FIN.16:4.3 - Assemble one compatible financial comparison

Bring together the results needed for the alternatives, with their common subject, valuation date, currency, horizon and operating assumptions. Read what each figure measures before combining it. Project NPV, enterprise value, available cash, borrowing capacity and a covenant ratio answer different questions. An attractive value result can coexist with a payment gap or a transaction restriction. Keep the preference and its feasibility together so that the receiver does not have to discover the missing condition after agreeing to act.

Follow the connection between the calculations. If the recommended financing changes interest, tax, ownership or the cash available for a later commitment, return those terms to the appropriate financial account. If a protection arrangement requires collateral before the protected receipt, include that earlier use of cash. An amount described as surplus at group level must still be available to the entity making the payment. FIN.2, FIN.10–12 and FIN.13–15 supply these constructions. FIN.16 combines their results; it cannot turn an unqualified estimate into a supported one.

Check for repeated contributions. A valuation that already contains an operating synergy must not receive the same synergy as an additional recommendation benefit. A financing cost already included in a qualified cash comparison is not subtracted again because a separate loan report also shows it. Conversely, a valuation excluding financing effects must not silently absorb a new financing charge. Reconcile the actual construction and retain the unresolved difference if the accounts cannot yet be made compatible.

Use a table when it makes unlike alternatives easier to compare, but choose its columns from the decision. Amount and date of the first cash need, value on a common basis, remaining exposure and an actual permission condition can be more useful than twenty general ratios. A calculation supplied as adequate for the present question can remain a supplied result. Reconstruct it only when a mismatch, changed condition or unsupported reliance makes the construction necessary.