Presentation Structure:

Slide 1: Title Slide

• Title: Annual Recurring Revenue (ARR) Calculation for TEAM Plans
• Subtitle: Methodology & Analysis for CFO Review
• Presented by: [Your Name] | Finance Analyst
• Date: [Presentation Date]

Slide 2: Understanding TEAM Plans

• TEAM Plans operate on a seat-based billing model ($499 per seat).
• Seats are prepaid for 12 months and can be used at any time within a year.
• If unused, credits expire with no refunds.
• Companies may onboard employees at different times within the contract period.

Slide 3: What is ARR & Why It Matters?

• Annual Recurring Revenue (ARR) measures predictable revenue from active contracts.
• ARR is not cash-based but rather reflects recurring revenue on an annualized basis.
• Helps in business valuation, forecasting, and financial health analysis.

Slide 4: ARR Calculation Methodologies Considered

1. Upfront Booking-Based ARR

   • Recognizes full contract value immediately when booked.
   • Pros: Simple, upfront revenue clarity.
   • Cons: May overstate ARR if seats are not utilized immediately.

2. Seat Activation-Based ARR

   • ARR is recognized only when employees onboard and begin utilizing seats.
   • Pros: Reflects actual usage and prevents revenue overstatement.
   • Cons: Delays ARR recognition, impacting financial planning.

3. Prorated ARR (Recommended)

   • ARR is recognized evenly over the 12-month period, regardless of when employees onboard.
   • Pros: Best represents recurring revenue, aligns with SaaS accounting practices.
   • Cons: Requires careful tracking of contract start and end dates.

Slide 5: Recommended ARR Calculation Methodology

Formula:

ARR=∑(Total Contract Value12×Months Remaining)ARR = \sum \left( \frac{{\text{Total Contract Value}}}{12} \times \text{Months Remaining} \right)ARR=∑(12Total Contract Value​×Months Remaining)

• Each prepaid seat contributes $499 per month.
• If a company books 10 seats for $59,880, the ARR contribution is $4,990/month.
• If onboarding occurs later, the revenue still spreads evenly over the term.

Slide 6: ARR Calculation for 2022 TEAM Plans (Example)

Total ARR for 2022 = $24,950 per month → $299,400 annually

Slide 7: Key Takeaways & CFO Recommendations

• Prorated ARR is the most accurate methodology to reflect revenue.
• Aligns with SaaS industry standards and financial reporting best practices.
• Ensures stable revenue recognition regardless of onboarding timing.
• Allows for better forecasting and valuation of TEAM Plan revenue.

Next Steps:

• Implement this ARR methodology in financial reporting.
• Develop automated tracking of seat activation vs. contract start dates.
• Monitor ARR trends for revenue forecasting and strategic planning.

Final Deliverable:

Would you like a PowerPoint (PPT) file with graphs and visualized ARR calculations? I can create it for you!

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Guide to Tackling Your Assignment

Hey there! It looks like you’re going to analyze the stock performance of a public company—Walmart in this case. Don’t worry; I’m here to guide you step by step so you can tackle this assignment like a pro!

Here’s how to approach the task:

1. Step 1: Understand the Assignment

   • The first thing you need to do is make sure you know exactly what you’re being asked to do. You need to pick a public company (in this case, Walmart), look up its stock performance over the past year, and talk about the highs and lows (the peaks and valleys). Also, you’ll need to think about why you think these changes in stock price happened (like what events or forces might have caused it).

2. Step 2: Research the Company

   • Choose Walmart: You’re going to look at Walmart’s stock performance for the last year. To do this, go to Yahoo Finance or another website that shows stock performance.
   • Find the Stock Information: On Yahoo Finance, search for Walmart’s stock symbol (WMT) and check out its performance over the past year. You should see a graph showing how the stock price went up and down throughout the year.

3. Step 3: Look for Peaks and Valleys

   • Peaks are when the stock price is really high, and valleys are when the stock price is really low. Try to find the highest points (peaks) and the lowest points (valleys) on the graph.
   • Why did these happen? Think about what might have caused these peaks and valleys. Did Walmart have any special promotions or sales during the high points? Was there any news (like economic news, company news, or something big that happened in the world) that might have caused a drop in stock price?

4. Step 4: Think About Market Forces

   • What is a market force? Market forces are things that can change the price of a company’s stock. These include:
     • Economic conditions: For example, during times of economic growth, people spend more money, and companies like Walmart can make more sales, which can make the stock price go up.
     • Interest rates: If interest rates go up, it might be harder for people to spend money, so Walmart’s stock could go down.
     • Company news: Any good or bad news about the company can affect the stock price.

5. Step 5: Financial Health of Walmart

   • Think about what Walmart’s stock performance says about the company’s financial health. If the stock is going up, it might mean the company is doing well and making good profits. If it’s going down, the company might be facing challenges.
   • Walmart is a big company with lots of stores and online sales, so look for information that shows how well they are adapting to new trends, like e-commerce or customer preferences.

6. Step 6: Write Your Answer

   • Start by introducing Walmart and telling the reader about its stock performance over the last year.
   • Explain the peaks and valleys in Walmart’s stock price. Where did the price go up and where did it go down?
   • Then, talk about why you think this happened. What market forces or events might have influenced the stock price changes?
   • Finally, explain what Walmart’s stock performance tells us about the company’s financial health.

Final Checklist Before You Submit:

• Did you clearly explain the peaks and valleys in Walmart’s stock price?
• Did you think about why these changes might have happened, like economic conditions or company news?
• Did you explain what Walmart’s stock performance tells us about the company’s financial health?
• Have you used clear sentences and explained things simply, like I showed you?

Follow these steps, and you’ll be able to complete your assignment with confidence. You’ve got this!

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Struggling with where to start this assignment? Follow this guide to tackle your assignment easily!

This assignment requires you to build an LBO (Leveraged Buyout) model in Excel for Big5 Sporting Goods and determine whether it meets the required 25% hurdle rate. You will analyze financials, create an assumption sheet, and provide answers to key questions.

Step 1: Understand the LBO Model Structure

Your Excel model should have the following components:
Assumptions Sheet – Lists key financial and operational assumptions.
Sources and Uses Table – Shows how the acquisition is financed.
Income Statement Projections – Forecasts revenue, EBITDA, and net income.
Debt Schedule – Tracks total debt, interest payments, and repayments.
Cash Flow Analysis – Calculates leveraged cash flow for debt repayment.
Exit Valuation and Returns – Determines final debt level, cash balance, and IRR/MOIC.

Step 2: Set Up the Assumptions Sheet

Your assumptions drive the entire model. Clearly define:

Transaction Assumptions:

• Control Premium: 20-25% over the last 6 months of traded share price.
• Debt Financing Fee: 3.5%, paid at close.
• Debt Structure: Use industry benchmarks for Debt-to-Total Value.
• No Management Rollover: Assume the entire company is purchased.
• Exit Multiple: Equal to the multiple implied by your control premium.

Financial Drivers:

• Revenue growth rate (based on historical trends).
• EBITDA margin as a % of revenue.
• Capex, depreciation, and NWC as % of relevant financials.

Step 3: Build the Sources & Uses Table

This table details how the LBO is funded.

Sources:

• Equity contribution.
• Debt financing (leveraged amount based on PE deal trends).

Uses:

• Purchase of equity (Enterprise Value).
• Transaction fees, debt financing fees.

Step 4: Construct the Income Statement Projections

Project revenue, costs, and net income for a 5-year holding period. Key steps:
Use historical growth rates for revenue.
Calculate EBITDA (Revenue – Operating Expenses).
Include interest expense (calculated from average debt balance).
Deduct depreciation & amortization (D&A) (assume 50% is depreciation).

Step 5: Create a Debt Schedule

Your debt schedule should track:

• Debt balance over time (beginning and ending).
• Interest payments (average debt * interest rate).
• Principal repayment (based on available cash flow).

Step 6: Calculate IRR and MOIC

IRR (Internal Rate of Return) – Measures annualized returns on investment.
MOIC (Multiple on Invested Capital) – Shows how much the investment grows.

Compare IRR to the 25% hurdle rate. If your model exceeds 25%, identify a financial assumption that lowers it. If it falls below 25%, adjust an income statement assumption (e.g., revenue growth, EBITDA margin) to improve returns.

Step 7: Answer the Assignment Questions

In a separate Excel sheet (“Answers”), provide:

1⃣ IRR and MOIC Analysis:

• What is the IRR and MOIC in your model?
• Does it exceed 25%?

2⃣ Adjustments to Hurdle Rate:

• Identify a forecast change that lowers IRR below 25% (if IRR > 25%).
• Identify a financial assumption required to exceed 25% (if IRR < 25%).

3⃣ Due Diligence Questions for Management:

• Two critical questions related to your model.
• Examples:
  • Revenue Growth Assumptions: “What strategies are in place to sustain projected revenue growth?”
  • Debt Strategy: “How does management plan to handle potential macroeconomic risks affecting debt repayment?”

Step 8: Finalize Your Excel Model

Clearly label all sections.
Ensure formulas are linked correctly.
Provide clean formatting for readability.
Double-check calculations for accuracy.

Final Tip:

LBO modeling is about logical structuring and assumption testing. Stay clear, concise, and realistic in your approach. Follow this guide, and you’ll be well-prepared for your assignment!

The post LBO Model Assignment: Assessing Big5 Sporting Goods as a Buyout Target appeared first on blitz.

Struggling with where to start this assignment? Follow this guide to tackle your assignment easily!

Step-by-Step Guide to Writing Your Paper

Step 1: Introduction

• Objective: Start by introducing the company you have chosen.
• What to Include:
  • Provide the name of the company and a brief description of what it offers to consumers.
  • Mention the industry it operates in and any unique aspects of the business.

Step 2: Collect Financial Data

• How to Proceed:
  • Access the financial statements (balance sheet, income statement, and cash flow statement) from Mergent Online for the latest fiscal quarter.
  • Report the key financial values listed in the instructions (e.g., total assets, liabilities, net income, etc.).
  • Be sure to include the exact numbers as provided in the financial reports.

Step 3: Explain the Role of Financial Statements

• How to Approach:
  • Define what financial statements are (balance sheet, income statement, cash flow statement).
  • Explain how they help a business assess its financial health, performance, and stability.
  • Discuss their role in decision-making and planning for business leaders.

Step 4: Cash Flow Management Example

• What to Include:
  • Find a relevant financial news story from the past two months that highlights a business dealing with cash flow management challenges or successes.
  • Explain how the example illustrates the importance of managing cash flow to ensure financial health.
  • Discuss how poor or strong cash flow management can affect a company’s operations and long-term strategy.

Step 5: Conclusion

• How to Conclude:
  • Summarize the main points, emphasizing the importance of financial statements and cash flow management.
  • Reflect on how financial health can directly impact a business’s success or failure.

Step 6: Review and Submit

• Final Touches:
  • Proofread your paper for clarity and accuracy.
  • Check your financial data to ensure it’s correct and matches the latest fiscal quarter’s reports.
  • Save and submit your paper according to your instructor’s submission guidelines.

This step-by-step guide will help you organize your assignment and ensure you cover all the necessary details. Best of luck with your project!

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