How to Balance Your Balance Sheet

One of the hardest parts of building a financial model is getting the balance sheet to balance, meaning the basic equation of Assets = Liabilities + Shareholder’s Equity is true.

The balance sheet itself is not the problem, it is usually the cash flow statement that introduces the error.

Here are some tips to make sure your cash flow statement is correct to ensure you calculate the correct ending cash balance.

For a working model, start with the basic financial model.


Make sure you rebuild the historical cash flow statement with formulas, that’s the only way to ensure you’ve accounted for all numbers and everything will flow going forward.

All line items on the balance sheet must be used in the cash flow statement. Continue reading “How to Balance Your Balance Sheet”

How To Forecast The Income Statement

Forecasting the income statement is the first step to building

Rebuild the historicals

To forecast the income statement, you have to understand the historicals. So start by rebuilding the financial statements.  This means taking the given values and adding formulas where necessary.

If you want to give it a shot (highly recommended), you can download the values only version and rebuild the financial statements by adding in formulas for all three financial statements. Continue reading “How To Forecast The Income Statement”

Excel rocks on Windows, not so much on Mac

Microsoft Excel is the preferred weapon choice of financial modelers. In fact, I can’t think of any financially oriented people who don’t live and breathe Excel. This is pretty obvious.
But not all Excel’s are created equally. Excel on a Mac is not a financial modeling tool. It’s a simple spreadsheet tool like Google Doc’s Spreadsheets or Mac Numbers. If you’re serious about building financial models, you have to use Excel for Windows. You can see some differences between the Mac and Windows version of Excel.

There are too many shortcomings in the Mac version for you to be efficient and productive – not enough keyboard shortcuts and while Mac Office 2011’s Excel brought back macros, I’ve heard of some issues with them.

I’ve played with different variations of Windows Excel on a Mac including Parallels, VMWare’s Fusion, and Bootcamp. While they all loaded and ran fine, I just never felt comfortable with the keyboard.

So for my setup, I keep a Window’s machine around mostly for Excel and a Mac for other stuff.