![]() ![]() At this stage, it’s sufficient to know that later on, we need to do calculations for them. Two items that we will not look at here are the forecast period’s Net PP&E and Equity. Thereafter, we need to use the assumptions to help produce our forecast figures. current assets, total assets, current liabilities, total liabilities, and total liabilities and equity. We first need to fill in the subtotals for the historical periods i.e. To start, we are given the balance sheet – historical period (period -1 and period 0). Here, we are forecasting the line items of period 1 (i.e. Given below is an example of how to build a balance sheet. ![]() Example – Forecasting Balance Sheet Line Items Occasionally, each line must be copied across individually, but copytable formulas are much more commonly used. Therefore it is sensible to build one full year of forecasts, check for accuracy (and that the balance sheet ‘balances’), and then apply them to subsequent years. It might seem easier to create a line and then drag it over for future years, but this may mean that any corrections made are not uniformly applied to all the years. The important first step is to build the first forecast year before copying it across to later years. The example below will go through the line-by-line steps. It is important to not rebuild subtotals through the model as it can allow man-made errors and potential typing errors to alter the forecasts. This is done for the historical period and then can be copied across to forecast periods. This is usually to sum up: current assets, total assets, current liabilities, total liabilities, and total liabilities and equity. The first step involves calculating subtotals (of historical periods) wherever applicable in the balance sheet so that the forecasts can be compared to the historical performance. The process of forecasting the balance sheet line items is very similar to that of forecasting the income statement line items. Part of the balance sheet forecasting will usually be completed using BASE analysis. The balance sheet forecasts will then be linked to the cash flow (along with the income statement) to give a full view across all three financial statements. Often it is helpful to build the income statement forecasts first and then complete the balance sheet forecasts. period 1) and check it thoroughly before copying it across to the later years (i.e. A good modeler, when attempting to forecast the line items of a balance sheet statement, should initially build the first forecast period only (i.e.Forecasting balance sheet line items will be based on the set of assumptions that an analyst makes about the company’s anticipated performance in future business conditions. ![]()
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