EXCEL FINANCIAL MODEL WITH LINKED FINANCIAL STATEMENTS

Instructions:
1) Start with Assumptions tab and input assumption data into blue shaded cells -->
2) On income statement tab, input further assumptions behind sales and expenses in blue shaded cells.
3) On Balance Sheet tab, input balance sheet assumptions in blue shaded cells. Check cell notes for explanations on inputs.
4) Check your balances, remember that balance sheet total assets and total liabilities and owner's equity should equal based on formula Assets = Liabilities + Stockholder's Equity

Comments: This spreadsheet presents a scenario of a company that started in Year 0 but didn't start revenue generating activities until Year 1.

Note that this Excel spreadsheet is not protected, so if you know how to use Excel, you can modify any field. Note that modifying fields other than
the blue ones could result in errors and the statements may no longer correctly articulate. Tips to prevent errors include saving a version of the
file to manipulate so that you retain a master copy. If your master copy does become corrupted, it may be best to download a new copy.

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 A B C D E F G H
1 BUSINESS ASSUMPTIONS
2 Directions: Input Assumptions into blue shaded cells
3 LONG TERM DEBT INTEREST RATE a.p.r. 6%
4 NOTES PAYABLE INTEREST RATE a.p.r. 4%
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6 I. AMOUNT FINANCED Input In Thousands (000)
7 Year Assumptions Year 0 Year 1 Year 2 Year 3
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9 LONG-TERM DEBT OUTSTANDING 600 600 600 600
10 NOTES PAYABLE - 75 60 75
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12 EQUITY CAPITAL 400 - - -
13 DIVIDENDS PAID - - 50 75
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16 II. INTEREST EXPENSE
17 Year Assumptions Year 0 Year 1 Year 2 Year 3
18 FINANCING COSTS
19 LONG-TERM DEBT 36.0 36.0 36.0
20 SHORT-TERM NOTES PAYABLE 1.5 2.7 2.7
21 TOTAL 37.5 38.7 38.7
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23
24 III. CASH BALANCES
25 Year Assumptions Year 0 Year 1 Year 2 Year 3
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27 BEGINNING CASH BALANCE - 478 128 217
28 CASH FLOW FROM OPERATIONS 478 (350) 89 208
29 ENDING CASH BALANCE 478 128 217 425
30 LESS MINIMUM CASH BALANCES 25 40 50 60
31 EXCESS CASH $ 453 $ 88 $ 167 $ 365
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34 IV. PP&E AND INVESTMENT
35 Year Assumptions Year 0 Year 1 Year 2 Year 3
36 CAPEX & DEPRECIATION
37 CAPEX IN PP&E (INVESTMENT IN BUSINESS) 400 100 100 100
38 GROSS PP&E 400 500 600 700
39 DEPRECIATION 7% 0 35 40 46
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41 Comments: To simulate the effect of invntory junking (write off), you can enter the value of the inventory being written off in the EQUITY
CAPITAL assumptions fields. Remember to use parentheses to show a negative amount . For example, a reduction of $400 would be
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recorded in the appropriate blue assumtion field as (400). To determine how much inventory value should be written off, when you make a
43 change in the inventory input assumptions fields on the Balance Sheet tab, take note of the amount of increase in CASH AND CASH
44 EQUIVALENTS at the top of the balance sheet. The amount of this increase (or a percentage of it if some value is gained when the inventory
is sold) is entered in EQUITY CAPITAL as a negative amount to offset this increase in cash.
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 A B C D E F G
1 INCOME STATEMENTS
2 Directions: Input Assumptions into blue shaded cells Input In Thousands (000)
3 Year Assumptions Year 0 Year 1 Year 2 Year 3
4 $ 2,373 $ 2,855 $ 3,120
5 SALES - GROSS $ 2,373 $ 2,855 $ 3,120
6 SALES DISCOUNTS, RETURNS & ALLOWANCES 3% 71 86 94
7 NET SALES 2,302 2,769 3,026
8
9 COST OF GOODS SOLD (COGS) 56% 1,289 1,551 1,695
10 FREIGHT AND TRANSPORTATION 3% 69 83 91
11 TOTAL COGS, FREIGHT, AND TRANSPORTATION 1,358 1,634 1,786
12 GROSS PROFIT 944 1,135 1,241
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14 SELLING EXPENSES 9% 207 249 272
15 GENERAL AND ADMINISTRATIVE 6% 138 166 182
16 LEASE EXPENSE 3% 69 83 91
17 DEPRECIATION 7% 35 40 46
18 EARNINGS BEFORE INTEREST & TAXES (EBIT) 494 597 650
19 INTEREST EXPENSE 38 39 39
20 PRE-TAX INCOME 457 559 611
21 PRE-TAX MARGIN % 20% 20% 20%
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23 CUMULATIVE PRE-TAX INCOME (NON-OP LOSS) - 457 1,016 1,627
24 TAX CALCULATIONS 33% 151 184 202
25 EFFECTIVE TAX RATE 33% 33% 33%
26 PRE-TAX INCOME 457 559 611
27 INCOME TAXES 151 184 202
28 AFTER TAX INCOME $ 306 $ 374 $ 409
29 AFTER TAX MARGIN % 13% 14% 14%
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32 Comments: To simulate a loss in Year 0, you can input a negative amount in cell C22 (enter the number in parentheses). The tax loss
carryover will reduce the tax owed in the next year or years and therefore it will reduce the effective tax rate. Note that the actual tax loss
33 carryover rule allows a tax loss to be applied in any of the next seven years, but for simplicity this model immediately applies it to future years
34 until the loss is fully absorbed. Note that this cell is not used in either of the activities, but can be altered to see the effect of a loss.
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 A B C D E F G H I J
1 BALANCE SHEET
2 ASSUMPTIONS
3 Directions: Input Assumptions into blue shaded cells Input Input Yearly Inventory Level In Thousands (000)
4 Year Assumptions Year 1 Year 2 Year 3 Year 0 Year 1 Year 2 Year 3
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6 CASH & CASH EQUIVALENTS $ 478 $ 128 $ 217 $ 425
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8 RAW MATERIALS INVENTORY 8% 8% 8% 8% 20 103 124 136
9 WORK-IN-PROCESS INVENTORY 10% 10% 10% 10% 57 129 155 169
10 FINISHED GOODS INVENTORY 20% 20% 20% 20% 45 258 310 339
11 TOTAL INVENTORY 122 490 589 644
12
13 PREPAID INSURANCE - - - -
14 ACCOUNTS & NOTES RECEIVABLE 18% - 427 514 562
15 TOTAL CURRENT ASSETS 600 1,045 1,320 1,630
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17 GROSS PLANT PROPERTY & EQUIPMENT 400 500 600 700
18 ACCUMULATED DEPRECIATION - 35 75 121
19 NET PLANT PROPERTY & EQUIPMENT 400 465 525 579
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21 TOTAL ASSETS $ 1,000 $ 1,510 $ 1,846 $ 2,209
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23 ACCOUNTS PAYABLE 10% - 129 155 169
24 SHORT-TERM NOTES PAYABLE - 75 60 75
25 TOTAL CURRENT LIABILITIES - 204 215 244
26
27 LONG TERM DEBT 600 600 600 600
28 OWNER'S EQUITY (INCLUDES RETAINED EARNINGS) 400 706 1,030 1,365
29 TOTAL LONG TERM DEBT & OWNER'S EQUITY 1,000 1,306 1,630 1,965
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31 TOTAL LIABILITIES & OWNER'S EQUITY $ 1,000 $ 1,510 $ 1,846 $ 2,209
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34 BALANCE CHECK (Green = Model OK, Red = Error) $ - $ - $ - $ -
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36 Comments: Note that if the balance check indicator area shows red, you may need to undo any changes you have made or start over with a new copy of the spreadsheet.
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 A B C D E F G
1 CASH FLOW STATEMENT
2 Directions: Input Assumptions into blue shaded cells
3 In Thousands (000)
4 Year Year 0 Year 1 Year 2 Year 3
5
6 AFTER TAX INCOME $ 306 $ 374 $ 409
7 DEPRECIATION ADD-BACK - 35 40 46
8 (INCREASE)/DECREASE IN INVENTORY (122) (368) (99) (55)
9 (INCREASE)/DECREASE IN ACCOUNTS RECEIVABLE - (427) (87) (48)
10 INCREASE/(DECREASE) IN ACCOUNTS PAYABLE - 129 26 14
11 CASH FLOW FROM OPERATIONS (122) (325) 254 368
12
13 CAPEX SPEND (400) (100) (100) (100)
14 CASH FLOW FROM OPERATIONS & INVESTMENT (522) (425) 154 268
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16 ADDITIONAL EQUITY CAPITAL 400 - - -
17 LESS DIVIDENDS PAID - - (50) (75)
18 INCREASE/(DECREASE) IN LONG TERM DEBT 600 - - -
19 INCREASE/(DECREASE) IN SHORT TERM NOTES - 75 (15) 15
20 CASH FLOW FROM OPERATIONS, INVESTMENTS & DEBT 478 (350) 89 208
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22 BEGINNING CASH BALANCE - 478 128 217
23 ENDING CASH BALANCE $ 478 $ 128 $ 217 $ 425
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25 Comments:
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