Quarterly to annual conversion of 3 statement model
I have a created 3 statement models in both the quarterly format and in the annual format. Obviously the quarterly format reflects the most current info. And I want to have the quarterly model roll right into an annual model. So I have the Q1 Q2 Q3 actual numbers inputted, and the Q4 numbers are forecasted. What should I do to convert those quarterly numbers into annual numbers (Q1A+Q2A+Q3A+Q4E = Annual) and still have the model balancing and flowing dynamically?
Your Q4E balance sheet numbers will be used as you annual year end numbers. Those should balance. Q1+Q2+etc is the wrong way to think about balance sheet figures. They are not cumulative and are a snapshot in time.
Hope this helps.
Thanks! I understand that the balance sheet numbers are a snapshot in time. But the income statement is not so it must be summed. The difference between the 4 quarters of the balance sheet items must be captured in the cash flow statement along with some of the income statement items subtracted or added back. So I sum the income statement numbers, and difference the balance sheet numbers for the 4 quarters capture those differences in the CF statement; put it all together the model does not balance. I am not getting the right cash balance to go back to the balance sheet.
Good - that’s a start. Are you sweeping your cash to pay down debt each quarter? Check NWC calc and minimum cash too. I’d build your debt schedule quarterly as well.
Ignore this is your model is set up differently - but if your Q3 is actual and balances (which is should). Then you just need to do the Q4 CF and cash sweep correctly for it to balance.
Third option assuming this is for an LBO. You can just make the transaction as of FYE 2019. Use your Q4 balance sheet to start and then just project annuals. You don’t really need a quarterly model unless the business is cyclical or you are building an operating model.
Yes i have a quarterly debt and interest schedule with a commercial paper revolver that maintains a minimum cash balance. I also have the same company modeled annually in almost an identical way. Both models balance and are stable. But I can not figure out how to combine them.
Whose Q4 forecast are you using and when was it released? Can you be certain that they will necessarily reconcile?
I am using my own forecast. I forecast the sales growth rate for the fourth quarter elsewhere.
Best way to do this is with the SUMIFS function. Just wrap things up that way.
Thanks! If its not too much trouble could you please explain in more detail?
If you have a row with the year or whatever above the quarter, you can SUMIFS to get the cumulative sum of the year, half year, quarter, week, month, or whatever you want based on your column groupings. For BS, obviously its best to link to CFS which will drive your end of period values.
So what I did is summed the income statement numbers to get the annual numbers. I created a cash flow using the change from previous Q4 to the projected Q4 balance sheet numbers. Should I just be summing the CF numbers as well?
Yes that worked; summing the CF numbers. A little counter intuitive. In accounting we are trained to build the CF from the balance sheet (or directly from the accounts). But this worked. When I built the model I differenced out the the quarterly CF numbers from the cumulative CF numbers presented in the 10Qs because I want the model to display what happened within the quarter. So to go to annual I guess summing the CF is really just sort of reversing that.
Hi. Am facing the same problem with my model. Was wondering if you could please elaborate a bit more on how you managed to get the BS to balance. Here is where I am (and stuck).
Have 10-Qs for 3 quarters along with 10-Ks for previous years.
Have forecasted IS, CFS and BS for 4th quarter and BS balances
Where am I going wrong? I'd expect this to be a challenge that anybody would face when modeling in real life because you'd typically have something more than just the last 10-K.
Thanks for your help in advance. If you could share the model that you worked on and balanced, that would be much appreciated. (Fully understand if you can't - confidentiality and such).
The convention is:
FY0 | 1Q 2Q 3Q 4Q | FY1 | 1QE 2QE 3QE 4QE | FY2E FY3E
use the Group function in Data tab for the quarters, sum the Q's for the FY. Project FY3E without breaking out the quarters.. Good luck getting your projected working capital accounts by quarter and CF/BS links -- this is the most challenging part.
Hey Thanks! Now that I have it working I will try to get it formatted as you have shown. Thanks a bunch.
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