Cash Balance for Facebook

February 17, 2012
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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 Flow 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

Cash Balance for Facebook

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

2moro 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. Tomorrow’s integrated linked model would include all financial statements for facebook

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. CUL8R!!

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About the Author
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Pankaj Baheti is a CFA Level III Candidate currently working with Pristine. Prior to Pristine, he was working with Achi Group. He has done his Post Graduate Diploma in Management and loves trekking in the hills of Arunachal.

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