Lecture 5
Forecasting Income Statement and
Balance Sheet
Elias Rantapuska / Aalto BIZ Finance 2
Group valuation company, bonus points,
signup for case presentations
• Group Valuation Project company is Ekokem
• Use class activity points section at MyCourses to track
your activity: mark down your comment there
– Instructors will add their own judgement when deciding on the
final bonus points
• 1 Group = 1 case discussion in any of the four exercise
sessions
– Sign up via MyCourses
Elias Rantapuska / Aalto BIZ Finance 3
Operating leases: recipe for Carrefour
case
• Operating Lease is
like rental, Financial
Lease is like buy with
debt
• Big idea of operating
lease capitalization:
– Treat operating
lease as if debt
would have been
issued to
purchase the
leased asset
– Move lease
payment from
operating costs
to interest
payments and
depreciation
– Add leased asset
to both sides of
balance sheet
Forecast leasing payments
Calculate PV of lease
Forecast new lease agreements for financial
year
Calculate depreciation schedule for leased asset
Calculate net change in leased assets and
resulting balance sheet values for each year
Take out lease payment from COGS
Calculate interest part of lease payment
Rest is amortization
1
2
3
4
5
6
7
8
Calculate deferred tax asset
9
Elias Rantapuska / Aalto BIZ Finance 4
Learning objectives for today
• After today’s lecture, you should know how to:
– Set up revised income statement for forecasting
– Know how to forecast sales and operating profit
– Understand how the income statement forecasts
link to balance sheet
– In short: be able to start building your group
valuation project model
Elias Rantapuska / Aalto BIZ Finance 5
Structure of discussion today
•H&M example: structuring revenue tree
•Where do we start from: simplified and revised income
statement
•Forecasting income statement and balance sheet: “theory”
•Forecasting income statement and balance sheet: case
Finnair
•It all seemed very easy, any more tricks of the trade?
Elias Rantapuska / Aalto BIZ Finance 6
Structuring H&M revenue growth tree
H&M: first possible solution
EMEA
H&M Americas
UK
France
Germany
Market area Country
Italy
Etc.
Business
Retail
Wholesale
(Weekday brand)
Observations:
