Modeling Help with Cash Balance
Hi guys. I'm practicing modeling a company and came across something weird. I have projected next year's cash abalance to be 220k, and the 4 years after that are 10-12k. The company's most recent year reported cash was 16k. The 220k obviously looks alarming...but the company has reported very little debt obligations (3,800) for upcoming year, while the following years after that, they have 824,000 followed by 281,000. With these numbers, the financing cash flows used in 2016 are very little, which results in a jump to 220k in cash balance.
Is this something that can happen, or did I make a mistake somewhere?
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Nevermind! I forgot to add short-term debt to the model, which messed up the cash balance. But I suppose my question can still hold; can something like this ever happen?
EDIT: I have one more question. I'll start by posting some information from the company's financials:
Long Term Debt Beginning Balance for 2016: 1,105,764 Less: Repayment: (3,800) = 1,101,964
LTD Beginning Balance for 2017: 1,101,964 Less: Repayment: (824,000) = 277,964
LTD Beginning Balance for 2018: 277,964 Less: Repayment: (281,400) = NEGATIVE 3,436.
My question is whether it is correct to leave the ending debt balance as negative, or use an IF function to set it to zero?
To answer your question about the negative balance, I would try to understand where the negative balance comes from because there could be an error in your calculation, and you don’t want to let that into your model.
In the example you provided, it seems to me that 3.8 is the current portion of long-term debt. By definition, it comes due within the next 12 months of the date of the balance sheet so you want to include it in “Long Term Debt Beginning Balance for 2016” if this is the case. However, after this adjustment the ending balance still wouldn’t be zero. I am wondering if this could be due to rounding (1,105,764 is more precise than the repayment figures) or a typo (in the first message you used 281,000 while in the second message it became 281,400).
The 3.8 was found on the section of the company's 10k where they list annual maturities due within the next 5-years. On my debt model, I just subtract the amounts they provided for each year up until year 2020. Is this not correct?
The reason it's negative is because, based on the information they have provided regarding debt, they will be repaying more than they have to owe (again, according to the numbers they've provided) in 2018....maybe I messed up somewhere. I don't know.
Yes, I just rounded; sorry for the confusion. They keep switching from thousands to millions in their financials.
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