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3-Statement Model (Horizontal Build)

Build a linked 5-year, three-statement operating model from an empty grid: a bottoms-up revenue build, the full income statement waterfall, cash flow, and a balance sheet that ties out with no plug. Financing is built out, not netted: term debt interest, revolver interest and cash interest income as separate lines, plus the revolver's opening → draw → ending roll, all on the opening-balance convention the course explains. Then two supporting schedules: working capital broken into AR / inventory / AP with a tie-out back to the net line, and a parallel average-balance interest block that prices what the opening-balance convention is worth and shows exactly where a real model turns circular. Years run across the columns, every line is linked to its drivers, and the course won't pass a pasted number. Finishes on the balance check.

IB · Intermediate · about 150 minutes · 46 guided steps

Lesson outline

Income Statement

  1. Step 1: Customers
  2. Step 2: ARPU
  3. Step 3: Revenue
  4. Step 4: Gross Margin %
  5. Step 5: Gross Profit
  6. Step 6: SG&A
  7. Step 7: EBITDA
  8. Step 8: D&A
  9. Step 9: EBIT
  10. Step 10: Term Debt Interest Expense
  11. Step 11: Revolver Interest Expense
  12. Step 12: Cash Interest Income
  13. Step 13: Net Interest Expense
  14. Step 14: Pre-Tax Income
  15. Step 15: Taxes
  16. Step 16: Net Income

Cash Flow Statement

  1. Step 17: Cash Flow: Net Income
  2. Step 18: Add Back D&A
  3. Step 19: CapEx
  4. Step 20: Change in NWC
  5. Step 21: Free Cash Flow

Balance Sheet

  1. Step 22: Cash
  2. Step 23: Net Working Capital
  3. Step 24: PP&E
  4. Step 25: Total Assets
  5. Step 26: Term Debt
  6. Step 27: Revolver Opening Balance
  7. Step 28: Revolver Draw / (Paydown)
  8. Step 29: Revolver Ending Balance
  9. Step 30: Equity
  10. Step 31: Total Liabilities + Equity

Working Capital Build-Up (AR / Inventory / AP)

  1. Step 32: Accounts Receivable
  2. Step 33: Inventory
  3. Step 34: Accounts Payable
  4. Step 35: NWC from Build-Up
  5. Step 36: Working Capital Tie-Out

Interest Circularity (Average Balance) — memo

  1. Step 37: Average Term Debt Balance
  2. Step 38: Average Revolver Balance
  3. Step 39: Average Cash Balance
  4. Step 40: Term Debt Interest (Average Balance)
  5. Step 41: Revolver Interest (Average Balance)
  6. Step 42: Cash Interest Income (Average Balance)
  7. Step 43: Net Interest Expense (Average Balance)
  8. Step 44: Δ vs Opening-Balance Convention
  9. Step 45: Net Income (Average Balance, 1st Pass)

Balance Check

  1. Step 46: Balance Check