Anoverviewoftheprocessofbuildinganintegratedfinancialstatementmodel.

A Simple Model
Integrating Financial
Statements: Overview of the
Process

NOTES TOACCOMPANYVIDEOS
These notes are intended to supplement the videos on ASimpleModel.com. They are not to be used
as standalone study aids, and are not written as comprehensive overviews of the topic detailed. The
purpose of these notes is to provide a tangible collection of the visuals used in the videos with
comments highlighting the more important aspects covered.
2014 A Simple Model, LLC. All rights reserved.

Integrating Financial Statements

002

Overview of the Process

The objective of the first video in this series is to explain and briefly walk through the
process of building a fully integrated financial statement model.
Initially a brief outline is provided detailing the sequence in which this model will be
built:

Overview of Building an Integrated Financial Statement Model

1.

Input Historical Data

2.

Project Financial Statements

3.

I.

Income Statement

II.

Balance Sheet

III.

Cash Flow Statement

Build the Supporting Schedules

I.

Debt Schedule

II.

PP&E Schedule

Keeping this sequence in mind as you build the model provides a good reference for
progress made.

A Simple Model

Integrating Financial Statements

002

Overview of the Process

The video then walks through these steps using a fully integrated financial statement
model that has been formatted to fit on the screen.
The relationships between the financial statements and supporting schedules are
pointed out individually and color coded to make it easier to identify the source of
information.
A red arrow, for example, indicates that data from the PP&E Schedule is being used
at the location referenced.

Financial Statements

Supporting Schedules

INCOME STATEMENT
Revenue
Cost of Goods Sold
Gross Profit
Operating Expenses (SG&A)
Operating Incom e (EBIT)
Interest Expense
Pretax Incom e
Income Tax Expense
Net Incom e

20X1
1,331
799
532
200
333
43
290
102
189

20X2
1,464
878
586
220
366
38
329
115
214

20X3
1,611
966
644
242
403
33
370
130
241

20X4
1,772
1,063
709
266
443
28
415
145
270

BALANCE SHEET
Cash
Accounts Receivable
Inventory
Total Current Assets
Property Plant & Equipment (PP&E)
TOTAL ASSETS
Accounts Payable
Current Portion on Long Term Debt
Total Current Liabilities
Long Term Debt
TOTAL LIABILITIES
Common Stock
Retained Earnings
TOTAL EQUITY
TOTAL LIABILITIES & EQUITY
Check

20X1
478
109
131
718
840
1,559
66
50
116
400
516
100
943
1,043
1,559
0.0

20X2
627
120
144
892
837
1,729
72
50
122
350
472
100
1,157
1,257
1,729
0.0

20X3
809
132
159
1,100
827
1,927
79
50
129
300
429
100
1,397
1,497
1,927
0.0

20X4
1,026
146
175
1,346
808
2,155
87
50
137
250
387
100
1,667
1,767
2,155
0.0

CASH FLOW STATEMENT

CASH FLOW FROM OPERATING ACTIVITIES
Net Incom e
Add Back Non-Cash Item s
Depreciation
Amortization
Changes in Working Capital
Accounts Receivable
Inventory
Accounts Payable
Net Cash Provided by Operating Activities
CASH FLOW FROM INVESTING ACTIVITIES
Capital Expenditures - Purchase of PP&E
Net Cash Used in Investing Activities
CASH FLOW FROM FINANCING ACTIVITIES
Revolving Credit Facility
Long Term Debt (Current Portion)
Net Cash Provided by (Used in) Fnce Activities
Net Cash Flow

20X1

20X2

20X3

20X4

214

241

270

73
0

81
0

89
0

(11)
(13)
7
269

(12)
(14)
7
302

(13)
(16)
8
337

(70)
(70)

(70)
(70)

(70)
(70)

0
(50)
(50)
149

0
(50)
(50)
182

0
(50)
(50)
217

DEBT SCHEDULE
Cash Balance @ Beg of Year (End of Last Year)
Plus: Free Cash Flow from Operations and Investing
Less: Minimum Cash Balance
Total Cash Available or (Required) for Debt Service

20X1

20X2
478
199
0
677

20X3
627
232
0
859

20X4
809
267
0
1,076

Debt
Current Portion of LT Debt
Long Term Debt

50
350

50
300

50
250

Total Cash Surplus

627

809

1,026

Line of Credit
INTEREST EXPENSE
Interest Rate on Long Term Debt
Interest Rate on Line of Credit
Interest Expense on Long Term Debt
Interest Expense on Line of Credit
Total Interest Expense
PP&E SCHEDULE
Beg: PP&E, Net of Accum. Depreciation
Plus: Capital Expenditures
Less: Depreciation
End: PP&E, Net of Accum. Depreciation

10%
8%
37.5
0
38
20X1

20X2
840
70
73
837

10%
8%
32.5
0
33
20X3
837
70
81
827

10%
8%
27.5
0
28
20X4
827
70
89
808

This is merely used to provide a visual reference. The model built in the video that
follows incorporates a greater level of detail.

A Simple Model