Hey there,
I've prepared a financial model of a power plant and the revenues are based on quoted tariff. I assumed a large no. for quoted tariff so that my figures made sense to me in my first draft and for large tariffs my model balances.
However once I change the tariff to too low, my Cash and Cash Equivalents and Retained Earnings become negative and my model doesn't balance.
Any idea where I might be doing wrong?
PS: For simplicity I have included the following on my BS:
Assets
- Net PPE
- Cash and Cash Equiv.
- Interest during construction
Liabs:
- LT debt
- Current portion of LT
Equity
- Shareholder's Equity
- Retained Earnings
Sounds like expenses are too high and cash flow is negative. Negative NI flows through to RE, negative cash flow is eating away your cash. Try raising debt to prevent negative cash balance.
Edit: Sorry, didn't see that BS doesn't balance.
you need to model in a revolver so when you have negative cash flow and a cash balance below your min cash, it assumes you borrow debt to cover the cash needs
I'm guessing you're in school OP.
Making the model balance is step one. Defining what causes the error will make correcting it easier.
Plug a revenue / tariff / whatever figure so that cash is barely positive Check if your model balances Repeat with revenue that makes cash slightly negative
Now do the same thing for retained earnings.
Once you know what values are throwing the model out of balance, you can move forward
Common sanity checks? (Originally Posted: 05/29/2016)
I'm about to start as a SA in IBD BB. Learning how to model is pretty interesting, and I was wondering if you guys had common sanity checks you use when looking over a model you're building or glancing through a pitch book. Anything from common formatting issues to look for to common mistakes in building a model.
Apologies if this is a scrub question, I'm just trying to get prepared for the summer.
Something a surprising number of people do not know;
When your numbers don't balance check to see if the difference is evenly divisible by 9. If the difference is an even number you committed a transposition error on one of your lines. If the difference is 3 or a multiple of 3*(a power of ten) then you placed a zero in the wrong spot somewhere.
I'm just going to rattle off things as they come to my mind, so I apologize if this lacks coherent structure.
Look at growth rates and margins. Are they obnoxious y/y? Does revenue/EBIT jump by a factor of 10? If so, you likely did something wrong.
For comps, look at multiples. Are they consistent over time? Is FY17E much larger than FY16E? If so, why?
F7: Spell Check. Do this before ever sending anything to print or sending an email. It works in all of Office.
Always check page numbers at the bottom, ESPECIALLY if you paste in slides from another group. The Slide Masters can overlap and the numbering system can get messed up.
Always check bullet alignments. Should be consistent from page to page.
Check vertical and horizontal alignments of everything. I like to always work with the Guides and Gridlines on in PPT.
Check spacing between lines to make sure it is consistent.
Make sure colors are consistent. For example, if your bank highlights a table every other row in Excel, make sure each one starts with the same color (if the first row in the first table of your book is white, they should all start with white and then alternate). If that doesn't make sense let me know and I'll try to elaborate.
I can probably think of more, but I'm pretty beat. I hope this helps. Best of luck this summer!
When you're proof reading, you'll often be tempted to let your brain think that it knows how the sentence reads, so skim over sentences too quickly. That can often leave you missing obvious spelling errors, cut-and-paste errors, punctuation problems etc.
Force yourself to read every word. It's painful, but less painful than looking sloppy.
Printing out an e-mail or page and looking at it on paper (rather than on screen) can also help you spot obvious errors that you may otherwise skim over.
Checking other people's model (Originally Posted: 03/07/2018)
Hey fellow monkeys,
I would love to hear how you check your analyst's model as an assoicate. Do you have any tricks? I find it really difficult to check the model of someone else that I didn't build. And I am not talking about the simple models where you pull the factset consesus figures but a very detailled one as you would find on a live deal and where you add lines as the process progresses and you receive further information and when additional analysis is required and added.
1
Ctrl+[ . First I'll go down the P&L, top line through net income to ensure the inputs are flowing correctly and any adjustments to the inputs are documented and justified. Once I feel good about that, I do the same between three statements / whatever schedule was built to get to FCFF.
Vel rerum ad velit ipsam modi possimus voluptas neque. Et culpa quia aut amet totam nemo iusto quidem. Aut vero doloremque qui magnam at. Dolore mollitia est eligendi aperiam eos.
Officia debitis fugit atque dolores odio. Temporibus numquam eveniet aut nostrum quisquam iste laudantium ea. Exercitationem exercitationem necessitatibus reprehenderit est velit. Sint sit facere est odit ducimus exercitationem quasi officia. Aut quam omnis porro rerum in quisquam. Aspernatur laudantium ratione necessitatibus accusantium ea natus.
Est et nesciunt molestiae et. Corporis cupiditate eum sed distinctio quia autem illo. Fuga fugit qui aliquid qui. Minus cupiditate rem nam ea quia est. Deserunt sed illo culpa veniam rerum. Enim voluptatem porro qui ut amet.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...