LBO Case Study - Interest on Income Statement
- 02:07
How to put interest into the income statement and the cash flow statement of a financial model, using a switch mechanism and a range name.
Glossary
cash flow statment Income statement SwitchTranscript
So what we're now ready to do is we're now ready to put interest into the income statement and this will calculate and correct the model for the facts that we haven't put interest in. So when we put interest in to rows 33 and 34, that will reduce net income. Net income is also the top of the cashflow statement. So it will also reduce the cashflow available for debt repayment. So this is how we're capturing the interest lines. So now I'm gonna pull in the interest line, but I need to use a switch mechanism. And in this model we have a switch on the very front page on the info sheet. And you can see the circular switch. And it's actually got a range name here. It's actually called circ switch. So this is quite useful because it means I don't need to actually go and reference that. I can just use the name circ switch. You don't have to have a name for it, but it's quite useful too. So I'm going to do an if statement. If the circ switch, in fact, if you can't remember the range name, if you hit the function three key, it gives you a nice list circ switch. If circ switch is equal to 1, then pull in the interest expense. And this is going to be the interest expense on the senior, plus the interest expense on the subordinated tranche. If not 0, which is gonna give me 0 because remember I don't have my circ switch on. And then the interest income, I also need to do another if statement, which again press F3 to give me the lift. If that circ switch is on, then put in the interest income number, if not 0. So we've done that and then I can just copy this across. Now it's not gonna put in, so we don't have any circularity happily. And before I do that, so clarity, I'm gonna go and do the returns to equity holders first.