Financial Modeling and Valuation: A Practical Guide to Investment Banking and Private Equity

APPENDIX 1

Model Quick Steps

I. Income Statement

1. Input Historical Income Statement Data

2. Project revenue

3. Project all expenses

a. Leave Depreciation empty (to come from Depreciation Schedule; III.1.a)

b. Leave Interest Expense and Interest Income empty (to come from Debt Schedule; VI.8 and VI.9)

4. Build to Net Income

II. Cash Flow

1. Input Historical Cash Flow Data

2. Cash Flow from Operations Projections

a. Pull in Net Income before Dividends from Income Statement

b. Leave Depreciation empty (to come from Depreciation schedule; III.1.b.)

c. Leave Deferred Taxes empty (to come from Depreciation schedule; III.3.a)

d. Leave Changes in Operating Working Capital empty (to come from Operating Working Capital schedule; IV.1.a. and IV.2.a)

e. Project “Other” items

3. Cash Flow from Investing

a. Project Capex

b. Project “Other” Items

4. Cash Flow from Financing

a. Leave Short Term Debt Borrowings / (Retirements) empty (to come from Debt Schedule VI.3.b)

b. Leave Long Term Debt Borrowings / (Retirements) empty (to come from Debt Schedule VI.4.b)

c. Pull in Dividends from Income Statement

d. Project “Other” items

5. Sum Total Cash Flow

III. Depreciation Schedule

1. Project GAAP Depreciation

a. GAAP Depreciation links to Income Statement (I.3.a.)

b. GAAP Depreciation will link to Cash Flow (II.2.b)

2. Project Tax Deprecation

3. Calculate Deferred Taxes

a. Deferred Taxes will link to Cash Flow (II.2.c)

IV. Operating Working Capital

1. Project Each Current Asset ...