The 13-Week Cashflow Model Introduction. A quick tour of the model first so that we know what we're looking at. There are many worksheet tabs on the bottom of this. I have a list of the tabs here in our Tab Structure section. Those correspond with the tabs on the bottom. The monthly data tabs are to the left and the weekly tabs are to the right. We will be moving around a great deal in the model, but in general, the flow is left to right as we will be taking the monthly data that the company has provided us. And we will be converting that first into weekly data and then into a weekly cashflow statement. We will finish with a reconciliation of EBITDA because everything of course comes back to EBITDA matrix. Integrity is key. This means that on all of the weekly tabs, the columns must align by date. Column Q, which is the column that aligns with the date November 6, will be our first cashflow period or first income statement period on all of these tabs as we are also using monthly data. These columns will not align with the monthly worksheets. Now, it is possible in a model that's a quarterly model to have the quarters and the weeks align and also have quarters and years align. However, it is difficult with monthly data to get that to align with weeks or quarters because they're different numbers of days in every month. So on those on those tabs we will not have the same matrix integrity. However, the monthly worksheets will have matrix integrity amongst themselves, meaning that column H is October 31st on all of the monthly tabs. In this case in point we've been given the following information. A monthly historical balance sheet, a monthly historical and projected income statement, and a monthly historical operating working capital and property plant and equipment roll forward or base analysis for each of these accounts. We've also been given a monthly historical revolver base calculation. Lastly, we have a historical weekly income statement. So in this case, the historical weekly cashflow statement and model has already existed. That doesn't mean it's gonna be the case all the time but regardless, we will be building this as though it is coming essentially from scratch. So, you don't have to worry if you've never built one before. This is just here really just to give us some data and a reference point in case we need it. This is far more information than that which is publicly available. This however, what we've been given is still not detailed enough to build the 13-week cashflow statement. So we're gonna have to spend this time modeling to get this into shape. While it is not impossible to retrieve historical data on a weekly basis from the management team, most likely the forecast has not been prepared on a weekly basis. And this is because most planning in most companies or organizations is not done on a weekly basis. Weekly data for companies of all sizes is gonna be lumpy and not typically indicative of the longer cash flows of the business. However, for companies approaching distress, cashflow on a weekly and even daily basis becomes an issue as we have seen earlier in the course. For companies in liquidity crisis, the daily inflows and outflows do matter. Therefore, we will need to take this monthly data provided and convert it to weekly. Now, ideally, we would be able to see the historical weekly data to get an idea of any trends. And in this case, as I said, we do have that data. However, sometimes we don't have the data if the company's never done a weekly cashflow statement before or if their sponsor has never done one, or if their banks have never done one. But we need to kind of get a sense if the payments from customers come in, let's say early in the month or late in the month, or evenly throughout. Same for payments to suppliers. Is the payroll evenly distributed or is it staggered? Is there weekly, bimonthly or monthly payment of employees? If we do not have the benefit of an already existing weekly cashflow statement, we will hopefully be able to work with management to solve some of these issues. Payroll is a big deal. It's not good enough to simply say, "We'll have the cash at the end of the month. Can you just wait a couple of weeks?" So, that's why these issues are important. If it's not the case that we can work with management, although usually it is, monthly statements will have to be broken down purely on a mathematical basis using fractions, proportions, that sort of thing which is not ideal, but it certainly would get us somewhere along the path to where we need to go. If we look at the monthly income statement, unlike an income statement we see typically in an annual report, we need as much detail as possible for the operating expenses. If detailed revenues, revenues by sector or division make a difference, then we should seek to have those as well. For expenses this includes a breakdown of the labor expenses from other expenses. Fixed income, the income statement represents the accruals of these expenses that match the revenues for the period. Eventually, we will be moving away from the accrual method toward a cash method. If possible, a breakdown of fixed versus variable expenses can be very helpful as well, although this is not always easy to reconcile with the other data. Also, please note on our income statement, we do not have anything below the EBIT line. We will calculate interest on the 13-week cashflow statement once we know what our final borrowing balance is. Taxes we will not be dealing with. In reality, taxes of course must be paid and they typically must be paid in cash. However, for companies in this situation, there have often been some previous losses or tax carry forwards that will mitigate some of these taxes. There will most likely be a current loss as well while some taxes such as local or real estate taxes which are not based on earnings but other measurements might need to be paid regardless. We will leave this aside as the calculations can be complicated and we don't have enough information without the assistance of say the treasury or finance group or perhaps even an auditor. Interest will be calculated as I said on the 13-week cashflow statement but we do not need to show interest on the income statement as we are not interested, no pun intended, in arriving at a net income number. That's not the point of this because it's a credit-focused project. So, we're really interested in staying at or above the interest line. So in step one, we will begin by converting the monthly income statement to the weekly income statement. One last thing about the model is we have a legend here of what our cells mean. Anything that is coded in blue with shaded background is an input, an assumption so to speak. Anything that is in blue font with plain white background is a hard-coded number or an input number, perhaps a historical number. And then, anything in black is a formula. And of course, in general, we try not to touch or disturb anything other than the inputted numbers. So in step one, we will convert the monthly income statement to the weekly income statement. And of course, I will be giving more information about all these numbers along the way.