I am building a 3-statement financial model based on a provided business case for Temple & Webster Group Ltd.
My model includes an income statement, balance sheet, and cash flow statement, but the model does not balance (the Check line is not equal to 0).
The issue appears to come from inconsistencies between:
- Working capital calculations
- Changes in working capital used in the cash flow statement
- Cash & Short-Term Investments not reconciling with net cash flow
In the business case, working capital is defined as:
- Short-term receivables
- Inventories
- Other current assets
minus - Lease liabilities
- Accounts payable
- Other current liabilities
I have followed this definition, but my change in working capital ( WC) does not correctly link to the balance sheet movements, which causes errors in the cash flow statement.
Additionally:
- Net cash flow does not equal the change in cash
- Cash balances in the balance sheet are not rolling forward correctly
- This results in the balance sheet not balancing in forecast periods
I believe the issue comes from:
- Incorrect calculation of working capital (sign or formula inconsistency)
- Cash not being linked properly to net cash flow
- Possible inconsistencies in CAPEX and PPE movements
I am looking for guidance on:
- Correctly calculating working capital from the balance sheet
- Ensuring net cash flow matches the change in cash
- Structuring the links so that the balance sheet balances correctly
The goal is to ensure:
- Cash flow statement is fully linked
- Cash balances reconcile year-to-year
- Final Check line equals 0.00
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