Summary

In this chapter, we have seen that without a thorough knowledge of the nature and purpose of a project, you could end up with a model that doesn't meet the specifications of your client. We have learned about the nature of and reason for assumptions, as well as the importance of discussions with management in projecting your assumptions into the future. In making our assumptions, we have realized the importance of historical financials, balance sheets, profit and loss accounts, and cash flow statements. We have also learned about historical financials, which are an essential starting point in resolving anomalies that may arise in our model.

In the next chapter, Chapter 7, Asset and Debt Schedules, we will learn how to project long-term assets and borrowings. We will be introduced to different approaches: a complex but more accurate method and a simple, more subjective approach. We will also learn how to update the balance sheet and profit and loss with output from our...