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WST Circular Reference

CIRCULAR REFERENCE Income Statement Revenue Operating income (EBIT) 5 Interest Expense 5 Interest Income BALANCE SHEET Cash 4 CASH FLOW STATEMENT 1 Net Income CFF (exc. Debt) Cash Available / required 2 Before Debt Debt Payments / Sweeps 3 Debt Schedule 4 Debt Balance 4 Cash Balance 5 Interest Expense and income calculated off new balances and fed back into the Income Statement again.

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95 views

WST Circular Reference

CIRCULAR REFERENCE Income Statement Revenue Operating income (EBIT) 5 Interest Expense 5 Interest Income BALANCE SHEET Cash 4 CASH FLOW STATEMENT 1 Net Income CFF (exc. Debt) Cash Available / required 2 Before Debt Debt Payments / Sweeps 3 Debt Schedule 4 Debt Balance 4 Cash Balance 5 Interest Expense and income calculated off new balances and fed back into the Income Statement again.

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© Attribution Non-Commercial (BY-NC)
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CIRCULAR REFERENCE

INCOME STATEMENT Revenue Operating Income (EBIT)


5 Interest Expense 5 Interest Income

BALANCE SHEET Cash 4

CASH FLOW STATEMENT


1 Net Income

CFO CFI Debt


4

CFF (exc. Debt) Cash Available / Required 2 Before Debt Debt Payments 3 CFF
4 D Cash

Net Income 1

Circular Reference Logic: 1) Net Income from Income Statement goes to starting point of Cash Flow Statement 2) Calculate all cash flow items except for debt which balances the model This amount is the starting point of the Debt Schedule 3) Calculate additional borrowings required or excess cash build-up. This amount goes back into the CF and completes that statement 4) New ending debt and cash balances feed into the balance sheet and new average balances created 5) New interest expense and income calculated off new balances and fed back into the income statement 6) A new Net Income is generated, which now feeds into the cash flow statement again, creating a circular reference DEBT SCHEDULE Cash Available / Required 2 Before Debt Debt Payments / Sweeps 3
4 Debt Balance 4 Cash Balance 5 Interest Expense 5 Interest Income

TRAINING

WALL ST

Providing financial training to Wall Street www.wallst-training.com

2007 Wall St. Training

www.wallst-training.com www.wstselfstudy.com

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