Hi all,
i've been through some case study interviews where I was given an old IM and asked to create a presentation + an LBO and forming an investment decision in the end. When I was given the IM, I was not sure how detailed the B/S needs to be cuz IM usually doesn't provide a full-blown details of the balance sheet, most of the time just some info on working capital, current debt and then some small line items with very marginal numbers. Question here is do I need to increase all items included in the IM or can I just select the few relevant ones i.e. cash, working capital, pp&e, debt, goodwill, equity
thanks folks!!
This depends on
A) fund that you’re interviewing for, and; B) your personal background
My experience as a consultant recruiting for mid market funds, is that you need to be able to get down to a LFCF and show you can calculate returns and derive valuation. This means being able to model out change in working capital (current assets less current liabilities), typically by forecasting using ratios for:
And simple percentages of revenue for any other items
My impression from recruiters is that if you’re coming from an IB background the expectations re. model complexity would be higher.
thanks! the working capital part is clear and also the valuation/ return calc. but my focus is really on how detailed the B/S needs to be, and what exactly can I extrapolate here except the items provided in the IM?
What are the specific items in the IM you're asking about? If current assets/current liabilities, they'll be part of your working capital calc or projectable as a % of revenue. If long-term, it may be easier to just intuit how they would grow, e.g. customer deposits for a Cybertruck that isn't coming out for a couple years, and build a small schedule for them or grow them as a % of revenue too like @OCQH123" said.
I'd say get as granular as you reasonably can within the time allotted!
Keep things simple. If they state they need a 3 statement model, then include whatever line items are in the IM, they wouldn't ask for 3 statement if you didn't have the full BS.
If not, just have NWC and cash flow calcs
thanks
on another point, if the IM only goes to EBITDA and didn't provide anything below that, would you make assumptions to get to NI so that you have a full 3- statement model?
If CIM has a full BS, i.e. total assets = liabilities+SH equity, then yes. Otherwise just to EBITDA-interest-taxes-change in NWC to get to FCF
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