Building Financial Models with Microsoft® Excel®: A Guide for Business Professionals, Second Edition

Chapter 9. Free Cash Flows and Dashboard

While Chapters 2 through 8 covered the creation of Napavale's Master Budget, Operating Budget, Financial Budget, and Consolidated Financial Statements (Balance Sheet, Income Statement, and Statement of Cash Flows), this chapter is focused on Napavale's free cash flows and the Dashboard section of the Assumptions and Dashboard worksheet. The calculation of Napavale's projected free cash flows represents the final stage in building all of the components required for the analysis and evaluation of Napavale as a business. As such, after calculating Napavale's free cash flows, I will build the first Dashboard section of Napavale's Assumptions and Dashboard worksheet in which various outputs of the financial model are checked for consistency.

As mentioned briefly in Chapter 1, free cash flows represent the funds available to "all providers of capital"— a group that includes a company's equity (stock) owners and debt holders. The concept of free cash flows, which is a key component of traditional MBA finance classes, is central to the modeling and analysis of any company's operations. In essence, free cash flows represent the cash left over after all of a company's required expenses and obligations have been paid and fulfilled. I will revisit the concept of free cash flows later in the book when I cover the concept of valuation in Chapter 13.

The calculation and analysis of Napavale's free cash flows represent one way to assess and evaluate Napavale ...