Hi,
tasked with a building a model for Visa. They have a line item called client incentives that is a non-cash expense. How should you go about incorporating this item into your three statement model? I have it as an expense in income statement and I add it back in CFO but then my balance sheet is unbalanced as the cash balance is higher. Would appreciate some help.
| +131 | AI Creating More Work | 39 | 56m |
| +118 | Is it Bad That I ALREADY Don’t Care? | 33 | 9h |
| +117 | Senior Banker's Guide to IB Recruiting / Group Placement (with a Healthcare Bent) | 16 | 17h |
| +110 | Shit PWP Culture | 79 | 6h |
| +107 | Is pay at BofA really that bad? | 52 | 1h |
| +49 | How easy was recruiting for you? | 26 | 13h |
| +40 | Is the life of a VP at a 'top-bank' really good? | 15 | 13h |
| +38 | 22yo IB Analyst just had mental health breakdown | 12 | 21h |
| +31 | What Bank Will Make Women Instantly Fall In Love With Me? | 5 | 4h |
| +29 | Law school instead of MBA for RX Banking | 5 | 19h |
Career Resources
Get instant access to lessons taught by experienced private equity pros and bulge bracket investment bankers including financial statement modeling, DCF, M&A, LBO, Comps and Excel Modeling.
Adjust the balance sheet items that correspond to client incentives.
That's what I'm a bit confused about bc its not like D&A where it corresponds directly to PPE. What line item should I adjust it to?
Theres literally a line item on their BS that says "Client Incentives"
Took a quick look at their FY 23 earnings press release and it’s a non-cash expense in their walk down to net revenue so you wouldn’t add it back to CFO. The expense is just forgone revenue so your build to net income / EBITDA that flows into CFO already captures the cash impact via lower revenue.
Sorry, I'm a bit confused but wouldn't you add it back to CFO because even though the income statement/net income shows it as forgone revenue you haven't actually lost any "cash" (like D&A or something).
You do lose cash because you forwent the revenue which means you forwent the cash associated with that revenue. You don’t need to adjust for it because it’s already baked into Visa’s net revenue figures. It’s not like D&A which is purely a made up P&L line item to lower your taxable income (you don’t pay anyone D&A so you need to add it back if you’re building CFO off net income vs. you “pay” for client incentives by taking less revenue as opposed to taking higher revenue and then realizing higher expenses)
Molestias fuga tenetur occaecati dicta sit laboriosam quia. Porro reiciendis ea quae suscipit quo. Consequatur illum voluptas nemo incidunt quia officiis. Rem beatae quae sunt natus alias. Natus animi eveniet impedit quasi impedit deleniti.
Ex vitae ut quia et qui beatae. Et quam eius magnam. Aliquid distinctio voluptatum aut quibusdam. Necessitatibus aspernatur eum et expedita.
Dolores explicabo est tempore debitis praesentium. Est fugiat et facilis reiciendis in eos nam.
Et qui inventore eligendi repudiandae. Aut et quo sint corrupti amet eum. Occaecati nobis est et cupiditate blanditiis. Laboriosam qui officiis aliquam nostrum in.
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...