first year associate just starting out at my buy-side gig. obviously we have our standard model checks just like anyone else, but am curious if any of the more experience associates out here have picked up any useful model checks / tricks that you use to sanity check your work (esp when it's late and you've been staring at numbers for too long). thanks in advance
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Cumulative levered free cash flow = change in net debt (+ equity funding)
Should add this will show 99% of model busts
Cumulative levered free cash flow before mandatory and optional prepayments of debt, correct (i.e., FCF (unlevered FCF - cash interest payments)? Also, you should substract PIK from the levered FCF (if any), no? Otherwise you have the mismatch between actual cash flows and net debt which includes PIK.
Something like this was gonna be my answer - when I learned about this I was so amazed... I use this for very quick and dirty models where I don't have a full BS
What do you include in net debt since there are different ways you can calculate it?
Can you share an xls example? Thanks
Also another pro tip, leave some fake check lines that do random things in the model. When the vp is reviewing it, they’ll spend a lot less time grilling you if they see those
Few to add:
- For things like funds flows, helpful to have a global check that aggregates all of the checks throughout the document, so you don't have to manually go look for busts on all the various tabs
- This wasn't quite the question but a random tip that I've adopted as a reviewer of work - I'm often tasked with confirming that figures tie (e.g., main model vs. ripped out lender model) or haven't changed across versions. I find it helpful to just highlight large amounts of data (e.g., full quarterly P&L for multiple years) and sum via the Excel preview in the corner, then compare to the equivalent source file, rather than spot-checking certain cells or adding an A minus B calc off to the side and messing up my margin area.
What are your standard checks? Sorry newbie here
Not analysts.
Make sure the balance sheet balances.
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