Professional Documents
Culture Documents
Valuation Course
Ronak Gala
Week 2
Model making process
• Pending Line Items – Depreciation, Finance Cost, Other Income and Tax
Forecasting Fixed Assets and Depreciation
• Forecast Capex from guidance and expansion plans
• Forecast Gross FA = Previous Gross FA + Capex – (Curr. Cap WIP – Prev. Cap
WIP)
• Combined line items like other assets / other liabilities, you can keep
constant to grow with same % as sales growth – depends on past trends
• Check and Give Opposing effects of all Balance Sheet Changes in either P&L
or Cash Flow
Forecasting Debt and Finance Cost
• Calculate Interest Rate (%) : Finance Cost / Avg. Debt
• Forecast Debt – as a function of Capex (LT Debt) and Sales (ST Debt)
• This should complete your entire balance sheet except Cash & Bank
Complete your Cash Flow
• Link all the figures with forecasted line items from P&L or Balance Sheet
• Get cash value at the end of year and link it to Cash & Bank in Balance
Sheet
Adjustment and Debugging
• Now you Balance Sheet must Tally – Check value should be 0
• Debugging
• If your Check balance is not 0, you need to debug your model
Debugging the model
• Check the quantum of difference in check balance
• Search for values that are equal, double or half of it – if there is only 1
error, then you can identify it quickly
• If there are multiple errors, start from P&L and check line by line if
opposite entries in the Cash Flows are given correctly.
• Be conservative