Capital Expenditures and Depreciation

Capital Expenditures aka CapEx is the spending of money to buy or fix assets. CapEx is typically related to buildings, property, equipment. Many financial models are built to help determine growth and expansion plans that require spending money on equipment and other assets. Understanding the relationship between CapEx, deprecation, and the financial statement is a very important aspect of financial modeling.

In the current sample financial model, deprecation and CapEx are not forecasted to change. However as the business grows, additional equipment is needed.
In the new model, we CapEx spending in Years 5,6 and 8.
CapEx Forecast

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Days Sales Outstanding, Days Payable Outstanding, and Days Sales Inventory

Days Sales Outstanding (DSO), Days Payable Outstanding (DPO), and Inventory Turns are some key metrics for company analysis. While they are just some simple calculations, they tell are story about how a company is doing.

In the balance sheet assumptions section of the model, see below, we calculate each metric and then make assumptions about the forecast values.

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