REIT operating model final steps. We now have all the information that we need to complete the model. After completing the financing section, it is now time to bring the debt and the equity onto the balance sheet.

I'll go to my balance sheet row 53 and I will link my total debt to the financing section and we want the ending balance in the current year.

Remove my formatting and copy that across.

And now, in order to do the equity, I need to make sure that I'm including all of the components of equity. So I actually have one calculation left to do. Go to the calculations tab and scroll down to the equity section. Now, again, here I have all the information I need, I just need to make it flow. My beginning equity balance is going to be equal to my ending equity balance from the previous year. I need the net income attributable to parent which is on the income statement for year one. Now I need the increase in common stock and that I'm going to find on the financing page in row 20, portion to be raised in equity. My dividends paid, I calculated it above, I link to that. Now, again, you have your choice of whether you want to do this positive or negative. I tend to do it positive because the numbers show up in other forms, in other parts of the model, and I don't like to get caught. So I keep it positive here and then I flip it when I need to, but it's really your call. So the beginning balance plus the net income attributable to parent plus the increase in common stock, less the dividends and I have my total equity number. I copy that across and I can now link this into the balance sheet.

Now, I'm still off and I'm off by an amount, which I'm hopefully going to find as the result of my cash flow statement. First thing I need to do is I need to link the cash flow statement debt and equity. So for the change in debt, I'm gonna go up here to my balance sheet and I'm going to do this year minus last year.

For equity, I don't want the change in the stockholder's equity because that would be double-counting many of the other items. I want just the equity issuance so I can get that from the financing page. I can get it also from the calculations page. This is a little bit closer to me in terms of proximity. So I'm going to take the equity amount here. And now I can copy these across and I should have an ending cash amount that's equal to the amount that I'm out of balance and I do.

So when I plug the cash here into the cash line, I should balance.

And that's how we know we got the cash flow statement correct. Now we have a little bit of yellow left to clear up. That is the interest income and interest expense. Of course, since I'm calculating on the average balance of the debt and the cash and I'm using the cash flow statement to solve the model, I have a circular reference and this is a good circular reference. If you're uncertain about circular references and how they work, I would advise you to take one of the earlier financial edge courses in modeling. I'm not gonna go through the explanation of that now, but when I link to my interest, I should get a message that I am circular and then I will know that I have, to this point, modeled this part correctly. I do. So now, I'll go ahead and turn my iterations on. I don't think I calculated my cash yet, so I need to do this. This is gonna be straight from the balance sheet. Copy that across. I'm going to take the average of the beginning and ending times my cash interest rate. Copy that across and now I can link my cash interest. I won't get the circular reference warning now because I've already turned my iterations on, but I can copy these across. Now the cash interest income is much lower than in previous years, so we'd have to look into what they were doing with their cash to generate such a high return. To be conservative, I took a very low interest on cash because interest rates currently are very low. It is not uncommon for real estate and financial institutions to have their cash invested in much higher yielding assets. But again, to be conservative, I've taken this approach. We now have a completed model. Down below, I have a section on ratios and metrics. I'm not going to go through the calculations here because we've done them throughout the course. However, the ratios and metrics are a good opportunity to review the model, to review the numbers and see if we have any unusual hockey sticks or any unusual falloffs in any of the ratios or percentages. I advise you to always build a ratios and metric section in your models for this reason. They're just a good sanity check at the end. We have now completed the REIT operating model.