Balance Sheet Projections Cheat sheet:

A balance sheet is a financial statement that reports company assets and liabilities and shareholder equity at a specific point in time. The information in the balance sheet provides an idea of what the business owns, owes, and how much investment shareholders have made.

The balance sheet is one of the key financial statements in fundamental analysis when doing a deep dive on an investment opportunity or looking at ratios.

4 key points to remember

  • A balance sheet is a financial summary that reports a company's assets, liabilities, and equity.
  • The income statement, balance sheet, and cash flow statement are used to evaluate a business.
  • A balance sheet is a business’s snapshot of its financial health.
  • Financial analysts use the balance sheet, along with other financial statements, to calculate ratios.

Setting up Balance Sheet Forecast

Typically, a balance sheet has its own dedicated worksheet or it will be part of a larger workbook with other major financial statements. We'll take a look at individual line items below in more detail, but before we do that there are some important things to know about the main sections you'll find on the balance sheet.

  1. Two years of historical data: In order for the model to be useful, it is necessary to input at least two years of historical data. Historical data should be entered in columns starting from the left and going to the right.
  2. Reclassify GAAP to suit you: Balance sheets often lump together line items with different drivers. For example, groups of items may be combined even though they should not have been. In these cases, the line items need to be broken out and a forecasting approach tailored to the nature of each type. Conversely, GAAP requires that some line items be broken out into current and long-term components (such as deferred taxes and deferred revenue). For forecasting purposes, they can be combined because their forecast is based on the same drivers.
  3. Use supporting schedules: Forecasting is a technique for predicting the performance of certain business activities, and it should be calculated on its own worksheet. The consolidated balance sheet pulls the finished product, the forecasts, into one figure to show a complete picture.

Forecasting Balance Sheet

In preparing a financial forecast, the first step is to forecast the revenues and operating costs. The next step is forecasting the operating assets required to generate them; excluding the financing items on the balance sheet for now. Accordingly, we will only include accounts receivable, inventories, and accounts payable in our analysis.

Balance Sheet Items


  • Other Current Assets
  • PP&E
  • Accounts Receivables
  • Inventory
  • Other Long-Term Assets


  • Accounts Payables
  • Long-term Debt


  • Retained Earnings
  • Shareholder Capital

Income Statement

An income statement is one of the three important financial statements used for reporting a company's financial performance over a specific accounting period, with the other two key statements being the balance sheet and the statement of cash flow. The income statement primarily focuses on a company's revenue and expense over a particular period.

The income statement focuses on four key items—revenue, expenses, gains, and losses. It does not differentiate between cash and non-cash receipts (sales in cash versus sales on credit) or cash versus non-cash payments/disbursements. A balance sheet is designed to provide a snapshot of the financial health of a company. Specifically, it shows how revenue is turned into net income (profit or loss) over time.

Net income

Net income is synonymous with accounting for a company's profit over an allotted period of time. In this sense, net income includes all of the expenses and costs that the company incurred for themselves which are subtracted from their revenue during that time. Net income is often referred to as "the bottom line" due to its position on an organization's earnings statement.

Net income, which is often shown on a company's earnings statement or income statement, is typically derived by the following:

  • Operating expenses
  • Interest on debt and loans
  • Overhead or selling, general and administrative expense (SG&A)
  • Income taxes
  • Depreciation (long term commitment to paying for intangible assets)

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