Insights

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.)

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.

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.

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.

What is an independent sponsor? In contrast to a private equity fund, an independent sponsor sets out to source an acquisition target (business for sale), and then raises the funds to complete the acquisition. This can be achieved by an individual or a team of people working to raise capital on a deal-by-deal basis.