Balance Sheet.

When building our balance sheet, we start by making sure we have our historical figures. In this case, Year 0 is a set of actual or reported figures. From here, we can build our forecast or estimates using our assumptions, and in this case, we're gonna forecast for years one to five. We build these forecasts for all our asset and liability line items and equity, except that we will leave cash and the revolver lines blank. We can't forecast these until we've built our cash flow statement, so we simply leave these blank and come back to them later on. We will build our forecast just for Year 1 to start with from operating assets down to equity. And then once we've finished and checked our Year 1 forecasts, we'll copy our formulas across for years 2, 3, 4, and 5. When we're checking our forecast for Year 1, we firstly sense check to make sure that a change in an assumption changes the model as we would expect. So, if I increase my assumption for operating assets as a percentage of sales, does this result in an increase in operating assets in Year 1 and an increase in total assets? Once we've checked our numbers, we can then copy our formulas across to the right. We build all of our forecasts just for Year 1 to start with from operating assets down to equity. When we're checking our Year 1 numbers, we firstly sense check to make sure that the Year 1 forecasts are broadly in line with the Year 0 numbers. We then structure check to make sure that our formula's linked to the correct row and columns, and then stress check to make sure that a change in an assumption changes the model as we would expect. So, if I increase my assumption for operating assets as a percentage of sales, does this result in an increase in operating assets in Year 1 and an increase in total assets? Once we've checked our Year 1 forecasts, we can then copy our formulas across to the right. Now, you might notice that at the moment, this balance sheet shown on screen doesn't balance. Eek. That's okay. We don't need to worry because we haven't yet built our cash flow statement. So there isn't a cash or revolver balance in the balance sheet so we wouldn't yet expect it to balance. However, we will revisit this balance sheet check later on, once we've input cash and the revolver to check that our balance sheet balances.