VCE SUMMMER INTERNSHIP PROGRAM

FINANCIAL MODELING (INFRA)

NAME:- Anajna
COURSE:-BBA
• Module-1 : In this module, interns need to go through the basics of Project Finance and Non-Recourse
Debt. How it's different from Corporate Finance. What are the eligible sectors for project finance and
why? All other relevant information and terminologies related to Project Finance. They need to prepare
a list of 20 new terms that they learned and understand in this module.
• Smart Task 01

• What is Finance? How is Finance different from Accounting? What are important basic points that
should be learned to pursue a career in finance?

• What is project finance? How is project finance different from corporate finance? Why can’t we put
project finance under corporate finance? Define 20 terminologies related to project finance.

• What is non-recourse debt / loan? What is mezzanine finance, explain with an example.

• Explain in detail with reasons of what the sectors are or which type of projects are suitable for project
finance?
1. What is Finance? How is Finance different from Accounting? What are important basic points
that should be learned to pursue a career in finance?

• FINANCE

• Finance is a broad term that describes activities associated with banking, leverage or debt, credit,
capital markets, money, and investments. ... Finance also encompasses the oversight, creation, and
study of money, banking, credit, investments, assets, and liabilities that make up financial systems.

• How is Finance different from Accounting?

• Finance and accounting operate on different levels of the asset management spectrum. Whereas
accounting provides a snapshot of an organization's financial situation using past and present
transactional data, finance is inherently forward-looking; all value comes from the future.
What are important basic points that should be learned to pursue a career in finance?

• 1. Interpersonal Skills
• There was once a time when financial professionals were bound to an office, attached to a cubicle.
However, nowadays, interpersonal skills are more important than ever. Workers are required to deal
with people every day, constantly attempting to build successful relationships with co-workers and
customers. If you want to excel in the financial field, being friendly and approachable is a big part of the
job requirements.

• 2. Formal Qualifications
• When pursuing a career in finance, there are a few things that can set you apart from the rest. While in
some industries, hands-on experience and a dazzling personality can be enough to get you through the
door, finance requires a little more paperwork. Because rigorous processes and standards rule the
sector, formal accounting qualifications are desired. Whether that is studying a TAFE course, degree,
certificate or diploma – education is as important as your expertise when securing a career in finance.
• 3. Problem Solving Skills
• When working in finance, no two days will look the same. While it is important to have adequate
knowledge of systems and processes, it is also essential to have the skills to tackle complex problems
as and when they arise. Whether it’s addressing the financial dilemma of a business, or tackling a
client’s tax dilemma, employers rely on employees that will pull through at challenging times. A good
finance candidate takes action to find solutions.

• 4. Analytical Skills
• Some of the most influential leaders in finance have the ability to think laterally, analysing scenarios
and drawing suitable conclusions. They embrace and utilise this part of their role, demonstrating their
ability to think in logic and order. This is an extremely important skill to have as a finance employee, as
your job will require you to be well versed in rationality and putting emotion aside to come through with
an adequate solution.
• 5. Technologically Savvy
• Technological advancements have made waves in the financial industry. Not only have they made
streamlining time consuming processes a breeze, but they have also increased speed and productivity
in the majority of business practices. With this being said, financial professionals must place tech skills
at the forefront of their learning. They must have knowledge in the most up to date programs, going
above and beyond to excel in the specific tools and platforms that are relevant to the industry. Without
this knowledge, you will find yourself falling behind and becoming less of an asset to the finance
industry around you.

• 6. Desire to Innovate
• While a career in finance may be traditionally associated with routines and systems, this does not mean
there is no place for innovation. Productivity drives this industry, always looking for new ways to
achieve and complete things. This is where you come in. Your innovation can streamline processes to
speed and accuracy, helping to save time and money within your organisation. These efforts will help
your career in leaps and bounds, showing that you are constantly pushing yourself to think outside the
box.
• 7. Relationship Management Skills
• When people come to see you, it’s because they have issues with money. In order to succeed as a
financial professional, you need to retain a level of sensitivity and professionalism in your relationships.
This comes with the territory, and also your ability to understand different personality types. You must
ask the right questions, work to resolve conflict, as well as constantly educating and counselling clients.
Clients require an unbiased advisor who can still remain sensitive, understanding their needs and
assisting in financial decisions.

• 8. Exceptional Leadership
• The most coveted and respected financial professionals are those that drive themselves forward
through leadership and motivation. While you may not be in the highest management position, even
entry-level financial jobs require a high level of leadership. Everything you do sets a foundation for
those around you. From general project management, to spearheading team activities – these are the
things that set you apart from the rest.
2. What is project finance? How is project finance different from corporate finance? Why can’t we put
project finance under corporate finance? Define 20 terminologies related to project finance.

• project finance
• Project finance is the funding (financing) of long-term infrastructure, industrial projects, and public
services using a non-recourse or limited recourse financial structure. The debt and equity used to
finance the project are paid back from the cash flow generated by the project.

• How is project finance different from corporate finance?

• Corporate financing refers to the financial management of an overall company like deciding the
financial model of a company then raising the finance and optimal utilization of funds and enhancing the
working of the company whereas project financing refers to taking financial decision for a project like
sources of funds
• Why can’t we put project finance under corporate
finance?
• Project finance greatly minimizes risk to the sponsoring company, as compared to traditional
corporate finance, because the lender relies only on the project revenue to repay the loan
and cannot pursue the sponsoring company's assets in the case of default.

• Define 20 terminologies related to project finance.

• 1. Amortization: Amortization is a method of spreading an intangible asset's cost over the course of its
useful life. Intangible assets are non-physical assets that are essential to a company, such as a
trademark, patent, copyright, or franchise agreement.

• 2. Assets: Assets are items you own that can provide future benefit to your business, such as cash,
inventory, real estate, office equipment, or accounts receivable, which are payments due to a company
by its customers. There are different types of assets, including:

• Current Assets: Which can be converted to cash within a year

• Fixed Assets: Which can’t immediately be turned into cash, but are tangible items that a company owns
and uses to generate long-term income
• 3. Asset Allocation
• Asset allocation refers to how you choose to spread your money across different investment
types, also known as asset classes.

• 4. Balance Sheet
• A balance sheet is an important financial statement that communicates an organization’s
worth, or “book value.” The balance sheet includes a tally of the organization’s assets,
liabilities, and shareholders’ equity for a given reporting period.

• 5. Capital Gain
• A capital gain is an increase in the value of an asset or investment above the price you
initially paid for it. If you sell the asset for less than the original purchase price, that would be
considered a capital loss.
• 6. Capital Market
• This is a market where buyers and sellers engage in the trade of financial assets, including
stocks and bonds.

• 7. Cash Flow
• Cash flow refers to the net balance of cash moving in and out of a business at a specific
point in time.

• 8. Cash Flow Statement

• A cash flow statement is a financial statement prepared to provide a detailed analysis of
what happened to a company’s cash during a given period of time. This document shows
how the business generated and spent its cash by including an overview of cash flows from
operating, investing, and financing activities during the reporting period.
• 9. Compound Interest
• This refers to “interest on interest.” Rather, when you’re investing or saving, compound interest is earned on the
amount you deposited, plus any interest you’ve accumulated over time. While it can grow your savings, it can also
increase your debt; compound interest is charged on the initial amount you were loaned, as well as the expenses
added to your outstanding balance over time.

• 10. Depreciation
• Depreciation represents the decrease in an asset’s value. It’s a term commonly used in accounting and shows how
much of an asset’s value a business has used over a period of time.

• 11. EBITDA
• An acronym standing for Earnings Before Interest, Taxes, Depreciation, and Amortization, EBITDA is a commonly
used measure of a company’s ability to generate cash flow. To get EBITDA, you would add net profit, interest, taxes,
depreciation, and amortization together.

• 12. Equity
• Equity, often called shareholders’ equity or owners’ equity on a balance sheet, represents the amount of money that
belongs to the owners of a business after all assets and liabilities have been accounted for. Using the accounting
equation, shareholder’s equity can be found by subtracting total liabilities from total assets.
• 13. Income Statement
• An income statement is a financial statement that summarizes a business’s income and expenses during a given
period of time. An income statement is also sometimes referred to as a profit and loss (P&L) statement.

• 14. Liabilities
• The opposite of assets, liabilities are what you owe other parties, such as bank debt, wages, and money due to
suppliers, also known as accounts payable.

• 15. Liquidity
• Liquidity describes how quickly your assets can be converted into cash. Because of that, cash is the most liquid
asset. The least liquid assets are items like real estate or land, because they can take weeks or months to sell.

• 16. Net Worth

• You can calculate net worth by subtracting what you own, your assets, with what you owe, your liabilities. The
remaining number can help you determine the overall state of your financial health.

• 17. Profit Margin

• Profit margin is a measure of profitability that’s calculated by dividing the net income by revenue or the net profit by
sales.
• 18. Return on Investment (ROI)
• Return on Investment is a simple calculation used to determine the expected return of a project or
activity in comparison to the cost of the investment, typically shown as a percentage. This measure is
often used to evaluate whether a project will be worthwhile for a business to pursue. ROI is calculated
using the following equation: ROI = [(Income - Cost) / Cost] * 100

• 19. Valuation
• Valuation is the process of determining the current worth of an asset, company, or liability. There are a
variety of ways you can value a business, but regularly repeating the process is helpful, because you’re
then ready if ever faced with an opportunity to merge or sell your company, or are trying to seek funding
from outside investors.

• 20. Working Capital

• Also known as net working capital, this is the difference between a company’s current assets and
current liabilities. Working capital—the money available for daily operations—can help determine an
organization’s operational efficiency and short-term financial health.
3. What is non-recourse debt / loan? What is mezzanine finance, explain with an example.

• non-recourse debt / loan

• Non-recourse debt is a type of loan secured by collateral, which is usually property. If the borrower
defaults, the issuer can seize the collateral but cannot seek out the borrower for any further
compensation, even if the collateral does not cover the full value of the defaulted amount. This is one
instance where the borrower does not have personal liability for the loan.

• mezzanine finance
• Mezzanine financing is a hybrid of debt and equity financing that gives the lender the right to convert to an equity
interest in the company in case of default, generally, after venture capital companies and other senior lenders are
paid.

• Mezzanine debt has embedded equity instruments attached, often known as warrants, which increase the value of
the subordinated debt and allow greater flexibility when dealing with bondholders. Mezzanine financing is frequently
associated with acquisitions and buyouts, for which it may be used to prioritize new owners ahead of existing
owners in case of bankruptcy.
• an example of a mezzanine

• Some examples of embedded options include stock call options, rights, and warrants. ... For
example, a private equity firm may seek to purchase a company for $100 million with debt,
but the lender only wants to put up 80% of the value, offering a loan of $80 million.
4. Explain in detail with reasons of what the sectors are or which type of projects are suitable for
project finance?

• What is a project finance arrangement

• A project finance arrangement is a structured finance scheme based on the long-term cash-flows
generated by an enterprise incorporated for an isolated project, taking as collateral said enterprise’s
assets. The truly differentiating element of a project finance arrangement is that it is structured based
on the long-term predictability of its cash flows in accordance with a structure of fixed contracts with its
customers, suppliers, market regulators, etc.

• These characteristics are usually linked to companies that are active in the infrastructure, energy,
renewable or utilities sectors, to name a few, engaging in the development of projects that require an
especially costly initial investment and which are depreciated over very long periods of time, such as
such as roads, power plants, vehicle park lots, airports, wind farms, refineries, etc.
• Advantages and disadvantages
• Revenue stability and predictability is precisely what makes it possible to consider financing structures
subject to maturity and leveraging terms that exceed the terms that a corporate structure with a
comparable credit rating could ever opt to. The appeal of longer terms and the higher volume of the
loan offset the potential drawbacks of project finance structures, such as higher costs and more
complex and lengthier closure processes.

• In terms of financing deadlines, they can be extended considerably, up to 30 years for the highest-
quality risks. Also, leveraging can reach levels impossible to match in corporate financing operations,
with some cases exceeding a 90:10 Debt-Capital ratio.