Watch the embedded video by Professor Damodaran (it is at the bottom of the web page). Identify a portion, say a particular "minute into the 28-minute video" that reminds you of any topic in Ch 7 of our book. Explain what Damodaran said, and what you read.

In the article published in Seeking Alpha prof. Aswath Domadoran has provided detailed information to the public market investors regarding the IPO (initial public offering). According to Aswath Domadoran, it is essential to know how venture capitalists price organizations and how they pressurize the organization so that they can scale up rapidly.  The article professor has stated that there are two types of games one is a value game and the other is a pricing game. For both games, different tools and skills are required. The determinates of pricing games are demand & supply whereas the determinants of value game are cash flows and risk (Smith, Smith, & Bliss, 2011).

The players in the pricing game are traders who play through shifts in the momentum whereas in the value game the players are investors who play through estimating the value and betting on prices. The skills that are required in pricing games are related to detecting the shifts that occur in the momentum whereas in value game the skills regarding assessing the risk are important. In value games, the tools that are used for analysis include forensic accounting, discounted cash flow models. However, these tools are not affected by the pricing game. In pricing game tools like technical indicators, peer group pricing and charts can be more helpful (Chandra, 2011).

Domadoran has said that the IPO process has key role in setting the prices. According to Domadoran the IPO market is not for the investors. The IPO market is usually for traders. The IPO market plays a pricing game instead of a value game it is recommended to the investors to use the skills and techniques which are required in the pricing game so that investors can perform well in the IPO market. If the investors are not going to focus on the above-mentioned techniques than they can suffer from financial loss (Smith, Smith, & Bliss, 2011).

Chapter 7 provides detail information regarding the financial forecasting and how the revenues of the venture can be forecasted. In the chapter different techniques of forecasting have been discussed such as exponential smoothing. For performing the forecasting significant amount of data is required. The forecasting is usually done on the basis of historical data. In the chapter, it has been discussed that the IPO prospectus provides detailed information about the organization and on the basis of that data forecasting can be done. According to Domadoran, the historical data of IPO can be utilized for estimating the pricing (Smith, Smith, & Bliss, 2011).

It means that forecasting plays an important role whether it is value game or pricing game in the IPO market. If the forecasting is done accurately than the investors can perform exceptionally well in the IPO market. Their techniques such as scenario analysis and sensitivity analysis should be utilized for estimating the price of the assets (Smith, Smith, & Bliss, 2011). As mentioned by Domadoran the technical indicators can help in understanding the dynamics of the market. The forecasting techniques will help the investors to evaluate which companies will make a profit in the future and on the basis of forecasting investment should be made. The forecasting provides a quick overview of the future performance of the organizations in which investment has been made (Damodaran, 2019).

1.      Now, look at the BEYOND MEAT spreadsheet that you downloaded. Go to the sheet (tab) called STORIES TO NUMBERS. Relate this in some way of your choice to Chapter 8-Financial Modeling.

The organization’s story allows the organization to focus on its activities and deliver value to cash flow, risk, and growth. The financial modeling helps the organization to estimate its liquidity, profitability, asset management, and financial leverage. The organizations use financial modeling techniques such as financial ratio analysis to know how the organization is performing financially (Smith, Smith, & Bliss, 2011).

The story of the organization and financial modeling has a strong connection. The story of the organization tells what the organization wants to achieve and what targets it has set. The financial modeling techniques like financial ratios indicate whether the organization has achieved the set target or not. The financial modeling techniques provide a quick overview of the financial performance of the organization. These techniques are used not only for assessing financial performance but also for attracting the investors in the organization. The investors use financial modeling information to assess the financial outlook of the businesses (Fridson & Alvarez, 2011).

The financial modeling techniques such as ratio analysis provides brief overview to the organizations about the financial performance of the organization. Through ratio analysis the organization can evaluate the liquidity, profitability, financial leverage and efficiency of the organization. The financial ratios provide quick overview of the organization and that is why many investors analyze the financial ratios before making investment decision. The main aim of investors is to invest in such organization from where they can earn significant amount of profit. if the investors are not going to evaluate the profitability of the corporation than the chances exists that the investors might unable to get significant amount of return.

The financial ratios alone does not provide information in detail. It is recommended that the ratios of the organizations should be compared with the financial ratios of other organization or industry avenge to get brief information regarding the performance of the organization. The financial modeling allow the organization to understand how the organization will perform in near future and what things should be done for improving the performance of the corporation. The organizations implement various strategies so that its profitability and revenue can increase. The tools such as ratio analysis and sensitivity analysis help the organization to understand whether its implemented strategies has proven successful or not.

            If all the above discussion is summarized than it is evident that the story of the organization and financial modeling has a strong connection. The story of the organization tells what the organization wants to achieve and what targets it has set (Fridson & Alvarez, 2011). The financial modeling techniques like financial ratios indicate whether the organization has achieved the set target or not. The financial modeling techniques provide a quick overview of the financial performance of the organization.

The financial ratios alone does not provide information in detail. It is recommended that the ratios of the organizations should be compared with the financial ratios of other organization or industry avenge to get brief information regarding the performance of the organization. The financial modeling allow the organization to understand how the organization will perform in near future and what things should be done for improving the performance of the corporation (Chandra, 2011).

References Entrepreneurial Finance

Chandra, P. (2011). Financial Management. Tata McGraw-Hill Education.

Damodaran, A. (2019). IPO Lessons For Public Market Investors. Retrieved from https://seekingalpha.com/article/4296238-ipo-lessons-for-public-market-investors

Fridson, M. S., & Alvarez, F. (2011). Financial Statement Analysis: A Practitioner's Guide. John Wiley & Sons.

Smith, J. K., Smith, R. L., & Bliss, R. T. (2011). Entrepreneurial Finance: Strategy, Valuation, and Deal Structure. Stanford University Press.