Modeling Forecast Question
Hi, I have been practicing modeling and I am curious how bankers project out certain line items on the B/S like Current portion of LTD, and on the job which projections get specific with a build / which do you just chalk up as a % of revenue or % of COGS?
Also would be interested what on the desk bankers do for AOCI, Deferred taxes (asset and Liability), Dividends paid, and share repurchases. Many of the videos I have been watching give only a surface level overview and tend to flatline some of the more complex items. Is there any resource to learn fuller and more complex modeling?
Also, do bankers tend to build DCF’s off of full 3 statement models, or do you build a smaller model without all of the necessary projections or builds?
While I mentioned some line items above, any other points you would think are helpful to know when modeling / other normal practices of bankers on the desk projecting items that I may not have mentioned above are appreciated.
Thank you in advance.
Bump
TTS, WSO all have good courses.
Hey there! You've got some great questions, and I'm here to help you navigate through them.
When it comes to projecting out certain line items on the Balance Sheet like Current Portion of Long-Term Debt (LTD), it's often based on the company's debt schedule. If there's no specific information available, a common approach is to keep it constant or grow it in line with revenue.
As for which projections get specific with a build or which do you just chalk up as a % of revenue or % of COGS, it really depends on the level of detail you want in your model and the time you have. For quick and dirty models, using percentages is common. However, for more detailed and accurate models, you'd want to build up each line item.
Regarding AOCI, Deferred taxes (asset and Liability), Dividends paid, and share repurchases, these are often more complex and company-specific. They may require a deeper understanding of the company's financials and policies.
As for resources to learn fuller and more complex modeling, the WSO Academy offers a variety of courses that can help you, including the Financial Modeling Course which covers these topics in depth.
When it comes to DCF models, they are typically built off of full 3-statement models. This is because the DCF model requires a projection of free cash flows, which come from the income statement, balance sheet, and cash flow statement.
Lastly, when modeling, it's important to understand the business and industry of the company you're modeling. This will help you make more accurate assumptions and build a more realistic model.
I hope this helps! Keep practicing and don't hesitate to ask if you have more questions.
Sources: https://www.wallstreetoasis.com/forum/investment-banking/which-de-ratio-should-i-use-on-a-3-year-projection-of-the-following?customgpt=1, Seeking advice on Corporate Banking modeling, Coverage bankers, how do you keep up with activity in your space? What resources do you use?, Project Finance Bankers
Thanks
Bump
Pretty rare that we actually build out the full 3-statement model into our projections. Typically just FCF, net debt balances, and equity distributions.
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