This happens if D&A is embedded in other Income Statement line items. When this happens, you need to use the Cash Flow Statement number to arrive at EBITDA because otherwise you’re undercounting D&A.
Operating leases are used for short-term leasing of equipment and property, and do not involve ownership of anything. Operating lease expenses show up as operating expenses on the Income Statement. Capital leases are used for longer-term items and give the lessee ownership rights; they depreciate and incur interest payments, and are counted as debt. A … Read more What’s the difference between capital leases and operating leases?
The “quick and dirty” way to do this: reduce the Taxable Income by the portion of the NOLs that you can use each year, apply the same tax rate, and then subtract that new Tax number from your old Pretax Income number (which should stay the same). The way you should do this: create a … Read more How do Net Operating Losses (NOLs) affect a company’s 3 statements?
The simple way: project each one as a % of revenue or previous PP&E balance. The more complex way: create a PP&E schedule that splits out different assets by their useful lives, assumes straight-line depreciation over each asset’s useful life, and then assumes capital expenditures based on what the company has invested historically.
Normally you make very simple assumptions here and assume these are percentages of revenue, operating expenses, or cost of goods sold. Examples: • Accounts Receivable: % of revenue. • Deferred Revenue: % of revenue. • Accounts Payable: % of COGS. • Accrued Expenses: % of operating expenses or SG&A. Then you either carry the same … Read more How do you project Balance Sheet items like Accounts Receivable and Accrued Expenses in a 3-statement model?
• Restructuring Charges • Goodwill Impairment • Asset Write-Downs • Bad Debt Expenses • Legal Expenses • Disaster Expenses • Change in Accounting Procedures Note that to be an “add-back” or “non-recurring” charge for EBITDA / EBIT purposes, it needs to affect Operating Income on the Income Statement. So if you have one of these … Read more What are examples of non-recurring charges we need to add back to a company’s EBIT / EBITDA when looking at its financial statements?
This statement shows everything we went through above – the major items that comprise Shareholders’ Equity, and how we arrive at each of them using the numbers elsewhere in the statement. You don’t use it too much, but it can be helpful for analyzing companies with unusual stock-based compensation and stock option situations.
APIC = Old APIC + Stock-Based Compensation + Stock Created by Option Exercises If you’re calculating it, take the balance from last year, add this year’s stock-based compensation number, and then add in however much new stock was created by employees exercising options this year.
Retained Earnings = Old Retained Earnings Balance + Net Income – Dividends Issued If you’re calculating Retained Earnings for the current year, take last year’s Retained Earnings number, add this year’s Net Income, and subtract however much the company paid out in dividends.
Common items include: • Common Stock – Simply the par value of however much stock the company has issued. • Retained Earnings – How much of the company’s Net Income it has “saved up” over time. • Additional Paid in Capital – This keeps track of how much stock-based compensation has been issued and how … Read more Walk me through the major items in Shareholders’ Equity.