Although it feels like our job is done because the balance sheet is balancing, which we're very happy about, uh, we still have interest left to do, which is a circularity in this model and so deserves special care.

It's not circular down here yet.

We are just going to use averages to come up with the interest.

We need to be a bit careful.

We can't just take this line here because it's either cash or short term debt.

So we need to be careful to go back to the p and l and point it to the short term debt line.

So we'll take the average of those two by beginning and ending.

We'll then multiply it by the short term debt interest rate.

And then I'm gonna make it negative because I like my costs to be negative.

We're going to do the exact same thing for long-term debt.

So I fast forward to that a little bit, but it's the same principle.

You can see it's higher because we're ending up with a lot more debt there and it's more expensive.

We're now gonna do the same thing for cash.

Again, just a little careful there.

It's tempting to attach that to the bottom of the cash flow statement because you're kind of used to the final line in the cash flow statement being ending cash.

But the way we've constructed the cash flow statement now, it also has a dual function as a simple sweep.

And so attaching cash here would be wrong.

Our cash needs to be attached to the balance sheet.

We're now ready to tie up the income statement.

We need to be careful because errors in the income statement won't be caught by the balance check necessarily.

So we need to be extra careful when building anything on the income statement.

And now we need to be triply careful because this area of the model is circular.

When we drop the interest expense in the p and l, it will filter down to net income.

Net income will filter down into cash by the cash flow statement.

That then will inform the level of short-term debt, which in turn will inform the level of interest expense.

So what we have here is a circularity.

I've gone into options formulas, and you can see that I've got iteration switched off.

This is the way I'm supposed to be building because if there are circularity, which you can see it's picking up from another spreadsheet I've got open, it should warn me about it.

This is a desirable state because it protects us from unintended circularity to make sure that the circularity that gets picked up is the first one that X Excel sees.

What we should do is build a switch around row 34.

If you want more information on this or this video is going too fast.

You can find this in a lot of information and detail under our three statement modeling under Felix.

We will however, build it fully here.

So hopefully it will also be clear when I explain it, what we're gonna say is if, and then we want a logical test.

Now we wanna point it towards this circular switch here.

Now we can do that manually like this. Okay? And we'll find, Find, and I've pressed enter a bit too quick there.

Okay, we'll find that when I point it to the circular switch, it actually says switch.

Now I can use that later because that's a named cell and that's quite helpful.

Now if the switch is on, then what I'm gonna do is go and fetch the interest and we're on interest expense.

So we're gonna grab the two interest expenses.

And if the switch is off, then we just want it to drop a zero in.

Now it's dropping a zero in because the switch is off.

And so the model is in a kind of safe state.

And if I were to model onwards now and create an unintended circularity, assuming I didn't have any other spreadsheets open with circularity, then it would warn me about them.

Now, the fact that I do have another spreadsheet open would be a problem.

And if I were building then I probably should close that off.

But I'm using that other spreadsheet as a way of checking my work as I go.

Now I'm then gonna do, if switch is one, go fetch interest on cash, otherwise don't.

Now I've got two switch protected interest cells.

I've just removed a color, which is the reminder for myself.

Okay, so now this is working.

What I could do now is I could turn on iteration and then I could go to the switch and throw the switch.

And what I've done is I've said to Excel, you can and should iterate.

And it's now a fully circular model where the interest income and the interest expense is filtering through the cash flow statement and actually informing its itself a quick final check that the balance sheet is still balancing.

It probably would do even if we'd made an error there, but it's always good to have a look.

And we're now ready to start copying to the right.

So given we have an entire working model now, we could grab the entire model top to bottom, press control R and copy to the right, and then take a good look at it top to bottom, especially looking at the balance sheet check and then kind of looking reasonably left to right, are things going up or down in a reasonable way? Are there any sudden jumps, any weird negatives that shouldn't be negative and give it a good look over.

Once we're satisfied, we can now move on to the metrics and then we can start to put together the segmental ebitda, the full EBITDA, and then put together a valuation using some of the parts.