Financial Models
Unlevered Free Cash Flow (UFCF) UFCF is the cash flow generated from core business operations, before considering any debt payments. It's a measure of the company's intrinsic profitability, independent of its capital structure. How is it calculated? A common way to calculate UFCF is: * EBIT (Earnings
Financial Models
Companies must continually invest in their assets to thrive and survive. These investments, known as capital expenditures (capex), are the lifeblood of both immediate operations and future success. However, not all capex serves the same purpose. To truly decode a company’s strategy and financial health, it’s critical to
Financial Models
Once a portfolio company is sold for a profit, who gets paid first, and how much? The distribution waterfall is a critical yet often misunderstood framework that dictates how profits flow between investors and fund managers. Understanding this structure is fundamental to grasping how PE firms generate returns and how
Financial Models
Paid-in-Kind (PIK) interest offers borrowers a double-edged sword: the ability to defer cash interest payments in exchange for a growing debt burden. Commonly used in leveraged buyouts (LBOs) and distressed debt scenarios, PIK interest can provide short-term liquidity relief but carries long-term risks. Let’s unpack how PIK works, its
Financial Models
The cash sweep is a powerful tool that accelerates debt repayment by allocating surplus cash toward reducing principal debt balances. For financial modelers, understanding how to incorporate a cash sweep into projections is essential for optimizing debt schedules, lowering interest costs, and improving a company’s financial health. Let’s
Financial Models
The revolving loan facility (revolver) is a versatile credit tool that acts like a financial safety net for businesses. Whether managing seasonal cash flow gaps or funding growth initiatives, revolvers are a cornerstone of leveraged buyouts (LBOs), project finance, and everyday corporate liquidity management. Let’s dive into how revolvers
Financial Models
In the world of private equity and mergers & acquisitions, Leveraged Buyout (LBO) Models are vital decision-making tools. These financial models enable investors to assess the viability of acquiring a company using significant debt, while projecting potential returns. This guide breaks down the mechanics, applications, and nuances of LBO models.
Financial Models
Ever looked at a large company’s financial statements and seen a line item called Non-Controlling Interest (NCI)? It might seem like jargon, but understanding NCI is key to truly grasping the financial picture of many businesses, especially large corporations that operate through subsidiaries. NCI, also known as minority interest,
Financial Models
Securing a business loan is often a critical step for growth, but the excitement of funding can overshadow the importance of understanding the bank covenants embedded in the loan agreement. These covenants are legally binding clauses that outline specific terms and conditions the borrower must adhere to throughout the loan
Financial Models
Relying on a single financial forecast is like navigating a storm with a single compass reading. What if interest rates spike? What if a key supplier goes out of business? What if demand for your product skyrockets? Scenario planning is the tool that helps businesses prepare for these what-ifs by
Financial Models
Financial models are essential tools for forecasting, planning, and decision-making. But let’s face it: the future is uncertain. Every financial model relies on assumptions, and these assumptions are rarely set in stone. What if sales grow slower than expected? What if interest rates rise? What if costs spike? Sensitivity
Financial Models
The cost of capital is a cornerstone of corporate finance, representing the minimum return a company must earn on its investments to satisfy its investors and maintain its value. Whether evaluating a new project, valuing a business, or optimizing capital structure, an accurate cost of capital is critical. What is