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Explore this video tutorial on building a 3-statement financial model in Excel, walking through the key inputs, formulas, and assumptions for this step of the analysis.
Video Transcription:
Full Video Transcript
In the previous video we just completed historical and forecasted assumptions, and now we're getting into finishing supporting schedules for working capital, depreciation, debt schedule, and retained earnings schedule.
Working Capital Schedule Setup
Let's start with a working capital schedule. Please notice that we already basically built it for historical years, and we can just take the formulas we already built and fill it to the right for all forecasted years. Please note that because we did not fill the forecast period for the balance sheet for accounts receivables, inventories, and accounts payable yet up above, we can see lots of zeros here.
The situation will change as soon as we fill up the balance sheet. So just trust the steps — you know that the formulas are correct here. Trust the steps and it all will be filled up back into our financial statements. In this case scenario, after the balance sheet will be filled, my working capital schedule will be filled and change in net working capital will go into my cash flow statement for the forecasted period. Trust the steps here.
Depreciation Schedule Construction
Now let's work on the depreciation schedule. First of all, here I want to fill up property, plant, and equipment ending balance. I'm going to find it in my balance sheet above in row 23 — that's my ending balance, meaning that my PP&E beginning balance will be equal to the ending balance of the previous year. So I will go ahead and link it.
As for the CapEx, I'm going to grab CapEx from my cash flow statement forecasted periods. It's in the row, however again it's not filled yet. So just trust the steps — as soon as the cash flow statement will be filled, my supporting schedules will be filled up as well. And because my CapEx here in the cash flow statement is negative (it's my cash outflow), I'm going to put a minus sign for the formula in my supporting schedules because here I want to add CapEx to property, plant, and equipment beginning balance.
Next is less depreciation. Since it's minus depreciation, again I'm going to put a minus sign here and go ahead and grab depreciation in my income statement in row 10. Same idea here — as soon as the income statement will be filled, it all will beautifully flow to my supporting schedules. Now I'm going to sum up for cell J90. PP&E ending balance would be my property, plant, and equipment beginning balance plus CapEx and minus depreciation. Alt+Equals, and I will fill it all to the right with Ctrl+R. Trust the steps that it will all flow beautifully through the whole model.
Debt Schedule Setup
Following this similar logic, we will build the debt schedule. The ending balance I'm going to find in my balance sheet in row 28. My beginning balance of debt will be equal to my ending balance. My debt issuance and repayment I can find in row 51 — here it is in my cash flow statement. And again, as soon as we fill up the forecast period for the cash flow statement, it will be filled up here for the debt schedule as well.
My debt ending balance: Alt+Equals — it's a sum of two items above. And I'm going to fill it all to the right with Ctrl+R and move on to the next schedule.
Retained Earnings Calculation
For retained earnings ending balance, I'm going to find it again in my balance sheet. Let's go ahead and find it in row 32, right here. My beginning balance equals my ending balance of the previous year. My net income — we have it in the income statement, so let's go ahead and find it in row 16. I again trust the steps here.
My dividends I will find in the cash flow statement in row 52. Make sure you convert the sign here into negative with a minus sign, because I need to subtract dividends from retained earnings beginning balance and add net income to calculate retained earnings ending balance. So as I flipped the sign for dividends, I can use again the Alt+Equals function here and sum it up, and fill it all to the right with Ctrl+R.
Next Steps
Beautiful! We did fill up all the formulas for supporting schedules here. Now step number six, seven, and eight is filling up the income statement, balance sheet, and cash flow statement for forecasted periods. Let's go ahead and do it in the following videos.
