FINANCIAL STATEMENTS MODELLING

SECTION 2: GETTING STARTED

Historical Income Statement
Projected Income Statement
- A combination of analyzing the past and making informed assumptions
about the future.
- Historical: Press Releases, Sec filings
- Assumptions: Analyst Reports, Industry knowledge, Company
knowledge
- Industry Sources: Industry Trade Journals, Equity Research
Reports
Company
Sources:
Historical
filings,
Press
Releases,
Conferecence Call, Equity Research Reports
- Practical Considerations:
- There are usually only a few key assumptions made in a financial
model which drive many of the line items in the model.
- Models contain option for multiple scenarios
- Forecasting accounts receivable indecently of revenue growth is
incorrect unless you have a reason
- Forecasting inventory independently of COGS growth is incorrect
unless you have a specific reason
- Models often include the ability to see several scenarios for
future performances: i.e.: Best Case, Base Case, Weak Case
- COGS Margin=COGS/Revenues; Operating Expenses Margin=Operating
Expenses/Revenues; Tax Rate = Tax Benefits/PreTax Profit
- Forecast the Income Statement
- Use the assumptions to calculate revenues, COGS, Operating
Expenses and Taxes
- Operating Expenses: Net income*Operating Expenses
Maring
- Leave Blank: Interest Income, Interest Expense
Historical Balance Sheet