I’m having some trouble projecting the CFS in a three statement model of a public company. For practice. It would be significantly easier for me to just create my own cash flow statement format using the balance sheet and IS projections instead of trying to reconcile them with this company’s CFS line items. They don’t seem to lineup well and it’s hard to tell where they have consolidated certain things. Is it kosher in the real world to do this? It shouldn’t matter right?
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I would say you can use your own projections/assumptions from the projected years in your BS/IS to forecast your CF line items and link the final cash balances back to the BS
As long as your only output is the end cash balance flowing into the balance sheet that should make no difference
Bump.
Am I right in thinking that the best way to run a 3-statement model would be to project the income statement pretty much as is, likewise the BS (maybe consolidate a few of the more esoteric line items) and then the CFS pretty much just exists to plug the BS from one period to the next (i.e. you would disregard most of the weird line items that normally show up in a real company's CFS)?
Many thanks
Second this question
Each company does their CFS differently and it’ll almost always be impossible for you to reconcile it line-by-line with BS accounts. To do a three statement op model project IS and BS and create the CFS from the balance sheet change year to year. (For assets, it’s beginning minus ending, vice versa for liabilities). There should be a line for everything that appears on the BS except cash. Then you can add andsubtract D&A and net income. Change in cash per period should match the company’s CFS, just the specific amounts contributed by Ops, Investment and Financing may differ depending upon how you organize.
Thanks - SB'd. So basically you create your own CFS based on your BS. Historical changes in cash per period should reconcile to the company's but line items (and O/I/F groupings) will not?
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