Projecting Financial Statements
Hey all,
A quick question. How do you project the items on your financial statements for, say, a lbo model? I know in the future, you can flatline the percentage increase, but in the first few years, how is this done? I believe you base it on historical data but not too sure how the exact numbers are calculated out, especially when the percentage increase between the first few years differ.
This is coming from a summer analyst about to get an model to work with, so I am wondering whether the analyst will give me the numbers to calculate the projections or if I will have to do it (somehow).
Thanks - much appreciated.
LBO & merger model step by step explanation
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Projecting Cash Flow Statement (Originally Posted: 10/19/2011)
Guys,
How does one project the "financing" section of the cash flow statement in a non-LBO scenario? What assumptions do you make of equity/debt issuance in the future?
Thanks!
Dividends Issued - either assume 0 or same as last year Short Term Debt Raised (Paid Off) - if you have a debt schedule, use that, otherwise assume 0 Long Term Debt Raised (Paid Off) - if you have a debt schedule, use that, otherwise assume 0 Issuance (Purchase) Shares - assume 0 or same as last year
Projecting out Cash Flow Statement (Originally Posted: 02/27/2012)
If you forecast other non-current assets and liabilities (ie % of sales), then where does that tie into the cash flow statement? Do you take the change and put it in Investing activities?
Depends. PP&E is CapEx (CF from Investing). SHE comes from dividends and retained earnings (net income). Varies.
is this sadmunky posting under another name? do yer own homework ya lazy prick.
As bonobo said, it really depends because we don't know what the "other" component represents - it could be an operating, financing, or investing activity. So...look at the footnotes to try to understand what these aggregated line items are comprised of. If you have no insight as to the nature of these line items, look at historical results over the last few years and see if they show some correlation to revenue growth. If not, I would consider straight-lining.
Keep in mind that if you're growing by sales (as opposed to straight-lining) you are implicitly saying that these assets and liabilities are tied to operations somehow. In other words, as the company generates more revenue you expect these items to grow correspondingly. That makes sense if they are operating related items like deferred rents, or deferred taxes, for example, but not if they are investments in other businesses.
But if you've done all of the research and still have not found anything, just include it in financing or investing activities (that's often where these line items end up being) and comment that there are no disclosures about the nature of the items.
When projecting statements, where do you like to pull historicals from? (Originally Posted: 03/23/2013)
What source? CapIQ? Morningstar? Transcribing them?
If you're in colleges still = Edgar
Why Edgar?
pulling financials is for bitches. pop a 10x EBITDA multiple on that shit and go to happy hour - it's 5pm somewhere!
This guy is spot on...no one really looks at that junk anyways. I'm guessing he's a superstar analyst at some BB.
Pull it from whatever source you have and then cross reference it with official filings via EDGAR. Also, don't forget to check equity research reports to see their standard. Some companies are always analyzed via non-GAAP, i'm its case by case, but if you didn't check the equity research reports you would be using GAAP the whole time and be under consensus by a large margin.
Cash Flow Statement line items for projections (Originally Posted: 01/13/2014)
Does anyone have advice on how to handle the cash flow statement projections when building out a model?
More specifically, I have five years of historical information…the IS and BS are both pretty straightforward. However, when looking at the detailed CFS’s from the last five years…some years have line items that other years do not.
For example…in earlier years there was a line item under Cash Flow from Investing titled “Proceeds from Sales and Maturities of Investments” while in later years this wasn’t included. Likewise, later on there was “Payments for Businesses Acquired” where this absent in the early years. There are numerous situations like this.
So any thoughts on how to address both missing and new line items on the CFS when building out a model would be greatly appreciated.
Thanks.
Assuming the company is using an indirect cash flow statement (which 90%+ of companies do), the cash flow statement would just be a byproduct of your projected income statement and balance sheet. Most of the time, I'd say you don't need even to build out the entire cash flow statement for the projected periods. Only the items leading up to free cash flow are important (capex, working capital, etc).
The weird, inconsistent line items you see are non-recurring items and they are typically not projected unless management or some reliable source told you that the company will purchase x company in that year or whatever.
If this is your first time building a model, my advice is to just keep things simple and then add in more scenarios and assumptions when you have a base model.
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