Re: Inventory Writedown
You'd have to "manually" push the $100 writedown thru to the Inventory balance on the BS. We usually set this up with an extra line item at the bottom of the BS drivers that says Inventory writedown and have the calculated Inventory amount on top then subtract that amount. It truly is easi... You'd have to "manually" push the $100 writedown thru to the Inventory balance on the BS. We usually set this up with an extra line item at the bottom of the BS drivers that says Inventory writedown and have the calculated Inventory amount on top then subtract that amount. It truly is easier to do if you have a Pro Forma column. Thus, your formula would be: COGS * Days / 365 - Inventory Writedown. Read More

RE: AFM Core Model: CPLTDs
You have to make sure that you don't have so much mandatory payment that all your LTD is paid off, which is probably why you got a negative LTD balance. If you are adding a new tranche of debt, treat it like Tranche 2 methodology, and make sure everything still balances.

Re: Dividend payment for Debt Paydown
You answered your own question. How you treat dividends assumptions depends on your goal. If building a transaction oriented model (i.e. investment banking) or run-rate model and dividends are fairly steady, then you incorporate the dividends as we did in the models. That is, dividends are essenti... You answered your own question.

How you treat dividends assumptions depends on your goal.

If building a transaction oriented model (i.e. investment banking) or run-rate model and dividends are fairly steady, then you incorporate the dividends as we did in the models. That is, dividends are essentially a "known" input, and it is a recurring item.

However, many times in Research or Hedge Funds, one wants to see the available cash before making a decision as to how much dividends to pay and activist shareholders would go and tell mgmt what to do with excess cash (i.e. share buyback instead of dividends). Then, leave the dividends line blank the first go-around and then after the model is done, you'll still have to make an assumption as to how much dividends can be paid and go back and update. The mechanics of the model won't change much. If you like, you can move the dividends row to below Change in Cash, renaming it to Change in Cash before Dividends (and possibly even Share Repurchases), and then you'll STILL have to make the assumptions/calculations, but that's just presentation and largely immaterial whatever order you choose.

As you noted at the end of your post, the reality of the real world says, don't mess around with dividends because the capital markets don't like that (bad sign if you cut dividends), and so cutting dividends is a last resort. At that point, you should be taking our distressed class! This can be easily observed in the recent credit crisis with Citibank refusing to cut dividends while taking $50BIL loan write-downs. Read More

RE: AFM Core Model: mandatory debt payment for commercial paper
The assumption for CP is that the net change is zero - we assume that we borrow the same as any repayments. In reality, the CP is the revolver for WMT.

Re: Modeling Questions for Mature Company
Thank you for your inquiries. 1) Oftentimes, we will indeed model out CP as the revolver. Some companies, including WMT, use CP market as their revolver (of course, they still have an actual revolver facility in place as well). 2) Depending on the nature of the investments, we like to place Short-... Thank you for your inquiries.

1) Oftentimes, we will indeed model out CP as the revolver. Some companies, including WMT, use CP market as their revolver (of course, they still have an actual revolver facility in place as well).

2) Depending on the nature of the investments, we like to place Short-Term Investments as a cash equivalent. If you don't want to do that, create new line items in Current and Long-Term Assets for the Short and Long-Term Investments. You'll then have to figure out if you want to keep the balances constant (recommended) or if you want to mark-to-market. If MTM, then decide if it's AFS or Trading. Usually for a non-financial institution, it'll be AFS, so unrealized gains/losses will also flow thru OCI account to offset any changes (double entry) and allow your model to balance still. Any purchases/sales will flow through here as well.

3) As discussed in class, asset sales are usually considered one-time, non-recurring. Acquisitions require proper M&A accounting treatment and purchase price allocation rules (take our M&A courses: http://www.wallst-training.com/self-stu ... l#package5). Purchases/sales of securities will flow through your Investments accounts (see #2 above) and again for non-banks/insurance companies only.

4) The Debt footnotes in the financial statements will usually provide future debt paydowns required in the next 5 years. For borrowings/refinancings, our assumption is to refi any large amounts that are coming due (absent guidance from footnotes). Also, we tend to check the historical level of new debt issuances (borrowings) for a company on bloomberg or other data vendor - that usually provides a clue to a company's historical trend. Read More