Quarterly Financial Projections: How They’re Different скачать в хорошем качестве

Quarterly Financial Projections: How They’re Different

In this lesson, you’ll learn how quarterly financial projections differ from annual ones, how the model setup changes, and why there’s rarely a huge benefit to creating quarterly projections (outside of a few scenarios). http://breakingintowallstreet.com/ "Financial Modeling Training And Career Resources For Aspiring Investment Bankers" Table of Contents: 0:51 Why We Tend to Use Annual Financial Projections 5:19 How Quarterly Projections Differ (Avianca Example) 13:23 Recap and Summary Lesson Outline: Quarterly, half-year, or monthly projections all require more work, time, and effort to create than annual ones, but they don’t necessarily result in a huge benefit. It’s also harder to demonstrate the modeling process on-screen because there are additional columns. They’re most useful for deals that close midway through a year, highly seasonal companies where the performance varies significantly from quarter to quarter, and distressed or highly leveraged companies that need a more granular view of cash flow and liquidity. A good use case for quarterly projections might be for an airliner, like Avianca, that is both seasonal and highly leveraged. To assess whether or not it can service its existing Debt or raise new Debt, we evaluate credit stats and ratios like Debt / EBITDA and EBITDA / Interest, but since quarterly performance varies, it’s very helpful to look at these stats on a quarterly basis. Due to seasonality, the company might violate some of its covenants on a quarterly basis, even if it’s fine on an annual basis. Key Difference #1: You must use Year-over-Year (YoY) growth rates for revenue, expenses, and cash flow line items, and quarterly information for units, pricing, usage rates, etc. It doesn’t make sense to compare Q4 to Q3; compare it to Q4 in the previous year instead. Key Difference #2: Operational Balance Sheet line items like AR, AP, and Inventory should be linked to the Last Twelve Months (LTM) Income Statement numbers rather than the quarterly numbers – many of these items reflect longer-term trends. Key Difference #3: You must divide the interest rates on Cash, Debt, etc. by 4 (or by 2 in a half-year model or 12 in a monthly model) to get the correct interest figures. Key Difference #4: For key metrics and ratios that mix Income Statement and Balance Sheet figures, such as Debt / EBITDA, you need to take the LTM figures for the Income Statement metric (EBITDA here). That’s because the Balance Sheet is influenced by the entire 12 months, not just the past quarter; also, most Debt covenants are based on LTM figures. But metrics such as Debt / Equity can use just the quarterly Balance Sheet figures since both the numerator and denominator come from the Balance Sheet. Key Difference #5: You need to create an annual roll-up and summary at the end that uses SUMIF functions or INDEX/MATCH to retrieve the appropriate data. Be careful with the numbers you add vs. retrieve vs. recalculate. You’ll have to recalculate many figures, especially if the numerators or denominators in each quarter change! RESOURCES: https://youtube-breakingintowallstree... https://youtube-breakingintowallstree...