Professional investors must not be misled by rapid revenue growth in short-term

CIMA Business Brief seminar with Copal Amba

Aruna Perera CFA, Global Head of Knowledge Mana-gement and Training at Copal Amba (A Moody’s Analytics Company), highlighted why professional investors should not be misled by rapid revenue growth in the short term and instead focus on assessing the sustainability of long-term growth as the competitive environment changes.

He spoke about the common errors that analysts make while forecasting such as unrealistic capital investment assumptions, incorrect long run tax rates and overlooking non-operating holdings that result in flawed valuations and impairs the entire decision-making process.

As part of their role, management accountants often have to appraise the attractiveness of investing in listed and privately-held entities; and provide recommendations to senior management to successfully carry out inorganic growth strategies.  In addition, most management accountants are keen to improve their valuation skills which would enable them to better understand how institutional investors evaluate the companies they represent.

Discounted Cash Flow (DCF) remains one of the most commonly-used valuation techniques adopted by investors to assess the long-term viability of companies and shareholder value creation. Many successful institutional investors attribute their success in beating performance benchmarks to insights provided by DCF valuations on a company’s ability to generate sustainable returns.

CIMA, in association with Copal Amba, organised a Business Brief regarding Common Errors in DCF (Discounted Cash Flow).

The seminar, organised with the aim of providing a better understanding of valuation to practicing management accountants, was attended by over 75 corporate executives.