Estimating Balance sheet parameters

This page tells you how you can forecast i.e. change parameters in Balance sheet for estimate years. If you would like to get familiar with Balance sheet in past years, have a look at History document.

Notice that every parameter in the model includes a tooltip which may tell you the same thing as this document. You can see the tooltips when you set the mouse over the headings.

Keeping Balance sheet even

For the estimate years, the model always makes Balance Sheet even. This is done either

1. By increasing or decreasing interest bearing debt or
2. By increasing interest-bearing financial assets (cash at bank).

The model evens out the balance sheet after you have first forecasted all the items on both assets and liabilities. Notice that:

1. When the model evens out the balance sheet, it never changes your estimates. It can only increase interest-bearing debt, decrease it to the minimum level defined by you or increase generated interest bearing financial assets.
2. The model does not do any levelling in case you have forecasted the assets’ and liabilities’ sides to be equal.
3. You can change your balance sheet estimates at any time. The model does the levelling always after your estimate changes – if necessary.
4. The history years are not part of levelling. So, in case you have mistakenly filled in an uneven Balance sheet in some history year, the error will not be corrected by the model.

Next two chapters tell you how you can forecast i.e. change parameters in Balance sheet for current and future years. If you would like to get familiar with Income statement in past years, see history document.

Have a closer look how the Balance sheet is made even.

Balance Sheet Parameters - ASSETS

Goodwill

New goodwill and Goodwill depreciation are entered into the model in absolute terms.

Fixed assets total
Consists of the following three items:

1. Other intangible rights
To be changed directly (see self-filling input figure)

2. Fixed assets ordinary
Can be forecasted with three different methods.

1. Fixed Assets / Net sales %.
2. Gross investments in absolute terms.
3. Gross investments % (relative to Net sales)

Whatever way you use, the other parameters adjust themselves accordingly. Have a closer look to fixed assets and investments.

Note that Fixed assets ordinary is intended to consist of normal, i.e. tangible and depreciable fixed assets only.

3. Investments
To be changed directly (see self-filling input figure)

Notice that this Balance sheet Investments does not have anything to do with Gross investments that refer to the increase in depreciable assets over one year. Investments in Balance sheet are a non-depreciable item that consists of different securities the company has acquired, for example in associated companies. These securities have all in common that they must support the business and not to be only financial investments. If they would be pure financial investments then they would be booked either in financial assets or in inventories.

Valuation items
To be changed directly (see self-filling input figure)

Inventories
Can be forecasted with:

1. Inventories / Net sales %
2. Changing the parameter Net working capital %. The change affects Inventories %, Non-interest and Interest bearing financial assets % and also Current non-interest bearing liabilities %.

Total financial assets
Consists of the following items:

1. Non-interest bearing financial assets
Can be forecasted with:

1. Non-interest bearing financial assets/ Net sales %
2. Changing the parameter Net working capital %. The change affects Inventories %, Non-interest and Interest bearing financial assets % and also Current non-interest bearing liabilities %
   

2. Interest bearing financial assets
Can be forecasted with:

1. Interest bearing financial assets/ Net sales %
2. Changing the parameter Net working capital %. The change affects Inventories %, Non-interest and Interest bearing financial assets % and also Current non-interest bearing liabilities %
   
   

Interest bearing financial assets, generated
A parameter that is changed only by the model as it evens out the different sides of the balance sheet. You cannot change this parameter directly but when you are determining the size of the assets and liabilities with other parameters, you are also determining this item indirectly.

Have a closer look how the Balance Sheet is made even.

Balance Sheet Parameters - LIABILITIES

Share capital
To be changed directly (see self-filling input figure)

Such items as `Revaluation fund´ and `Share price in excess of nominal value´ can be included in Share capital.

Retained earnings
Calculated by the model with the following formula:

Minorities
To be changed directly (see self-filling input figure)

Reserves
To be changed directly (see self-filling input figure)

Deferred tax liability
To be changed directly (see self-filling input figure)

Convertibles
To be changed directly (see self-filling input figure)

Interest bearing long-term liabilities, ordinary
The item consists of Minimum level of interest bearing long-term liabilities (desired level of long-term liabilities) and Allocated debt, which evens out the difference if Balance sheet assets become bigger than liabilities. Have a closer look how the Balance Sheet is made even.

The level of Allocated debt is determined with the estimate parameter Share of generated debt allocated to long-term liabilities.

All the estimates can be made in section `Estimate parameters - All estimate parameters´ of the Company model.

Non-interest bearing long-term liabilities
To be changed directly (see self-filling input figure)

Non-interest bearing current liabilities, ordinary
Can be forecasted with:

1. Non-interest bearing current liabilities, ordinary / Net sales %.
2. Changing the parameter Net working capital %. The change affects Inventories %, Non-interest and Interest bearing financial assets % and also Current non-interest bearing liabilities %

Obligatory reserves
To be changed directly (see self-filling input figure)

Interest bearing current liabilities
The item consists of Minimum level of interest bearing current liabilities (desired level of current liabilities) and Allocated debt (which evens out the difference if Balance sheet assets become bigger than liabilities). Have a closer look how the Balance Sheet is made even.

The level of Allocated debt is determined with the estimate parameter Share of generated debt allocated to long-term liabilities.

All the estimates can be made in section `Estimate parameters - All estimate parameters´ of the Company model.

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