Usually I don't make comments on videos that I watch, but what you did is so amazing in terms of opening my eye on the big picture. Thanks from the bottom of my heart Eric.
I have a finance case study interview next Monday and was frustrated, since I graduated last year and haven't looked at accounting principles for a year. This video was helpful enough to bring my dead brain cells back alive! Thanks alot man
Happy to help. Good luck in the interview. I have a couple other videos on finance interviews as well if you are prepping, feel free to check them out here, bit.ly/fin_intervw_prep
@@captainwhitebelly88 well I didn’t get a position from the interview but I managed to get a job in a different company! Good luck with your interview!
Seems as the number of customers is incorrect. It says "Number of NEW customers". You should add the existing customers to the new. Hence, in year 2 you should have a total of 27 customers.
Thank you so much for this video, especially for also taking so much time to discuss the thought process on the recommendation, this is helping me remember to keep the bigger picture in mind and I think this so helpful as I am preparing to do case studies for recruiting processes!
Love this new video, Eric! So important to know how to apply the fundamental financial statement concepts you teach in your other videos to case study scenarios like this. Also love how broad this case study example is! Super helpful
Hey Michael - glad you found this a good way to tie together some of the concepts I teach in other videos! Appreciate the feedback 🙏 and glad it was helpful!
Hey Duncan - keyboard shortcuts are the key! If you want to start using them more, here's a quick video I made to learn the most common ones quickly => ua-cam.com/video/KTvoUVcmQlc/v-deo.html
Very good simple explanation. Just one little issue when you calculated the EBIT %, you chose the line gross profit as the denominator instead of the revenue line... ;-)
@@gabrieloyemike1578 Hi Gabriel - at the moment I'm not able to give 1-1 help because I don't have the time in my schedule for any new commitments. That being said I am always happy to recommend videos. Cheers
Good luck lmk. If you want to do deeper on finance, modeling & VC I have an upcoming course too! Jump on the wailist if you are interested: www.startupfinancecourse.com/earlybird-opt-in
Hi! I'm back to this video one year later for another case study interview ahah! for a Business Controller position (tasks of finance controller and handling of a lot of brands/products for a FMCG industry company. What would you recommend or another videos that could cover this type of tasks simulated?
Everything was pretty easy up until the Cash Flow section (give it i have not taken a finance class yet). I think the most essential thing to these case studies are the questions we should pose for evaluating potential investments. Great video as well
Cash flow confuses people who've been working in finance for 10 years, I've literally had to build cash flow models for actual CFOs who couldn’t do it. So just keep working at it. You will get it, and i recommend you watch my "3 statement financial model" video
Thank you so much for all this shared information, it's really helpful!! I have two case studies coming up for Coca Cola, what else do you think would be interesting to investigate in this type of exercises?
See if you can find anywhere what the customer lifetime value of a coca cola client is, and if they should be marketing more aggressively (spending more to acquire one new client, that's called your CAC) to pull growth forward and sacrifice short term profits. That's what I might look into and recommend if the data supported it. That's the capital strategy we use with startups.
I added back depreciation because I started with EBIT aka earnings before interest and taxes. It is already pre-tax so adding taxes to it wouldn't make sense. If you started with net income aka post-tax income, then yes you would add taxes back. You can work your way back to EBITDA from any metric just need to think about the math right
Questions? Let me know in the comments happy to discuss. 🚀 Also, if you want to learn how to systematically scale your startup without ending up as one of the 90% of startups that fail, have a look at this ⇒ www.ericandrewsstartups.com/financeforstartups
I loved this video! and found it very helpful, thank you so much for making it. I do have one question though, would you include a total line i.e. a sum total of the four years, you would then find that the sum of net income across the 4 years is -$57k so taking all expenditure into account (including taxes) you would make a loss, and therefore I would be inclined to advise not to go ahead with this deal. I would recommend to model it out for a further period as like you said it has the potential to be more profitable over a longer period e.g. 10 years. Would love to know your thoughts on this? thanks Eric.
Sure, I think the issue with your thinking is that it is very backward-looking. Finance is about predicting the future. And for sure modeling out more years would be helpful and give you more info. But at a high level, I would not assume - based on the model - that the next 4 years of this business will be anything similar to the last 4 years. Based on the trajectory the business just started making money and looks poised to make a lot of it in the future. So when making a recommendation make sure you are thinking about where things are going and if you want to own/invest in that future scenario.
Thanks you so much for this useful video and tips, that was really helpful to see all the insight and interpret it to get a recommendation, I have a case study with dental corporation, do you have any recommendation that what could be involved? Thanks
Hi thanks for the effort but you have missed the trick here, if you want to evaluate any project you need to start with project's IRR & NPV. Just a humble suggestion 😌
I would use whatever the current corporate taxes rates are for the country you are in. In the US for example it's currently 21%, but in certain states there are additional taxes on top of it.
having a case study tomorrow with Tesla. any recommendation or advice? kinda nervous cz I've been trying to get in the program. This video is great by the way!
Don't bold the whole row innecesarily, the cost of formatting for the excel can grow huge once the file gets more data. Only bold the specific cells that need to be bold.
Eric, I have a question! Shouldn't we add depreciation to CAPEX? Following the formula: Total Capital Expenditure = Net increase in PPE (from PY to CY) + Current Year Depreciation? Thanks in advance!
Hey - definitely not. That would not make sense. Watch my 3 statement financial model video and that will clear everything up for you I guarantee it! ua-cam.com/video/xlXDZyZ9azk/v-deo.html
Also you should check assumptions. Did you assume that the business or partnership will only be 4 years essentially by fully depreciating capex over 4 years?
Not sure if I have it correctly but if you calculate IRR using the Excel formula, the IRR is only 6%, which I would say is pretty low. WACC can easily go up 6%, which brings NPV to 0. Will this be a valid point to veto the project? Also, curious about how to calculate ROI for such projects. Is it important in terms of analyzing?
Yep, you're missing something. This analysis showed that we invest $2-3 million and increase create $40 million of value from it over 4 years. That's not a 6% IRR!!!! If you want to use IRR for your analysis (I don't think IRR is super important for math this extreme, but it could be an interesting metric), you need to include the actual value of the business at the end of the 4 years, not just the cash flows. Check out my video on the discounted cash flow model - the terminal value is what you're missing. Please let me know if that helps. I personally would just say we 10-20X our money in 4 years. I think that gets the same point across a little easier.
No, to calculate EBITDA we are adding depreciation back to operating income to basically strip it out. Depreciation is a non-cash expense (it is an estimate to put prior CAPEX on the P&L according to the matching principle) so with EBITDA we remove it to get a better proxy for a more cash-based operating income. Make sense?
Why did you take out the taxes from cash flows? This should be considered to check if the project really was profitable as a whole as they had to paid anyway.
Some are different but for a lot of them you can just hold the command key instead of the CTRL key and they will work just as well. For instance Command + C = Copy, Command + V = Past. Command + arrows = zoom around really fast. Shift + arrows = highlight blocks, etc. For anything else just google it
![Finance Case Study Example | SaaS Startup Financial Model [Template Included]](/img/n.gif)
As a senior financial analyst I have to say these skills are very important and you did an amazing job going over it all.
Hey thanks a lot !!
Do you have any advice for someone having interviews for entry level financial analyst position?
@@cheelotembo5445 yes look at my finance interview series playlist
Love that Eric brings the casual vibes to finance! Hawaiian shirts 7 days a week baybee!
I like to be comfortable, what can I say?
You dropped this video just in time. I have a case study finance interview coming up and I'm sooo rusty with my financial modeling haha
Stoked to hear it tatiana! Hope it helps 👍
Usually I don't make comments on videos that I watch, but what you did is so amazing in terms of opening my eye on the big picture. Thanks from the bottom of my heart Eric.
You are very welcome I'm glad to hear it Zaki
I have a finance case study interview next Monday and was frustrated, since I graduated last year and haven't looked at accounting principles for a year. This video was helpful enough to bring my dead brain cells back alive! Thanks alot man
Happy to help. Good luck in the interview. I have a couple other videos on finance interviews as well if you are prepping, feel free to check them out here, bit.ly/fin_intervw_prep
how did you do bro? I have one coming up next monday
@@captainwhitebelly88 well I didn’t get a position from the interview but I managed to get a job in a different company! Good luck with your interview!
Seems as the number of customers is incorrect. It says "Number of NEW customers". You should add the existing customers to the new. Hence, in year 2 you should have a total of 27 customers.
I don’t think this is a subscription model- but the idea of “Account” does imply it’s a continuing service.
Thank you so much for this video, especially for also taking so much time to discuss the thought process on the recommendation, this is helping me remember to keep the bigger picture in mind and I think this so helpful as I am preparing to do case studies for recruiting processes!
My pleasure!! Good luck out there
Love this new video, Eric! So important to know how to apply the fundamental financial statement concepts you teach in your other videos to case study scenarios like this. Also love how broad this case study example is! Super helpful
Hey Michael - glad you found this a good way to tie together some of the concepts I teach in other videos! Appreciate the feedback 🙏 and glad it was helpful!
Perfect explanation of how to build a case study!
Beautifully laid out. Its detailed and makes an aspiring FP&A professional think in a certain way!
Super helpful! Thanks so much.
Just a quick FYI pretty sure you miscalculated your EBIT % @13;46 you divided by GP instead of revenue ;)
Nice catch Stephanie, you're right. Fortunately I calculated the actual operating income correctly. Cheers 😁
I love this video! Your pace, thought process and thoroughness is great!
Thanks Erica glad it was helpful 👍
great breakdown that will help with my upcoming interview - thank you!
Finally found someone who eplains really well, and catches ur attention!! Thank youuu, im still a student, I want to smash my interviews like this
You got this Salim!!!! Appreciate the comment
Thank you so much. The explanation is so easy to understand.
Eric you’re the best. keep going coach.
oh my is this video real?! Thank you so much! This is like magic!
such an informative video.Soooo glad that I found your channel
Amazing to see how fast you can navigate Excel with those keyboard shortcuts. I have to start using these more! Thanks for the video Eric!
Hey Duncan - keyboard shortcuts are the key! If you want to start using them more, here's a quick video I made to learn the most common ones quickly => ua-cam.com/video/KTvoUVcmQlc/v-deo.html
I learn a TON
Very nice and easy to understand video ! Keep going and congrats from France 🇫🇷
Appreciate that and I'm glad to hear it!
This is so clear and helpful. Honestly, thank you!
I been have been looking for a business case analysis example
Very good simple explanation. Just one little issue when you calculated the EBIT %, you chose the line gross profit as the denominator instead of the revenue line... ;-)
Yes, you are right! Small error, nice catch!
Love this, great stuff as always. Thanks Eric!
Thanks Keyspan - happy it was valuable for you, appreciate the comment!! 🙏😀
So much thanks Eric. Great material!
Thanks for watching! To keep learning, check out my entire finance interview prep series ► bit.ly/fin_intervw_prep
Can i have your email id..i have a case study to work for a job interview
Thanks Eric for this video. Really really helpful. Good resource for any finance person wanting a good refresher.
Cheers Gabriel, happy to hear it. Thanks for the comment
@@eric_andrews Hi Eric, is it possible to reach out to you via email? Please let me know. Cheers
@@gabrieloyemike1578 Hi Gabriel - at the moment I'm not able to give 1-1 help because I don't have the time in my schedule for any new commitments. That being said I am always happy to recommend videos. Cheers
Thanks a lot! That's the best video I watched so far!
Glad you liked it!
@@eric_andrews got my job thanks in part to your videos 😄
@@eleonoredm8612 you don't know how happy that makes me, congrats!
Thank you so much , this is really helpful!
You're very welcome!
Great content. Thank you Eric.
My pleasure. Glad it was helpful ИД !
Interesting college teaching
this is great thanks for doing and sharing Eric!
You're welcome glad it was helpful Harry 👍
Great video
Really nice and useful video. Many thanks to the author!!! Greetings from Ukraine 🇺🇦
Good example of finance cash study. thanks eric
Hey it's my pleasure Fast Updates and really appreciate you checking it out! Hope it was valuable, cheers!
Awesome video! Thanks!
Great video! Thank you
Hey Eric, loved the video content. please do make more finance case study videos! lots of respect from INDIA.
Hey Aakash, you'd like more? I can definitely make more, these ones are fun for me! Appreciate the support!
interview tomorrow haha I will be letting you know how the case study goes. I really do appreciate you for this
Good luck lmk. If you want to do deeper on finance, modeling & VC I have an upcoming course too! Jump on the wailist if you are interested: www.startupfinancecourse.com/earlybird-opt-in
Great Video Eric
Thanks for sharing
So helpful! Thank you!!
Thanks Maria happy to help 😁
Hi! I'm back to this video one year later for another case study interview ahah! for a Business Controller position (tasks of finance controller and handling of a lot of brands/products for a FMCG industry company. What would you recommend or another videos that could cover this type of tasks simulated?
Great 👍 I would watch my 3 statement financial model video, and potentially my ecommerce playlist...that would help a lot!
Everything was pretty easy up until the Cash Flow section (give it i have not taken a finance class yet). I think the most essential thing to these case studies are the questions we should pose for evaluating potential investments. Great video as well
Cash flow confuses people who've been working in finance for 10 years, I've literally had to build cash flow models for actual CFOs who couldn’t do it. So just keep working at it. You will get it, and i recommend you watch my "3 statement financial model" video
Amazing video, very insightful.
My pleasure Osman, glad it was helpful for you
Thank-you it's really helpful for me ✨☺️
My pleasure thanks for letting me know Kajal 😁
Thank you so much for all this shared information, it's really helpful!! I have two case studies coming up for Coca Cola, what else do you think would be interesting to investigate in this type of exercises?
See if you can find anywhere what the customer lifetime value of a coca cola client is, and if they should be marketing more aggressively (spending more to acquire one new client, that's called your CAC) to pull growth forward and sacrifice short term profits. That's what I might look into and recommend if the data supported it. That's the capital strategy we use with startups.
This was amazing.
Very glad to hear it!
Thanks so much Eric, for these great exemples. Where can I find the solution to the Thumbs up case study please?
Hi Eric, great explanation. Question - in calculating EBITDA, you included back Depreciation, but not taxes. Is that something that should be added?
I added back depreciation because I started with EBIT aka earnings before interest and taxes. It is already pre-tax so adding taxes to it wouldn't make sense. If you started with net income aka post-tax income, then yes you would add taxes back. You can work your way back to EBITDA from any metric just need to think about the math right
Thanks Eric, you have a really nice contents
Appreciate the comment Taleb 🙏 glad you liked it!
Questions? Let me know in the comments happy to discuss.
🚀 Also, if you want to learn how to systematically scale your startup without ending up as one of the 90% of startups that fail, have a look at this ⇒ www.ericandrewsstartups.com/financeforstartups
I loved this video! and found it very helpful, thank you so much for making it. I do have one question though, would you include a total line i.e. a sum total of the four years, you would then find that the sum of net income across the 4 years is -$57k so taking all expenditure into account (including taxes) you would make a loss, and therefore I would be inclined to advise not to go ahead with this deal. I would recommend to model it out for a further period as like you said it has the potential to be more profitable over a longer period e.g. 10 years. Would love to know your thoughts on this? thanks Eric.
Sure, I think the issue with your thinking is that it is very backward-looking. Finance is about predicting the future. And for sure modeling out more years would be helpful and give you more info.
But at a high level, I would not assume - based on the model - that the next 4 years of this business will be anything similar to the last 4 years. Based on the trajectory the business just started making money and looks poised to make a lot of it in the future. So when making a recommendation make sure you are thinking about where things are going and if you want to own/invest in that future scenario.
For EBIT %, is it the same as operating margin? then should you be divide operating income by revenue? instead of Gross Profit? 13:48
Ya that was a typo but yes you are correct
Thanks you so much for this useful video and tips, that was really helpful to see all the insight and interpret it to get a recommendation, I have a case study with dental corporation, do you have any recommendation that what could be involved?
Thanks
Thank you so much Eric!
You're welcome Gabriella! Glad it was helpful
Yes the better evaluation tools are project IRR and NPV, which is further down to equity IRR and comparison of FCFF and FCFE
Thanks a lot Eric
Sure thing Andrei!
Thank you! So good,...
Glad to hear it Tania, cheers!
thanks for the great video and setup, the link to the case study I believe is different to the one you explain in this video
Hey my pleasure - I just double-checked, and the file matches the one in this video!
Very useful, thank you
Hey Tarek - so glad you found it useful! Appreciate you letting me know, thanks a lot !!
I believe you should call given customers for each year as total and not new.
Hi thanks for the effort but you have missed the trick here, if you want to evaluate any project you need to start with project's IRR & NPV. Just a humble suggestion 😌
What tax rate should I use in 2022?
I would use whatever the current corporate taxes rates are for the country you are in. In the US for example it's currently 21%, but in certain states there are additional taxes on top of it.
Hey you have not considered tax in calculating cash flows.
100% value....appreciate it Eric!
100% appreciate that comment Vakeesan and happy it was valuable!
having a case study tomorrow with Tesla. any recommendation or advice? kinda nervous cz I've been trying to get in the program. This video is great by the way!
How did it o? What was on your case study, if I may ask?
Don't bold the whole row innecesarily, the cost of formatting for the excel can grow huge once the file gets more data. Only bold the specific cells that need to be bold.
killed it bro
Appreciate that!
Eric, I have a question! Shouldn't we add depreciation to CAPEX? Following the formula: Total Capital Expenditure = Net increase in PPE (from PY to CY) + Current Year Depreciation? Thanks in advance!
Hey - definitely not. That would not make sense. Watch my 3 statement financial model video and that will clear everything up for you I guarantee it! ua-cam.com/video/xlXDZyZ9azk/v-deo.html
Hey @ 13:49 shouldn't it be operating income/revenue instead of operating income/gross profit? EBIT% seems wrong
Yes that was a small error i made, you are correct!
Insert row: shift + space to select row, Ctrl + + to insert row.
Thanks!! 😁
Love u bro
Also you should check assumptions. Did you assume that the business or partnership will only be 4 years essentially by fully depreciating capex over 4 years?
Usually CAPEX has depreciation rules. Often software is 3 years, etc
hi, the EBIT % should be EBIT/Revenue shouldnt it? I saw your calculations were divided to Gross profit
That was a typo you are correct
@@eric_andrews Thanks for reply
Very good
👍 thanks
Not sure if I have it correctly but if you calculate IRR using the Excel formula, the IRR is only 6%, which I would say is pretty low. WACC can easily go up 6%, which brings NPV to 0. Will this be a valid point to veto the project?
Also, curious about how to calculate ROI for such projects. Is it important in terms of analyzing?
Yep, you're missing something. This analysis showed that we invest $2-3 million and increase create $40 million of value from it over 4 years. That's not a 6% IRR!!!! If you want to use IRR for your analysis (I don't think IRR is super important for math this extreme, but it could be an interesting metric), you need to include the actual value of the business at the end of the 4 years, not just the cash flows. Check out my video on the discounted cash flow model - the terminal value is what you're missing. Please let me know if that helps. I personally would just say we 10-20X our money in 4 years. I think that gets the same point across a little easier.
@@eric_andrews Thank you!
ALT W F F for freeze panes shortcut!
Appreciate you sharing, agreed! I just use the shortcuts a bit less on my videos sometimes so that I don't confuse the viewers....cheers!
hi Eric! dont you think in this study we have double calculating in Ebitda? because Operating income has already included depreciaiton amount
No, to calculate EBITDA we are adding depreciation back to operating income to basically strip it out. Depreciation is a non-cash expense (it is an estimate to put prior CAPEX on the P&L according to the matching principle) so with EBITDA we remove it to get a better proxy for a more cash-based operating income. Make sense?
Hi,
I am able to download the excel file but is not opening,
Can you please look into it?
Thanks
Why did you take out the taxes from cash flows? This should be considered to check if the project really was profitable as a whole as they had to paid anyway.
Unless US allows offset of earlier losses from profits in later years? But you didn’t do this in your Income Statement.
Why operating income over gross profit to get ebit margin? I think it is operating income over revenues.
That was a quick typo, nice catch tho!
I cannot get the excel file! Can you help me please!?
Just wait a few minutes it works
these mouse shortcuts don't work for a Mac
Some are different but for a lot of them you can just hold the command key instead of the CTRL key and they will work just as well. For instance Command + C = Copy, Command + V = Past. Command + arrows = zoom around really fast. Shift + arrows = highlight blocks, etc. For anything else just google it
👍👍
This isn't a "model" its a table...
TOO MUCH ADS!! CAN`T FOCUS WITH AN AD EVERY 15 SECONDS
Are a lot of financial analyst gay?
Great video! thank you
Cheers Tony!
Great content. Thank you.
My pleasure, glad it was helpful