Introduction
When entering historical financial data into ValuPlan, many clients prefer to use the actual financials for accuracy and consistency. However, extraordinary items, transactions that fall outside of regular operations of a business can distort forecasted earnings if not properly adjusted.
Adjusting earnings to exclude these items is a common and essential practice in financial analysis. To address this, ValuPlan offers functionality to adjust earnings and cashflows allowing our clients to remove the influence of extraordinary items and produce a clearer, more accurate valuation.
Steps to Access and Use the Normalization Adjustments for Earnings Feature
Navigate to the Adjustments Tab
Open the ValuPlan Module and go to the Adjustments tab.
Access Income Statement and Cashflow Adjustments
Within the Adjustments tab, locate the tables for Income Statement Adjustments and Cashflow Adjustments.
These tables allow you to make up to five adjustments for each applicable period.
Adjust Historical Years
Select and adjust up to five historical years to normalize earnings based on extraordinary items or irregular transactions.
Use the Weight & Summary Tab
Switch to the Weight & Summary tab to create a weighted average of the adjusted years.
This feature enables you to factor in the importance of different years when deriving adjusted earnings.
Explore the New Valuation Methods
Utilize eight new valuation methods introduced for Trading and Transaction Multiples based on the adjusted data.
These include methods like EV/Sales, EV/EBITDA, and more.