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Cash as Balancing Figure

We are almost done with the trickiest part of the Facebook Model. We almost have the cash flow statement with us. Just to recap, the basic steps in creating the cash flow statements were:

  1. Categorizing Balance Sheet items of Facebook in Operating, Investing and Financing Activities
  2. Taking difference of two consecutive years and place it in the respective head in the Cash Flown Statement

If you remember we had also discussed the BASE Rule where we had discussed the generalized methodology of creating the closing accounts of the balance sheet from the other statements. It is time we put all our basic knowledge into action!



Joining the dots

Now that we have the basic elements of the cash flow statement with us and the pre requite knowledge to create the cash flow statement, we would find the real cash at the end of the year and ensure that it balances with the cash in the balance sheet.

Creating the final Cash Balance for Facebook

Today we calculate the closing cash balance for Facebook in the cash flow statement and ensure that it balances the cash in the balance sheet. Please note that this balancing is a basic error check in the model. If you are not getting it right, it is time to check your old numbers.

Remember: Closing Cash Balance = Beginning Cash Balance + Net Changes in Cash Flow

Try on your own and calculate the closing cash balance for the Facebook and see whether the resultant figure is the one that is given in the historical balance sheet.

Next Steps

Tomorrow we would release the cash flow statement of Facebook. You would see that the closing cash balance calculated in the Cash Flow Statement is same as the Cash in Facebook’s balance sheet. Next step’s integrated linked model would include all financial statements for Facebook

  • Income statement for Facebook
  • Balance Sheet for Facebook
  • Cash Flow Statement for Facebook (To be released)

Once we have the Cash Flow Statement in the model, we would clearly see the linkage between P&L,B/S and the cash flow statement.

Historical Cash Flow Statement of Facebook

If you have been following the posts till now, this post is as simple as it can be! This just releases the complete cash flow statement of Facebook. It is like a guide for you to check your efforts for the past few days. If you have been working hard, I am sure you would enjoy the glory today!

How do I create the model then?

The cash Flow statement for FB

Recap of the steps in getting the CFS in place

It is a matter of 2 minor steps: Categorizing Balance Sheet items of Facebook in Operating, Investing and Financing Activities and then taking difference of two consecutive years. Some numbers also need to be taken from the profit and loss account (i.e. Income Statement) like net profit.

Remember to maintain discipline: hard coded numbers in blue, calculations in black.

I am sure if you tried hard, you would have got it right. If not, let’s discuss the issues that you faced and start learning together!

Release all your Pains on our forums and Blogs and we would be happy to discuss your modeling troubles!

Next Steps

Now that we have the historical financial statements of Facebook (P&L, B/S and CFS) in place, we move forward to model historical drivers. Historical drivers are like crystal balls to predict future. Most of the revenue drivers would be in the form of growth and Costs would be %ages of Revenue. We would give more details tomorrow. In the meanwhile try to build historical drivers on your own!

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