WSP Financial Modeling/ Accounting Questions and Correct Answers
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Course
Financial Modelling
Institution
Financial Modelling
Calculating EBITDA -EBITDA is a non-GAAP metric so you usually won't find it in the 10K/Q -if you go by the literal def of EBITDA you only need to add back D&A (found in CFS) -most analysts also exclude stock based compensation expense (also in the CFS), so add this back as well -in addition to SBC...
WSP Financial Modeling/ Accounting
Questions and Correct Answers
Calculating EBITDA ✅-EBITDA is a non-GAAP metric so you usually won't find it in the
10K/Q
-if you go by the literal def of EBITDA you only need to add back D&A (found in CFS)
-most analysts also exclude stock based compensation expense (also in the CFS), so
add this back as well
-in addition to SBC and D&A, some companies provide disclosures that could justify
making other adjustments to arrive at EBITDA
Working Capital ✅Accounts Receivable
Inventory
Accounts Payable
Accrued Expenses & Deferred Revenue
Forecasting Accounts Receivable (AR) ✅-forecasting logic: grow AR @ rev. growth
rate unless you have a specific thesis
-modeling wrinkle: allow user to override w/ a different AR assumption than growing w/
revenue
-always track DAYS SALE OUTSTANDING (DSO) = AR/ Revenue x Days in the Period
Forecasting Inventory ✅-forecasting logic: grow with the rate that COGS is growing
because inventory cycles through COGS on the I/S
-modeling wrinkle: allow user to override with a different inventory assumption than
growing with COGS
-always track inventory turnover: COGS/Inventory
Inventory Turnover ✅COGS/Inventory
Accounts Payable (AP) ✅-logical driver: grow with COGS (or revenue in some cases)
-modeling wrinkle: allow user to override w/ a different AP assumption than growing
w/COGS
-Track Days Payable: AP/ COGS x days in period
Accrued Expenses ✅-wages, taxes, and other expenses related to operations
-forecasting logic: grow with revenue ( or operating expenses) because operating
expenses grow as the revenues grow
-modeling wrinkle: allow user to model a different assumption than simply growing with
revenue
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