Operational Modeling Flashcards
(49 cards)
What is the focus of an operational model within a broader financial model?
It analyzes the company’s core operations—revenue, costs, working capital, depreciation, taxes—excluding the capital‑structure modules.
Name the eight core operational schedules highlighted in the course.
- Revenue,
- Cost,
- Working‑Capital,
- Income‑Statement,
- Depreciation,
- Asset (Accounting Basis),
- Income‑Tax, and
- the Model‑Review / Library schedules.
Which three‑step flow applies to every schedule in the model?
1) Enter inputs,
2) Calculate with formulas,
3) Exit (summarize) figures that flow to other schedules.
Why should each schedule follow a consistent layout and structure?
Consistency speeds auditing, improves readability, and allows schedules to become reusable ‘building blocks’.
What is the primary purpose of the revenue schedule?
To house all inputs and calculations needed to forecast revenue accurately and push it to the income statement.
Why does the course insist on breaking revenue into price and volume components?
Separating price and volume reveals true business drivers and helps test sensitivities independently.
Which key inputs typically appear at the top of the revenue schedule?
Days in period, plant capacity, volume‑growth assumptions, and pricing‑increase assumptions.
What model alert is built into the revenue schedule and why?
A capacity‑exceeded flag that signals when forecast volume surpasses plant capacity, prompting capex planning.
How should immaterial business lines be forecast in the revenue schedule?
Using a simple year‑over‑year revenue‑growth rate if price‑and‑volume detail adds little insight.
Define the ‘operational efficiency’ metric shown in the sample schedule.
Sales volume divided by plant capacity, expressed as a percentage of utilization.
Differentiate fixed costs from variable costs.
Fixed costs do not vary with output in the short term; variable costs rise proportionally with volume.
What is operational leverage?
The extent to which a company’s cost structure contains fixed costs that amplify changes in profit as volume changes.
How does higher operational leverage affect risk and return?
It magnifies both upside and downside—profits grow faster in good times but fall faster in downturns.
What two‑step approach does the cost schedule use to forecast costs?
1) Forecast variable costs per unit then convert to totals;
2) Forecast fixed costs in totals then convert to per‑unit amounts.
Which driver most often links variable‑cost forecasts to the revenue schedule?
Sales volume.
List the three working‑capital items modeled in detail.
Accounts receivable, inventory, and accounts payable.
What three high‑level inputs feed the working‑capital schedule?
Days in period, revenue, and COGS.
Provide the formula for accounts‑receivable dollars.
A/R = A/R days × Revenue ÷ Days in period.
Provide the formula for inventory dollars.
Inventory = Inventory days × COGS ÷ Days in period.
Provide the formula for accounts‑payable dollars.
A/P = A/P days × COGS ÷ Days in period.
Why do we calculate ‘cash from working‑capital items’ at the bottom of the schedule?
To capture cash consumed or released by changes in net working capital for the cash‑flow statement.
Write the net working‑capital formula used in the schedule.
Net Working Capital = Current Assets (A/R + Inventory) – Current Liabilities (A/P).
Why must revenue and COGS both be driven by sales volume?
To honor the matching principle—expenses are recorded in the period that generates the related revenue.
Which lines in the income statement come directly from supporting schedules rather than manual entry?
Revenue (from revenue schedule), COGS (cost schedule), depreciation (depreciation schedule), and tax expenses (tax schedule).
