic Solutions (S.A.) Pty Ltd all rights reserved. This publication is Copyright and may not be resold or reproduced in any manner without the prior consent of the publisher.

Every effort has been made to ensure that this questionnaire is free from error or omissions. However, the Publisher, the Editor, or their respective employees or agents, shall not accept responsibility for injury, loss or damage occasioned to any person acting or refraining from action as a result of material in this questionnaire whether or not such injury, loss or damage is in any way due to any negligent act or omission, breach of duty or default on the part of the Publisher, the Editor, or their respective employees or agents.

 Business Details
Overview:
The following information is for the purpose of documenting the business’s identity, structure, key people involved and key advisors. It is used to provide information for the introduction to the report, and to provide contact details and reference information for the intrinsic valuation.

Item 1:		Your Legal Structure 

		Select the current legal structure of your main trading entity:
•	Limited Liability Company
•	Proprietary Limited Company
•	Non-Profit
•	Partnership
•	Sole Trader or
•	Other.

Item 2: 		Director’s / Partner’s Names

	Record the current owners, directors, partner’s names within the business and what percentage of the business they own. Please provide (as an attachment) qualifications and experience of each owner.
       Person’s Name 					Position 	          % Owned
#1
#2
#3
#4
#5
    100%

Item 3: 		Key Personnel
	
If the business is not mainly dependent on the owners for its ongoing operations and sustainability then list the key personnel and positions in the table below? 
       Name 						Position 	 
#1
#2
#3
#4
#5
Item 4: 		Your Business Advisors

Please record them in the spaces provided.

Your Bank’ Name
Your Accountant’s Name
Your Solicitor
Your Insurance Co.

Item 5: 		Description of Business Activities 

	Detail a brief description of your business below.  This may be answered using the following text: “We are in the business of …” 

Item 6: 		Industry you operate in 
		
List the industry that you operate in. If you operate in more than one industry please list them all and the percentage allocation of revenue.
		
Industry	% of Total Revenue	

		

Item 7: 		Style of Business 

		Please indicate what style of business you are operating:

Multiple-choice answers are accepted.
  Primary Producer			 % of annual revenue
  Manufacturer			 % of annual revenue
  Wholesaler				 % of annual revenue
  Distributor				% of annual revenue
  Retailer				 % of annual revenue
  Service Based			 % of annual revenue
  Professional			 % of annual revenue
  Other ____________		 % of annual revenue

            100%

Item 8: 		Closest Public Companies to Your Business

List the Public Companies traded on the Australian Securities Exchange (ASX) that are closest to the industry or industries that your business operates in.

Company	Ticker Code (if Known)	

		

		

		

Item 9:	 	Purpose of Business Valuation  

		Please indicate the reason for the valuation:
Multiple-choice answers are accepted.

  Knowledge of Intrinsic Value				
  Target Value 
  Sell parcel of shares/securities				% or number of sale		
 Sell Total Business externally				
  Sell Total Business internally				
  Business Loan					amount
  Raise Capital						amount
  Joint Venture				
  Franchise Business				
  Other ____________			

Item 10: 	Target Value  
		
List your targeted Value and the time period to achieve the targeted value.

Targeted Value				   $……………………….....
Period to Achieve (E.g. 4 years or 6 years or..)  ………………………......

Item 11: 	Past Financial Information Required 

Please provide a copy of your past Profit & Loss and Balance Sheets showing four financial year periods (e.g. for comparative statements 2 sets: 2006&2007; 2008&2009).  Four Financial periods are preferable but if not available less can be acceptable.

NOTE: The provision of the financial reports is critical.

Item 12: 	Personal Income or Expenditure included in Past Financial Information Required

List any personal income or expenditure that is included in the past years Profit and Loss Statements that is outside of the normal commercial operations of the business.

	Amount	
Expense	2006	2007	2008	2009	

					

					

Item 13: 	Owners Salaries included in Financial Information Required . . . .

This question is looking at ascertaining what are the commercially based salary amounts for the business owners (what is the salaries required to employ external persons to take the place of the owners) and what amount of salaries have been included in the financial statements.

Note: The owners’ salaries are the salaries actually included in the financial statements and forecasts.

The commercially based salary amounts may be the same as the owners’ salaries, but may often be different to the actual owner salaries paid. E.g. where the owners take all profits out of the business as salaries or where they take out no or minimal salaries and leave the profits in the business as retained income. Certainly in both these cases the Commercially Based Salaries would be different to the actual owner salaries.

Included in Financial statements:

	2006	2007	2008	2009	
Owners Salaries					
Commercially Based Salaries would be					

Included in Projected Forecasts:
	2010	2011	2012	2013	
Owners Salaries					
Commercially Based Salaries would be					
Item 14: 	Projected Financial Information Required 

4 years forecasted Profit and Loss and Balance Sheet information.  Four Financial periods are preferable but less can be acceptable. Template is included at the end of this Questionnaire.

If Balance Sheet information is not available please list the forecasted Capital expenditure over the next four years and note if there will be any changes to the last period accounts receivable, inventory and accounts payable days. Template is included at end of this Questionnaire.

Item 15:	Contingent Liabilities 

List any contingent liabilities not shown in the financial statements supplied that exist at the completion date of this questionnaire and include the estimated amount of the liability if known.

No statement assumes that there are no additional contingent liabilities:

Item 16: 	Other Events 
   
At this completion date list any other events or items not listed in the financial statements supplied that may affect the future value of this business.

No statement assumes that there are no other events or items:

Item 17:	Constitution

Provide a copy of the constitution or at least a copy of the clauses pertaining to “disposal of shares or securities”

Item 18: 	Signature of Completion & Provision of Financial Reports 

Completion Date	
You’re Name
You’re Business

_____________________________

Your signature of completion

Business:     . . . . . . . . . . . . . .. . . . . . . . .  . . . . . . . . . . . . . . . . . ……………………... 	
Forecasted Information	
Year	2010	2011	2012	2013	
No Months	12	12	12	12	
 PROFIT & LOSS					
Sales					
Less Cost of Goods Sold					
Gross Profit					
Fixed Expenses					
Depreciation Expense					
Total Expenses					
EBIT					
Less Net Interest paid					
Operating Profit (before tax)					
Income Tax					
Operating Profit After Tax					
Retained Profit Beg. of Year					
Retained earnings end of year					
    Less Dividend					
Retained Profit End-of-Year					
 					
BALANCE SHEET					
Current Assets					
Net Trade Debtors					
Inventory					
Other Current Assets					
Total Current Assets					
Non Current Assets					
Property Plant & Equip.(Net)					
Total Non Current Asset					
TOTAL ASSETS					
Less Liabilities					
Current Liabilities					
Trade Creditors					
Bank Overdraft					
Leases					
Other Current Liabilities					
Total Current Liabilities					
Non Current Liabilities					
Assoc. Co. Loans - Debt					
Employee Provisions					
Total Non Current Liabilities					
TOTAL LIABILITIES					
TOTAL NET ASSETS					
					
SHAREHOLDERS EQUITY					
Issued Capitals					
Retained Profits					
Total Shareholders Equity					
No. of Issued Shares					

Forecast Information: (Continued)

If the forecast Balance Sheet information table included above has not been completed then please complete the following tables.

Capital Expenditure:

Business:     . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 	
Forecasted Information	
Year	2010	2011	2012	2013	
No Months	12	12	12	12	
Capital Expenditure					

Working Capital:
If there are projected changes to working capital parameters please note these in the following table ensuring that you enter a + sign for an increase in days and a – sign for a decrease in days. Each change is based on the proceeding year. For example if Debtor days at year-end 2009 were 50 days and they are projected to be 45 days at year-end 2010 and 35 days at year-end 2011, 2012 and 2013 then you would enter – 5 in the 2010 column and -10 in the 2011 column and leave 2012 and 2013 blank.

Business:     . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . .. . . . . . . . . . . 	
Forecasted Information	
Year	2010	2011	2012	2013	
No Months	12	12	12	12	
Debtor Days – Changes 					
Inventory Days – Changes					
Creditor Days – Changes