Hey,
If during a LBO case study interview I have 2 hours to build a full 3-statement model (no presentation, only constructing the model) with different scenarios etc - should I try to build in a "date selection"-option for when the transaction closes and integrate stub periods in this model even if the case study does not specify when the transaction closes? This takes a bit more time to integrate into the model so don't want to do any unnecessary things. It's just that it feels sort of unreasonable to assume that the transaction closes 2019-12-31 when it is October 2020 now (although this is not what the interviewer likely wants to test, they want to see that you can construct a model..)
No, building out different transaction closing dates is not necessary at all. I have never seen that tested and no one will care about that in a 2 hour modeling test. Use the most recent financials you are provided as the closing date and go from there (for example, if you are given 3/31 LTM, go from there and project forward)
Thanks. But if you get latest fiscal year and q2 and q1 2020 (FYE in Dec), would you recommend calculating LTM figures or just go with latest annual report even though it is 2019-12-31? It takes 10-15 minutes to put together LTM figures for the P&L and would rather go with annual report..
Calculate LTM.
Two follow-up questions: If I am given the 3/31 2020 LTM but closing and previous fiscal year end is in Dec 31 2020, should I "treat" the 3/31 LTM figures as per Dec 31 2020? Otherwise the projected years would have their fiscal year end in 3/31 and also a stub period would be needed. I assume what you are saying above is to take the latest available LTM figures and use that as the figures per the given closing date?
Second question: If I am not given a specific closing date, should I treat the LTM figures as it is the fiscal year end figures for the company (Dec 31) or project each year from 31/3 and have that as the year end?
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