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A pro forma cap table, also known as a non-equity version of an equity version, is a spreadsheet which depicts the equity structure of an organization at a given point of time and in the future. The spreadsheet compares the current value of the organization's assets to its current liabilities, to calculate the effect of an exit and a prospective gain. The spreadsheet simultaneously calculates the net amount of cash inflows and outflows, as well as the effect of dividends. The spreadsheet models investment strategies by calculating the effect of incremental investments over time on value and earnings. It also evaluates the implications of changes in accounting standards and framework, adoption of new accounting principles, changes in tax law, management policies, and ownership structure.
In order to prepare a pro forma cap table, an investor must prepare it in Excel using the macros provided. Most investors have calculators at home or can use the Excel versions of Microsoft Financial Formatted Software (FFD). To prepare a pro forma cap table in Excel, first go to the "Workings" menu and then select "Cap Tables". A pop up window will appear and a button saying "New" will appear, click on it.
Next, double click on the "Calculate Shares Round Table" button. A pop up window will appear and a button saying "Rounds to Currency" will appear, click on it. A calculator will then be displayed, it uses the values of current price per share of the security as the input. The investor will now be able to enter in a variety of factors to the left of the grid, and a number of stock sales will be generated for an overall market capitalization assessment.
The investor can then proceed to the next section and add in the other financial terms for the selected company such as its PPS, Ebit and dividend payments. Finally, the investor will need to calculate the effect of financing round on the market cap and then select the number of shares the company is authorized to issue. Once this section is complete the value of the EPS will be calculated.
The last piece of information required in the pro forma cap table is the number of shareholders as well as their capital amounts. If more than one shareholder is provided then the numbers are rounded down to the nearest whole number. If there are only a few shareholders the numbers can be automatically calculated by dividing the number by the number of shares. If there are no shareholders the default is to give a multiple of 100. For large investors it is recommended that the EPS be divided by a multiple of a whole number so that a precise comparison can be made between all investors in the table.
Investors who invest in startups need to be careful when they calculate the EPS of the startups. They have to be extra careful because many startup s that get funded quickly and grow fast may not actually create much value for their investors. Some startups might not produce profit at all during their first five years of operation and thus the shareholders would have made no profit even if they had been paid. Thus in the pro forma cap table there are several formulas that help investors calculate the correct EPS for the startup based on the initial valuation.
There are some cap tables which are based on rounds instead of years. In a round based pro forma cap table, the valuation is done after each round of financing and therefore there are more factors that have to be considered such as liquidity and the ability of the business to pay salaries and buy premises. This type of cap table has more complicated calculations and it is advisable only for sophisticated investors. One disadvantage of this kind of table is that it might take longer to calculate the EPS depending on the number of rounds since the numbers have to be calculated.
The third type of pro forma cap table, which is the simple equity shareholder's table, compares the owner's equity with the owner's paid-in capital. The owner's equity and paid-in capital are compared using a discount rate. The discount rate is chosen by the investor and ranges between zero and one percent. The calculation of the owner's equity and capital effect the percentages of capital appreciation and the annual dividend yield. If there are high-priced stocks owned by the shareholder, then he can choose a discount rate between zero and one percent and accordingly invest his money in high earning companies.
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