Exam Scope
The exam consists of two parts: Valuation Fundamentals and Modeling.
Valuation Modeling
A. Valuation Fundamentals
Accounting, Financial Analysis and Tax
This section focuses on fundamentals of accounting, financial analysis and tax, and accounts for 35%~45% of total score.
Accounting
• Basic accounting concepts, such as accounting definitions, accounting estimates,
general principles of accounting, accounting hypotheses, accounting elements and measurements, accrual accounting and accounting policies
• The structure and components of financial statements
• Relationship between the financial statement components
Financial analysis
• Financial statement analysis, such as vertical analysis, horizontal analysis, ratio analysis
and comparative analysis
• Normalization for financial statements
Tax
• Basic concepts in tax, such as taxpayer, tax categories, tax basis, tax rate
• The major tax categories of companies, such as value-added tax, consumption tax,
and company income tax
• Financial statement items that are relevant to taxation
Valuation
This section focuses on the basic concepts, theories and methods for valuation, and accounts for 45%~55% of total score.
Basic concepts for valuation
• Distinguish between different value concepts, such as value vs. price, market value vs. book value, going-concern value vs. liquidation value, equity value of controlling interest vs. equity value of non-controlling interest, and pre-money value vs. post-money value
• Enterprise value
Absolute valuation methods
• Unlevered free cash flow (UFCF) discount method
• Discounted dividend model (DDM)
• Other absolute valuation methods, such as free cash flow of equity (FCFE) discount method, net asset value (NAV) method, economic value added (EVA) method, and adjusted present value (APV) method
• Summary and uses of the absolute valuation method, such as how to choose the forecast period, difference between core assets and non-core assets, three-stage growth model, Gordon perpetual growth model vs. exit-multiple method, the advantages and disadvantages of the absolute valuation method
Comparable company methods and other valuation methods
• P/E method and P/B method
• EV/EBIT method, EV/EBITDA method and other EV comparison ratios
• Other comparison ratios, such as A/H, PEG multiple
• Summary and uses of the comparable company method, such as how to choose comparable companies, how to choose comparable ratios, the advantages and disadvantages of the comparable company method
• Other valuation methods, such as book value method, liquidation value method and replacement cost method
• How to choose the most appropriate valuation method
Others
This section focuses on other important concepts in the process of modeling mentioned in the book, valuation modeling, and accounts for 5%~15% of total score.
• Modeling preparation
• Financial forecast modeling
• Valuation modeling
• Checking, formatting, print setting of the model
• Special valuation topics: valuation for Growth Enterprises Market, real estate company valuation and financial institution valuation
B. Modeling
Excel Basis
This section focuses on the functions, settings and other applications in Excel, and accounts for 10%~20% of total score.
• Excel basis, such as copy, paste, cut, relative reference vs. absolute reference, insert column (row) and delete column (row)
• Formatting (cell, column, row, etc.)
• Excel functions, such as SUM、AVERAGE、NPV、IRR、IF、HLOOKUP、CHOOSE、NOW
• Excel modeling skills, such as comment, find, named range, freeze panes, print setting
Financial Forecast Modeling
This section focuses on the techniques of financial forecast modeling, and accounts for 30%~40% of total score.
• Financial ratio analysis
• Revenue forecast
• Cost and expense forecast
• Income statement forecast
• Operating working capital forecast
• Fixed assets and intangible assets forecast
• Debt and financial expense forecast
• Shareholders’ equity forecast
• Deferred tax assets and deferred tax liabilities forecast
• Balance sheet forecast
• Cash flow statement preparation
Valuation Modeling
This section focuses on the techniques of valuation modeling and accounts for 25%~35% of total score.
• The unlevered free cash flow (UFCF) discount model
• Discount rate calculation
• Other absolute valuation models
• Comparable company model
• Comprehensive valuation
Modeling Assumption Analysis
This section focuses on the techniques of scenario analysis and sensitivity analysis, and accounts for about 10% of total score.
• Scenario analysis
• Sensitivity analysis
Specific Sector Modeling
In this section, the candidate should build models for some specific sector according to the background of the given sector. This section accounts for about 10% of total score.
Financial Statement Analysis
Accounting
• Basic accounting concepts, such as accounting definitions, accounting estimates,
general principles of accounting, accounting hypotheses, accounting elements and
measurements, accrual accounting and accounting policies
• The structure and components of financial statementsn
• Relationship between the financial statement components
Financial Analysis
• Financial statement analysis, such as vertical analysis, horizontal analysis, ratio analysis
and comparative analysis
• Normalization for financial statements
Tax
• The major tax categories of companies, such as value-added tax, consumption tax,
and company income tax
• Basic concepts in tax, such as taxpayer, tax categories, tax basis, tax rate
• Financial statement items that are relevant to taxation
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