Simple Balance Sheet Forecast

Overview This exercise guides you through building a simplified five-year Balance Sheet projection using three years of historical Balance Sheet and Income Statement (P&L) data, a standard approach for forward-looking financial forecasting. You will use key working capital metrics—Days Sales Outstanding (DSO), Days Payables Outstanding (DPO), and Days Inventory Outstanding (DIO)—along with historical averages and P&L forecasts to estimate future balances for Accounts Receivable, Inventory, Accounts Payable, and other assets/liabilities. This exercise helps you understand how operational efficiency, working capital management, and historical trends influence a company's financial position. Learning Goals Understand working capital metrics: Learn how DSO, DPO, and DIO impact the Balance Sheet and cash conversion cycle. Calculate historical averages: Compute average DSO, DPO, DIO, and other asset/liability ratios. Forecast Balance Sheet accounts: Use historical averages and P&L projections to estimate Accounts Receivable, Inventory, Other Assets, Accounts Payable, and Other Liabilities. Link P&L to Balance Sheet: Understand how revenue, COGS, and other P&L items flow into asset and liability projections. Key Concepts DSO (Days Sales Outstanding): Predict accounts receivable by measuring the average time to collect payment after a sale. DPO (Days Payables Outstanding): Predict accounts payable by measuring the average time a company takes to pay its suppliers. DIO (Days Inventory Outstanding): Predict inventory by measuring the average time inventory is held before being sold. Other Assets & Liabilities (% of Revenue): Use historical ratios to forecast miscellaneous accounts not directly tied to working capital. Balance Sheet Forecasting: Integrates P&L projections with working capital metrics to estimate future asset and liability balances.

Practice Simple Balance Sheet Forecast with interactive Excel modeling exercises in our Financial Statement Modeling module.

This hands-on modeling exercise helps you master Simple Balance Sheet Forecast through real-world Excel practice and financial modeling techniques.