LBO Case Study - Income Statement
- 02:04
Recalculate the income statement of a business after replacing its capital structure. Learn how to pull in the revenue, EBIT, cost savings, and tax assumptions from another model, and how to leave the interest lines blank until the debt schedule is done.
Transcript
In this model, what we're doing is we are replacing the capital structure in the three statement model, and we are putting a new capital structure onto the business. We want to recalculate the income statement. Now, I can do everything apart from the interest lines because I haven't modeled out the debt yet, so I'm not going to model out the debt or interest until after I have done the income statement and the debt schedule. So I'm gonna leave rose 33 and 34 blank. So let's pull in the revenue again. We've actually got it up at the top here, so I can use that already. And then what I'm going to do is pull in EBIT because I need to calculate the tax and therefore we need to reflect that depreciation and amortization are tax deductible. So I can't use the EBITDA. So I'm gonna go to the Red Bull model and I'm going to pull in the EBIT number here. And then I'm going to pull in the cost savings because actually that's not reflected in the EBIT. I'm gonna pull those in. And then I'm gonna leave blank, interest expense and interest income. And then I'll calculate the profit before tax, which is the sum of the ebit, pre-cost savings. Cost savings, or the benefit of cost savings, less the interest spends, plus the interest income. And I'm gonna use the assumption that my expenses are gonna be negative, so I can add through those lines. So I get my profit before tax, and then I can calculate the tax expense and I'll go and get the assumption for the long-term effective tax rate. And I'm gonna multiply that by minus the profit for tax, I now get 784.1. And then I can calculate net income, which is just the sum of those two items. So I've done my income stent there, obviously leaving out the interest, income, and interest expense. So I'm gonna copy this to the right.