BPM Valuation

Valuation Model
How to build an annual rolling
Valuation Model
Using the BPM Excel add-in
Duration: 1 hour
Valuation
How to build an annual rolling Valuation Model Using the BPM Excel Add-in
Please check www.bestpracticemodeling.com for any updates to this document. All copyright in this
document and any derivation of this document is owned by bpmToolbox Pty Ltd, bpmModules Pty Ltd,
BPM Analytical Empowerment Pty Ltd and/or its associated entities.
Copyright © bpmToolbox Pty Ltd, bpmModules Pty Ltd, BPM Analytical Empowerment Pty Ltd and
associated entities.
This is a Best Practice Modeling publication. To keep up to date with the ongoing evolution of best
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Document version: 7.6.0.0
BEST PRACTICE MODELLING (BPM)
Best Practice Modelling (BPM) is a business modeling organization that specialises in the provision of
best practice spreadsheet modeling resources including software, consulting and training services. BPM
is the founding member of the Spreadsheet Standards Review Board (SSRB) and remains committed to
overseeing the ongoing maintenance, development and adoption of the Best Practice Spreadsheet
Modeling Standards. BPM can be contacted as follows:
Website: www.bestpracticemodelling.com
Email: info@bpmglobal.com
IMPORTANT NOTICES
Many of the examples provided throughout this document have been created within Microsoft Excel using
the BPM Excel add-in – a best practice content management and sharing tool available from Best
Practice Modelling (www.bestpracticemodelling.com). The SSRB is of the opinion that the use of the BPM
Excel add-in within Microsoft Excel is the most efficient and effective means of implementing modular
spreadsheet development. A free trial of bpmModules may be downloaded from the Best Practice
Modelling website at www.bestpracticemodelling.com/software/packages.
www.bestpracticemodelling.com
Valuation
Table of Contents
Introduction ............................................................................................................... 3
Financial Model Creation .............................................................................................. 4
Historical Financial Statements ............................................................................ 4
Chart of Accounts Selection ................................................................................. 5
Initial Time Series Assumptions ........................................................................... 6
Initial Functionalities........................................................................................... 7
Source Data Type Selection ................................................................................. 8
Excel Source Data Location.................................................................................. 9
Income Statement Accounts Mapping ..................................................................10
Balance Sheet Accounts Mapping ........................................................................11
Outputs & Presentations.....................................................................................12
Version Control & File Saving ..............................................................................13
Forecasts Development & Valuation..............................................................................15
Entering Forecast Assumptions ...........................................................................15
Initial Valuation.................................................................................................17
Periodic Rolling ..........................................................................................................19
Time Series Updating .........................................................................................19
Importing Updated Financial Statements ..............................................................23
Forecast Assumptions Updating...........................................................................27
Revised Valuation ..............................................................................................28
Appendices ...............................................................................................................29
Income Statement Mapping Summary .................................................................29
Balance Sheet Mapping Summary .......................................................................30
Rolling Business Planning ...................................................................................31
www.bestpracticemodelling.com Page 1 of 31
Valuation
Introduction
This training exercise demonstrates how the BPM Microsoft Excel add-in can be used to build
and update a rolling planning & valuation model. A valuation model is commonly used by
advisors, funds and businesses to perform a discounted cash flow (DCF) valuation of a
business, often as part of a transaction or capital raising process.
This analysis involves three steps:
1. Financial Model Creation: The creation of a new valuation model based on existing
historical financial statements;
2. Forecasts Development & Valuation: The entering of forecast assumptions and

initial valuation; and
3. Periodic Rolling: The rolling-forward of the model to include newly-available

historical income statement and balance sheet assumptions, the updating of forecast
assumptions and revaluation.
The model will be of a hypothetical breakfast cereals company called ‘Twisted Cereals’, and
will initially have the following characteristics:
Twisted Cereals – Valuation Model Scope
Periodicity Annual
Time Frame(s) Historical & Forecast
Term 8 Years
Initial Start Date 1st July 2011
Initial Historical Years 3 (2012 – 2014)
Initial Forecast Years 5 (2015 – 2019)
Region Australia
This exercise assumes that you have a validly-installed copy of the BPM Excel add-in and
access to the following files which can be downloaded from the Best Practice Modelling
website:
File Content & Purpose Download URL
BPM-Twisted Cereals-  Historical financial https://www.bestpracticemo

Historical Financial statements for the 2012 delling.com/get/bpm-
Statements 2012-14.xlsb – 2014 financial years. twisted-cereals-historical-
 Provides initial income financial-statements-2012-
statement and balance 14.xlsb
sheet assumptions.
BPM-Twisted Cereals-  Historical financial https://www.bestpracticemo

Historical Financial statements for the 2015 delling.com/get/bpm-
Statements 2015.xlsb financial year. twisted-cereals-historical-
 Provides rolled-forward financial-statements-
income statement and 2015.xlsb
balance sheet
assumptions.
For more information regarding any of the concepts discussed in this training exercise see
the resources on the BPM website (www.bestpracticemodelling.com/resources).
Valuation
Financial Model Creation
The first step in the development of a rolling planning & valuation model is the creation of a
new bpmModules project containing historical and forecast business planning modules.
Historical Financial Statements
Before creating the new bpmModules project, open the workbook named ‘BPM-Twisted
Cereals-Historical Financial Statements 2012-14.xlsb’. This workbook contains two
worksheets – the first containing historical income statement data and the second containing
historical balance sheet data, as shown below:
Historical Financial Statements Data – FY 2012 - 2014
The data within this workbook will be imported into the new project when it is created.
Page 4 of 31 www.bestpracticemodelling.com
Valuation
Chart of Accounts Selection
To create the new project, activate the Modules tab (or the BPM tab if in User mode) and
click on the New button within the Projects group to load the New Project Wizard. Then
select the ‘Inventory’ chart of accounts. Ensure that the ‘Include GST’ checkbox is ticked, as
shown below:
New Project Wizard Dialog Box – Project Type
The Inventory chart of accounts is suitable for Twisted Cereals Incorporated, because it is a
manufacturing business and therefore reports cost of goods sold and inventory within its
financial statements.
The New Project Wizard provides a growing range of chart of accounts, differing based on the
accounts included in their financial statements as displayed on the right of the dialog box –
e.g. the Wages chart of accounts is more suited to services businesses requiring detailed
employee expense accounts within their financial statements.
Valuation
Initial Time Series Assumptions
Click the Next button to move to the second step of the New Project Wizard. These time
series assumptions will determine the starting time series properties of the new valuation
model, as shown below:
New Project Wizard Dialog Box – Initial Time Series Assumptions
Enter the following time series assumptions to ensure that the new valuation model initially
contains annual historical financial statements for the 2012 – 2014 financial years and 5
forecast years:
Type Assumption
Time series  Annual, Historical & Forecast
Financial year end  June
Model start date  2011
Term (years)  8
Last historical year  2014
Denomination  $’000
These assumptions can be quickly and easily changed after the model is built.
Valuation
Initial Functionalities
Click the Next button to move to the third step of the New Project Wizard. The options
selected within this tab will determine the way in which forecast assumptions are entered,
and outputs calculated, within the valuation model:
New Project Wizard Dialog Box – Initial Functionalities
Ensure that the following initial functionalities are selected for the Twisted Cereals model:
Assumptions Entry
Module Calculation Method
Method
Revenue No drivers Growth rates
Cost of Goods Sold Margins N/A
Operating Expenditure No drivers Growth rates
Capital Expenditure No drivers N/A
Trade Debtors N/A Debtor Days
Inventory N/A Inventory Days
Trade Creditors N/A Creditor Days
Inventory Payables N/A Creditor Days
Book Assets Depreciation Rates Straight-line
Ordinary Equity N/A Amounts or % of NPAT
Functionalities can be quickly and easily changed after the model is built by inserting,
deleting and editing modules.
Valuation
Source Data Type Selection
Click the Next button to move to the fourth step of the New Project Wizard and ensure that
the ‘Excel/CSV’ option is selected, as shown below:
New Project Wizard Dialog Box – Source Data Type
The source data is used to populate the historical financial statements during the project
creation process, and can be imported from either an open Excel workbook (often produced
from accounting software such as MYOB or Sage) or directly from QuickBooks Online or Xero.
Alternatively, the historical financial statement assumptions can be manually entered or
imported after the model is built.
Valuation
Excel Source Data Location
Click the Next button to move to the fifth step of the New Project Wizard, as shown below:
New Project Wizard Dialog Box – Excel Source Data Location
The rows within the designated ranges will be searched and the data within them made
available for importation into the historical financial statements of the new valuation model.
Ensure that the following ranges within the workbook named ‘BPM-Twisted Cereals-Historical
Financial Statements 2012-14.xlsb’ are specified for the historical income statement and
balance sheet respectively:
Financial Statement Excel Source Data Location
Historical Income Statement 'IS'!$1:$74
Historical Balance Sheet 'BS'!$1:$124
Valuation
Income Statement Accounts Mapping
Click the Next button to move to the sixth step of the New Project Wizard. This step is used
to allocate accounts from the source income statement data to the income statement
accounts within the valuation model, as shown below:
New Project Wizard Dialog Box – Income Statement Accounts Mapping
Use the mouse to drag and drop source accounts from the list on the left side of the dialog to
their appropriate income statement accounts until the difference between the Target and
Actual Net Profit After Tax is zero.
Each source account should be mapped based on its most suitable income statement account
for forecasting purposes – e.g. Tax Expense and Depreciation should not be mapped to
Operating Expenditure if the income statement contains Tax Expense and Depreciation
accounts. Source account totals should also be ignored to prevent double-counting.
A full list of the income statement accounts mapping is provided in the appendices to this
document. These mappings should match those in the ‘Destination income statement’ on the
right side of the dialog box before proceeding.
A Conversion factor of 1000 has been entered to convert the source income statement data
from $ to $’000s when imported into the valuation model.
Valuation
Balance Sheet Accounts Mapping
Click the Next button to move to the seventh step of the New Project Wizard. This step is
used to allocate the accounts from the source balance sheet data to the balance sheet
accounts within the valuation model, as shown below:
New Project Wizard Dialog Box – Balance Sheet Accounts Mapping
Drag and drop accounts from the list on the left side of the dialog to their appropriate
balance sheet accounts until the difference between the Target and Actual Total Equity is
zero.
Fixed assets are generally modeled based on their net book value, so in this case
accumulated depreciation contra accounts have been mapped to the same categories as their
associated fixed asset accounts – e.g. ‘Less Acc. Dep. – Buildings’ has been mapped to
‘Buildings’ so that only ‘Buildings’ appears within the historical balance sheet at their net
book values. This has been done by using the mouse to drag and drop each contra account
(e.g. ‘Less Acc. Dep. – Buildings’) onto its corresponding account (e.g. ‘Buildings’), as shown
above to map the ‘Less Acc. Amort.-Trademarks’ account, thereby creating many-to-one
mapping of source accounts to destination accounts.
Many-to-one mapping of accounts is also commonly used to group related accounts into a
single account to reduce the number of categories in the financial statements – e.g. grouping
all services-based operating expenses into a single operating expenditure category called
‘Services’.
A full list of the balance sheet accounts mapping is provided in the appendices to this
document. These mappings should match those in the ‘Destination balance sheet’ on the
right side of the dialog box before proceeding.
Valuation
Outputs & Presentations
Click the Next button to move to the eighth and final step of the New Project Wizard. This
step provides for the inclusion of a range of dashboard outputs, which will provide valuable
tabulated and graphical information about the Twisted Cereals business, as shown below:
New Project Wizard Dialog Box – Outputs & Presentations
Ensure that all the outputs & other modules are included within the model. In this instance a
DCF valuation (i.e. the Equity Valuation module) is included in the Twisted Cereals model
because the primary purpose of this model is valuation.
Outputs and presentation modules can be included during the new project creation process
or added later by inserting modules.
Click the Create button to build the valuation model.
Valuation
Version Control & File Saving
The rolling valuation model has now been built. It is now time to name the model, activate
version control and save the file.
Activate the workbook table of contents and click on the ‘Go To Cover Sheet’ hyperlink, then:
 In cell C9 enter the company name (in this case ‘Twisted Cereals Inc.’); and
 In cell C10 enter the name of the model in the space provided by the square
brackets within the formula in this cell.
Before saving, the model should be set to Save View by activating the Toolbox tab, selecting
the Workbook View menu from within the Finalization and Review group and then clicking
the Save View menu item.
Cover Page – Save View
The Save View tool assures that every sheet is consistently scrolled to its top-left position,
that the workbook cover sheet is active and the active cell is the top-left cell on this sheet.
This ensures that model users always start on the cover sheet when the model is first
opened.
Valuation
Before saving the file, activate version control by activating the Modules tab, selecting the
Project menu from within the Project group, then clicking the Version History menu item. The
Project History dialog box will be displayed, including the version settings, as shown below:
Project Manager - Version Control
To activate version control, ensure that the ‘Auto-increment on save’ option is set to
Revision, with the ‘Use version monitoring…’ and ‘Require comment before save’ checkboxes
both ticked as shown above. Then click the OK button.
Save the file using the Excel Save As command. The Version Monitoring dialog box will be
displayed now that version control is enabled, requiring a comment to be entered explaining
the version changes. In this instance, assure that the version is 1.0.0.0 and enter “Initial
model creation.” as the version comment, as shown below:
Time Series Assumptions – Before Roll Forward
Save the file as ‘Twisted Cereals-Valuation-1.0.0.0.xlsb’, thereby ensuring that the file name
reflects the model version.
Valuation
Forecasts Development & Valuation
Entering Forecast Assumptions
Enter the following forecast assumptions for each module into the assumptions within the
assumptions sheets throughout section 2 of the workbook:
Module – Cell Block Assumptions (All Periods)

Revenue – Growth Rates (%) 10%
Cost of Goods Sold – Apply Margins to Nutri Bubbles COGS = Nutri Bubbles Sales
Revenue Just Wrong COGS = Just Wrong Sales
Coco Bix COGS = Coco Bix Sales
Cost of Goods Sold – Profit Margin (%) 25%
Operating Expenditure – Growth Rates (%) 9%
Capital Expenditure – Categories Land
Buildings
Machinery & Equipment
Capital Expenditure – Amounts All categories should start at 250 and increase by 50
each period
Trade Debtors – Allocation Nutri Bubbles Sales = Trade Debtors – Nutri Bubbles
Just Wrong Sales = Trade Debtors – Just Wrong
Coco Bix Sales = Trade Debtors – Coco Bix
Other Revenue Sales = Trade Debtors – Other
Trade Debtors – Debtor Days 30 Days
Inventory – Allocation Nutri Bubbles Sales = Inventory – Nutri Bubbles
Just Wrong Bubbles Sales = Inventory – Just Wrong
Coco Bix Sales = Inventory – Coco Bix
Inventory – Inventory Days 45 days
Trade Creditors – Allocation All categories should be Trade Creditors
Trade Creditors – Creditor Days 20 days
Inventory Payables – Allocation All categories should be set to Inventory Payables
Inventory Payables – Creditor Days 40 days
Book Assets – Opening Assets – Land = 0 years
Depreciation (Years) Buildings = 30 years
Machinery & Equipment = 10 years
Trademarks = 15 years
Book Assets – Capital Expenditure – Timing All categories should be set to Middle of Period
Book Assets – Capital Expenditure – Land = 0 years
Depreciation (Years) Buildings = 40 years
Machinery & Equipment = 15 years
Trademarks = 20 years
Book Assets – Capital Expenditure – Land = Land
Allocation Buildings = Buildings
Machinery & Equipment = Machinery & Equipment
Debt - Drawdowns & Repayments All categories should be left at zero
Debt - All-In Interest Rate All categories should be 7.50%
Ordinary Equity – Dividend Payout Ratio 40%
GST No changes to the default assumptions
Corporate Tax No changes to the default assumptions
Interest on Cash – All-In Interest Rate 1.50%
Other Income Statement Items - Other 36.0
Revenue
Other Income Statement Items - Other 45.6
Expenses
Other Balance Sheet Items Module No changes to the default assumptions
Valuation
To view a summary of the financial statements as a dashboard, activate the workbook table
of contents and click on the ‘Financial Statement Summary’ hyperlink in position 1.a, as
shown below:
Financial Statements Summary – Before Roll Forward
Valuation
Initial Valuation
With the forecast assumptions entered it is now time to perform the discounted cash flow
(DCF) valuation of the ordinary equity of Twisted Cereals. To do this, activate the workbook
table of contents and click on the ‘Equity Valuation – Assumptions’ hyperlink in position 2.j.
to activate the Equity Valuation Assumptions, as shown below:
Equity Valuation Assumptions – Before Roll Forward
The equity valuation module calculates the value of the ordinary equity (i.e. common stock)
of a business, or an internal rate of return (IRR), based on its projected cash flows available
to equity (CFAE).
The appropriate valuation methodology, discount rate, terminal value methodology and
terminal value multiple will vary based on the particular characteristics of the business being
valued. For Twisted Cereals, the following valuation assumptions were used:
Type Assumption
Valuation Method  Assume Discount Rate, Calculate Value
Valuation / Cash Flow Type  Pre-Tax
Pre-Tax Discount Rate (% p.a.)  15%
Valuation Date  1-Jul-14
Terminal Value Date  30-Jun-19
Cash Flow Timing  Middle of Period
Terminal Value Methodology  2. EBITDA Multiple
EBITDA Multiple  10.0X
Valuation
To view the valuation, activate the workbook table of contents and click on the ‘Equity
Valuation – Outputs’ hyperlink in position 3.j., as shown below:
Equity Valuation Outputs – Before Roll Forward
In cell I27 it can be seen that based on the projected equity cash flows and valuation
assumptions entered the net present value of the ordinary equity in Twisted Cereals is
$17.1m. Note also that the application of the EBITDA Multiple of 10.0x to the forecast 2019
EBITDA (in cell I39) results in a Terminal Value Amount of $27.1m in 2019 and a Cash Flow
Perpetuity Discount Rate and Growth Rate of 15% and 9.7% respectively.
For more information regarding DCF valuation theory see the DCF Valuation Theory section
of the BPM Resources at:
www.bestpracticemodelling.com/resources/knowledge/business_planning/outputs_other/dcf_
valuation_theory.
Use the Excel Save As command to save the file as ‘Twisted Cereals-Valuation-1.0.0.1.xlsb’,
entering “Forecast and valuation assumptions entered.” as the version comment.
Valuation
Periodic Rolling
At the end of the 2015 financial year, the Twisted Cereals executive team wants to update
the valuation model to include the actual income statement and balance sheet data for this
year – i.e. they want to roll forward the model to include the actual 2015 data.
The BPM Excel add-in simplifies the rolling forward of historical and forecast business
planning models to three steps:
1. Update the time series assumptions to reflect the roll forward;
2. Import the newly-available historical income statement and balance sheet data; and
3. Enter new forecast assumptions for newly-created forecast periods.
Each of these steps will be discussed in turn.
Time Series Updating
One of the most powerful features of the BPM Excel add-in is that the time series sheets
throughout a project can be linked to the project time series assumptions such that changes
to time series assumptions are automatically reflected in time series sheets – i.e. time series
sheets automatically shorten and extend in response to time series assumptions changes.
When the Twisted Cereals valuation model was first created it had a term of 8 years, of
which the first 3 years were assumed to be historical years (2012 – 2014) and the last 5
years were assumed to be forecast years (2015 – 2019). Verify this by activating the
workbook table of contents and clicking on the ‘Time Series – Assumptions’ hyperlink in
position 2.a. to activate the time series assumptions, as shown below:
Time Series Assumptions – Before Roll Forward
Two assumptions changes are required to roll-forward the Twisted Cereals valuation model:
1. Change the Last Historical Year from 2014 to 2015, thereby creating an additional
historical year; and
2. Increase the Term (Years) of the model from 8 years to 9 years, thereby ensuring that
the model still contains 5 forecast years.
Valuation
Change the Last Historical Year drop down box in the range H22:I22 from 2014 to 2015. This
will load the Update Time Series Period Titles dialog box, as shown below:
Update Time Series Period Titles Dialog Box – Updating Historical Years
Click the Update button. Now change the Term (Years) assumption in the range H14:I14
from 8 years to 9 years. This will again load the Update Time Series Period Titles dialog box,
as shown below:
Update Time Series Period Titles Dialog Box – Updating Forecast Years
Valuation
Click the Update button. After updating these two assumptions, the valuation model will now
have a term of 9 years, of which the first 4 years will now be historical years (2012 – 2015)
and the last 5 years will now be forecast years (2016 – 2020), as shown below:
Time Series Assumptions – After Roll Forward
An alert has been temporarily triggered because new historical and forecast assumptions
cells have been created in the underlying model but no 2015 or 2020 assumptions have been
entered into these cells yet.
The additional historical year can be verified by activating the historical income statement
assumptions (within sheet 2.b. of the table of contents) and confirming that the extension of
the time series sheet to include the year 2015 in column M, as shown below:
Historical Income Statement Assumptions – After Roll Forward
Note that the BPM Excel add-in automatically extends all historical time series sheets in the
workbook to include an additional historical year in response to the change of assumptions.
In this way, BPM automates the rolling-forward of historical and forecast financial models.
Valuation
Activate the forecast revenue assumptions by activating the table of contents and clicking on
the ‘Operational’ hyperlink in position 2.d. Verify the addition of a forecast year by
confirming that the time series sheet to include the year 2020 in column R, as shown below:
Forecast Revenue Assumptions – After Roll Forward
Note also that the year 2015 column, which was a forecast period before rolling forward the
model, is now inactive (because it is now a historical period) and has therefore been
automatically grouped and hidden by the BPM Excel add-in.
This automated hiding of inactive forecast columns means that existing forecast assumptions
remain valid – e.g. the existing revenue Growth Rates % assumptions for the years 2016 –
2019 do not need to be copied and pasted across one column because they stay in the same
column after the model is rolled forward.
Valuation
Importing Updated Financial Statements
After rolling forward the model to provide for historical 2015 assumptions, the 2015 historical
income statement and balance sheet data needs to be imported into the historical financial
statements.
Open the workbook named ‘BPM-Twisted Cereals-Historical Financial Statements 2015.xlsb’.

This workbook contains two worksheets – the first containing historical income statement
data and the second containing historical balance sheet data, as shown below:
Historical Financial Statements Data – FY2015
The process used to import this data is very similar to that which was used to import the
historical income statement and balance sheet data when initially building the valuation
model using the New Project Wizard.
To import this data, first ensure that the historical income statement assumptions are
activated by clicking the hyperlink in position 2.b. of the table of contents, as shown below:
Historical Income Statement Assumptions – After Roll Forward
Valuation
Now, with the historical income statement assumptions visible, load the Import Assumptions
tool via the Data tab, Get External Data group, Import Assumptions button. The Import
Assumptions dialog box will be displayed. Ensure that the ‘Excel/CSV’ option is selected as
the source of the income statement assumptions, as shown below:
Import Assumptions Dialog Box – Source Data Type
Click the Next Button to move to the second step of the Import Assumptions Dialog. Ensure
that ‘Worksheet range’ is selected, with the range being ‘IS’!$1:$75 from the workbook
‘BPM-Twisted Cereals-Historical Financial Statements 2015.xlsb’, as shown below:
Import Assumptions Dialog Box – Import Assumptions Location
Valuation
Click the Next button to move to the third step of the Import Assumptions dialog. Note that
an assumptions mapping file was automatically created when the model was first created
which recorded the initial allocation of source data accounts to income statement accounts.
This mapping file is called ‘Historical Income Statement – Assumptions Map.csv’, and should
be selected as the ‘Existing mapping file’, as shown below:
Import Assumptions Dialog Box – Import Assumptions Criteria
Selecting this existing assumptions mapping file will prevent the need to re-map income
statement source accounts which were mapped when the valuation model was first created
using the New Project Wizard.
Valuation
Click the Next button to move to the fourth and final step of the Import Assumptions dialog.
In this instance, only one new source account has been added to the source data for 2015;
the operating expense account named ‘Social Media Strategy’. Map this account to Operating
Expenditure by dragging it from the source accounts panel and dropping it after the existing
‘Research & Development’ account, as shown below:
Import Assumptions Dialog Box – Import Assumptions Mapping
Ensure that the difference between the Target and Actual Net Profit After Tax amounts is
zero, then click the Import button to import the 2015 income statement data into the
historical income statement module.
The BPM Excel add-in will automatically detect that a Historical Balance Sheet is present in
the model, displaying the following dialog box:
Historical Balance Sheet Data Import
Click Yes and follow the same process as the income statement to import the 2015 balance
sheet data. Ensure that the source data comes from sheet ‘BS’ in ‘BPM-Twisted Cereals-
Historical Financial Statements 2015.xlsb’. Use the Excel Save As command to save the file
as ‘Twisted Cereals-Valuation-1.0.0.2.xlsb’, entering “Rolled forward model and imported
2015 historical financial statement data.” as the version comment.
Valuation
Forecast Assumptions Updating
Enter assumptions for the 2020 forecast year throughout section 2 of the model in-line with
those entered for previous periods. The model roll forward is now complete. Use the Excel
Save As command to save the file as ‘Twisted Cereals-Valuation-1.0.0.3.xlsb’, entering
“Entered 2020 forecast assumptions.” as the version comment.
To view a summary of the financial statements as a dashboard after the model roll forward,
activate the workbook table of contents and click on the ‘Financial Statement Summary’
hyperlink in position 1.a, then change the First Displayed Period drop down box in the range
L73:O73 from 2012 (H) to 2013 (H), as shown below:
Financial Statement Summary – First Displayed Period
This will change the dashboard display from showing years 2012-2019 to showing 2013-
2020, as shown below:
Financial Statements Summary – After Roll Forward
This process of rolling forward the model, importing new historical data and revising forecast
assumptions is then done on an annual basis for Twisted Cereals as new historical income
statement and balance sheet data becomes available.
Valuation
Revised Valuation
Following the importation of updated historical data and the updating of forecast
assumptions the equity valuation should also be reviewed and potentially revised to reflect
likely changes to forecast equity cash flows.
The initial equity valuation assumptions can be made by can be reviewed and revised by
activating the workbook table of contents and clicking on the ‘Equity Valuation –
Assumptions’ hyperlink in position 2.j. to activate the Equity Valuation Assumptions.
For Twisted Cereal, no changes to the equity valuation assumptions were required. To view
the valuation outputs, activate the workbook table of contents and click on the ‘Equity
Valuation – Outputs’ hyperlink in position 3.j., as shown below:
Equity Valuation Outputs – After Roll Forward
In cell I27 it can be seen that based on the updated forecast cash flows and rolled-forward
valuation dates the value of the ordinary equity in Twisted Cereals has increased from
$17.1m to $18.1m during the 2015 financial year. Also note that the EBITDA Multiple of
10.0x on an EBITDA of $3.4m, in cell I39, produces an implied Terminal Value Amount of
$29.2m and a Cash Flow Perpetuity Discount Rate and Growth Rate of 15% and 9.9%
respectively.
For more information regarding DCF valuation theory see the DCF Valuation Theory section
of the BPM Resources at:
www.bestpracticemodelling.com/resources/knowledge/business_planning/outputs_other/dcf_
valuation_theory.
Valuation
Appendices
Income Statement Mapping Summary
The following table provides a summary of the historical income statement mapping used for
Twisted Cereals as stored in the assumptions mapping file named ‘Income Statement -
Historical - Assumptions Map.csv’:
Source Accounts Action Destination Income Statement Category
Nutri Bubbles Sales Add Revenue Nutri Bubbles Sales
Just Wrong Sales Add Revenue Just Wrong Sales
Coco Bix Sales Add Revenue Coco Bix Sales
Total Income Ignore None None
Nutri Bubbles COGS Add Cost of Goods Sold Nutri Bubbles COGS
Just Wrong COGS Add Cost of Goods Sold Just Wrong COGS
Coco Bix COGS Add Cost of Goods Sold Coco Bix COGS
Total Cost of Goods Sold Ignore None None
Gross Margin Ignore None None
Other Revenue Add Other Revenue Other Revenue
Total Other Revenue Ignore None None
Television & Media Add Operating Expenditure Television & Media

Advertising Advertising
Print Advertising Add Operating Expenditure Print Advertising
Research & Development Add Operating Expenditure Research & Development
Total Operating Expenses Ignore None None
Depreciation - Buildings Add Depreciation Depreciation - Buildings
Depreciation - Machinery & Add Depreciation Depreciation - Machinery &

Equipment Equipment
Total Depreciation Ignore None None
Amortization - Trademarks Add Depreciation Amortization - Trademarks
Total Expenses Ignore None None
Operating Profit Ignore None None
Interest on Cash at Bank Add Interest on Cash Interest on Cash
Total Other Income Ignore None None
Other Expenses Add Other Operating Expenditure Other Expenses
Total Other Expenses Ignore None None
Interest - Commercial Paper Add Interest Expense Interest - Commercial Paper
Interest - Bank Debt Add Interest Expense Interest - Bank Debt
Interest - Working Capital Add Interest Expense Interest - Working Capital

Facility Facility
Total Interest Expense Ignore None None
Income Tax Expense Add Tax Expense Income Tax Expense
Total Income Tax Expense Ignore None None
Net Profit / (Loss) Ignore None None
Valuation
Balance Sheet Mapping Summary
The following table provides a summary of the historical balance statement mapping used for
Twisted Cereals as stored in the assumptions mapping file named ‘Balance Sheet - Historical
- Assumptions Map.csv’:
Source Accounts Action Destination Balance Sheet Category
Cash Add Cash Cash

Total Cash Ignore None None
Trade Debtors - Nutri Bubbles Add Trade Debtors Trade Debtors - Nutri Bubbles
Trade Debtors - Just Wrong Add Trade Debtors Trade Debtors - Just Wrong
Trade Debtors - Coco Bix Add Trade Debtors Trade Debtors - Coco Bix
Trade Debtors - Other Add Trade Debtors Trade Debtors - Other
Total Receivables Ignore None None
Inventory - Nutri Bubbles Add Inventory Inventory - Nutri Bubbles
Inventory - Just Wrong Add Inventory Inventory - Just Wrong
Inventory - Coco Bix Add Inventory Inventory - Coco Bix
Total Inventory Ignore None None
Prepaid Expenses Add Other Current Assets Prepaid Expenses
Other Current Assets Add Other Current Assets Other Current Assets
Total Other Current Assets Ignore None None
Land Add Fixed Assets Land
Buildings Add Fixed Assets Buildings
Less Acc. Dep. - Buildings Add Fixed Assets Buildings
Machinery & Equipment Add Fixed Assets Machinery & Equipment
Less Acc. Dep. - Machinery & Add Fixed Assets Machinery & Equipment
Equipment
Trademarks Add Fixed Assets Trademarks
Less Acc. Amort - Trademark Add Fixed Assets Trademarks
Total Fixed Assets Ignore None None
Other Non-Current Assets Add Other Non-Current Assets Other Non-Current Assets
Total Other Non-Current Assets Ignore None None
Total Assets Ignore None None
Trade Creditors Add Trade Creditors Trade Creditors
Inventory Payables Add Inventory Payables Inventory Payables
Total Trade Payables Ignore None None
Interest Payable Add Interest Payable Interest Payable
Dividends Payable Add Dividends Payable Dividends Payable
Total Non-Trade Payables Ignore None None
GST Payable Add GST Payable GST Payable
Corporate Tax Payable Add Corporate Tax Payable Corporate Tax Payable
Total Taxation Ignore None None
Other Current Liabilities Add Other Current Liabilities Other Current Liabilities
Total Other Current Liabilities Ignore None None
Commercial Paper Add Debt Commercial Paper
Bank Debt Add Debt Bank Debt
Working Capital Facility Add Debt Working Capital Facility
Total Debt Ignore None None
Other Non-Current Liabilities Add Other Non-Current Liabilities Other Non-Current Liabilities
Total Other Non-Current Liabilities Ignore None None
Total Liabilities Ignore None None
Net Assets Ignore None None
Share Capital Add Ordinary Equity Share Capital
Other Equity Add Other Equity Other Equity
Retained Earnings Ignore None None
Total Equity Ignore None None
Valuation
Rolling Business Planning
Rolling business planning modeling requires models that contain both historical and forecast
information, combined to give a comprehensive and continuous view of the business. The
forecast financials are projected off the latest historical numbers and if required the model is
‘rolled’ forward at the end of each period and the first period of forecast assumptions are
replaced by a new period of latest historical assumptions.
This is shown below for an eight year annual model, where the initial time series columns
have been constructed with three historical periods (columns J to L) for 2012 to 2014 and
five forecasts periods (columns M to Q) for 2015 to 2019. The roll forward from 2014 to
2015 (performed at the completion of 2015) changes the 2015 analysis from a period of
forecast numbers to a set of historical assumptions, as shown below:
Rolling Forward One Period Example
In addition to inserting an extra column of historical information, as per the above, it is also
possible to insert an extra column of forecast data for 2020 to retain the full five periods of
forecast analysis, as shown below:
Rolling Forward One Period (with Extra Forecast Year)
For more information regarding the fundamentals of time series analysis, see the time series
analysis fundamentals documentation within the Best Practice Modelling Resources at
www.bestpracticemodelling.com/resources/knowledge/time_series.

Other Best Practice Modelling publications…
Standards Standards
Tabulated Listing Commentary & Examples
bpmToolbox Modular Development

User Guide Fundamentals
bpmModules Business Planning

User Guide Modular Development
www.bestpracticemodeling.com
Best Practice Modelling
Phone: +613 9244 9800
Email: info@bpmglobal.com
www.bestpracticemodelling.com

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Valuation Model

How to build an annual rolling

Document version: 7.6.0.0

BEST PRACTICE MODELLING (BPM)

Financial Model Creation .............................................................................................. 4

Historical Financial Statements ............................................................................ 4

Chart of Accounts Selection ................................................................................. 5

Initial Time Series Assumptions ........................................................................... 6

Source Data Type Selection ................................................................................. 8

Excel Source Data Location.................................................................................. 9

Income Statement Accounts Mapping ..................................................................10

Balance Sheet Accounts Mapping ........................................................................11

Outputs & Presentations.....................................................................................12

Version Control & File Saving ..............................................................................13

Forecasts Development & Valuation..............................................................................15

Entering Forecast Assumptions ...........................................................................15

Periodic Rolling ..........................................................................................................19

Time Series Updating .........................................................................................19

Importing Updated Financial Statements ..............................................................23

Forecast Assumptions Updating...........................................................................27

Revised Valuation ..............................................................................................28

Income Statement Mapping Summary .................................................................29

Balance Sheet Mapping Summary .......................................................................30

Rolling Business Planning ...................................................................................31

This analysis involves three steps:

2. Forecasts Development & Valuation: The entering of forecast assumptions and

3. Periodic Rolling: The rolling-forward of the model to include newly-available

Twisted Cereals – Valuation Model Scope

File Content & Purpose Download URL

BPM-Twisted Cereals-  Historical financial https://www.bestpracticemo

BPM-Twisted Cereals-  Historical financial https://www.bestpracticemo

Financial Model Creation

Historical Financial Statements

Historical Financial Statements Data – FY 2012 - 2014

Chart of Accounts Selection

New Project Wizard Dialog Box – Project Type

Initial Time Series Assumptions

New Project Wizard Dialog Box – Initial Time Series Assumptions

Time series  Annual, Historical & Forecast

Financial year end  June

Model start date  2011

Last historical year  2014

New Project Wizard Dialog Box – Initial Functionalities

Source Data Type Selection

New Project Wizard Dialog Box – Source Data Type

Excel Source Data Location

New Project Wizard Dialog Box – Excel Source Data Location

Financial Statement Excel Source Data Location

Historical Income Statement 'IS'!$1:$74

Historical Balance Sheet 'BS'!$1:$124

Income Statement Accounts Mapping

New Project Wizard Dialog Box – Income Statement Accounts Mapping

Balance Sheet Accounts Mapping

New Project Wizard Dialog Box – Balance Sheet Accounts Mapping

Outputs & Presentations

New Project Wizard Dialog Box – Outputs & Presentations

Click the Create button to build the valuation model.

Version Control & File Saving

Cover Page – Save View