Budget vs forecast: update expectations without rewriting the plan
Learn the difference between a budget and a forecast with a dated monthly case: a variance bridge, two forecast versions and the annualising trap.
THE FINX JOURNAL LEARN BY DOING
Financial modelling
Understand how a model fits together, follow its connections and practise finding the mistakes behind the numbers.
In this topic
THE READING LIST
Fixed charge coverage ratio: define the obligations before calculating
Calculate fixed-charge coverage under two stated conventions, reconcile debt service, and test a fictional covenant without double-counting lease payments.
ROIC formula: calculate returns on invested capital consistently
Build and audit a return on invested capital: reconcile NOPAT and invested capital two ways each, choose a denominator convention, and catch three inconsistencies.
Sources and uses: balance acquisition funding in a worked example
Build a sources and uses table for a fictional buyout: offer basis, refinancing, fees and the sponsor equity plug — then run the checks that catch what the plug hides.
Cost of equity formula: build a CAPM estimate and explain its limits
Assemble Northgate's cost of equity from a dated risk-free rate, beta and equity risk premium, catch a 604% units error and two silent wiring errors, and price the range.
Football field valuation: build and check a valuation chart
Build a football field valuation chart in Excel with consistent enterprise-value ranges, a market reference, and checked bridges to equity value and value per share.