We first need to calculate subtotals for the income statement and balance sheet in the historical periods So for my net income, I'm going to take revenues minus costs Gives me 40 and I now copy that across into period 0 and to period 1 as well I don't want to recreate those formulas in period 1 The balance sheet, I can press "ALT + =", I sum up my total assets, copy that to the right Same for my total liabilities (sum them up), copy to the right And for my total liabilities and equity, I write the sum formula in manually. I sum up total liabilities and the equity figure Copy to the right Let's check that it balances! So I take my total liabilities and equity, subtract the assets (I hope for a zero) Yes! I do get a zero, it balances every period So I've done all of my historical figures now, I now want to start forecasting period 1 So I press equals, open brackets, one plus (why have a I done that?) Well I know that I have revenue growth as my assumption So one plus 5%, multiply that by last year, that will add 5% onto last year (5% growth) My costs (if I look at the assumption) is 60% of revenues Net income automatically calculated Great! I can now copy those to the right. Let's make sure those figures are all correct: 46.3, 48.5, fantastic! I carry on now down to the balance sheet. Now cash, I'm going to leave out There isn't actually an assumption given, what we need to do for cash is calculate a cash flow statement later on So I start with investments, I scroll up to my assumptions My assumption is investment growth is 5, so that's 5 added onto last period and I have gone up to 65, great! Accounts payable! Up to my assumptions, it's going to be 19% of my costs (66.2) 12.6 And long-term debt, again up to my assumptions and it's going to be a zero increase or decrease on last year So I add that onto last year's figure Last up then equity! Equity, if I think what's going to make that go up or down? It's going to be net income Making it go up, net income was 44.1. I add that onto last year's equity and that now gives me equity of 84.1 So having finished my balance sheet, I see that it's unbalanced by 51.7, disaster! Why is that? Well if I look up, I can see I still haven't quite done cash The next thing we'll have to do is do the cashflow statement and then put the eventual cash at the end of the cash flow statement up into the balance sheet and pray that it balances! But of course it will