In this recording we do step 1, we build the forecast income statement except for interest The income statement is an important part of the LBO model, primarily because it helps us calculate cash available to repay debt It'll also include the interest repayments which will also go into the cash available to repay debt So we start with the pre LBO income statement operating items We've got revenues, EBITDA and EBIT all for our target company We've also got some cost savings, maybe by going into the company buying them up, we can squeeze some efficiency savings So let's now come up with our adjusted income statement including those savings So revenues 576.9 EBITDA is the original EBITDA but we're now going to add on those cost savings And EBIT, similar again, the original EBITDA plus those cost savings So I've adjusted those items, now let's build up a proper income statement So we start with EBIT and it's the 107.7 And the next item is amortization of debt issuance fees Debt issuance fees are going to be capitalized and put onto the balance sheet So we'll have to wait until we do our balance sheet items before we put this item into the income statement The interests items are all on debt and cash, so we'll have to wait until we've done our debt schedule to calculate them However we can do the remaining items, profit before tax is going to be the sum of all of the items above And we are going to include those empty cells because we want them to flow through later My tax expense is going to be that profit before tax multiplied by the 36% effective tax rate I want this to be a negative because I want any costs in there to shown as a negative on the income statement My net income is the sum of my PBT and tax expense, coming to 68.9 We now copy all of those items to the right So as I copy these I'll need to copy the items above before anything flows through There we go, adjusted income statement, include that in as well And those figures have now filled themselves in, so net income 68.9, 74.3, 81.1 etc