Insights

Representations and Warranties of the Seller

  • Peter Lynch

This section of the stock purchase agreement contains statements of fact and assurances made by the Seller that must be true and correct as of the closing date. In an aggressively summarized format, the Buyer is looking to have the following confirmed:

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Interest Expense in a Monthly Financial Model (Cash Interest vs. Interest Expense)

  • Peter Lynch

Interest expense is a period expense, so it appears in each period on your income statement in a financial model. Per most credit agreements, however, interest is only paid on a quarterly basis. Consequently, in a monthly financial model you will have periods with interest expense on the income statement without a corresponding cash outflow for interest paid. (Template available for download at the bottom of this post.)

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Converting an Annual Growth Rate to a Monthly Growth Rate

  • Peter Lynch

The most common error I see in financial models as it relates to growth rates is to divide an annual growth rate by 12 to arrive at the monthly growth rate. In this post we will explore the correct way to convert growth rates for all periods.

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Monthly Three Statement Model

  • Peter Lynch

This post will focus on a few changes to keep in mind as you transition from building three statement models with annual periods to three statement models with monthly periods.

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Cash Free Debt Free Transaction

  • Peter Lynch

In this post we will look at what it means to structure a transaction on a “cash free, debt free” basis, and then look at how this is presented and calculated in the context of a financial model.

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