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Financial Modeling

Shareholder Equity

Let us start with shareholder's equity now. 


Equity Schedule

  • Project shares outstanding
  • Reference back to historical count (flat-line)

Purpose: Need EPS (Earnings Per Share) for share repurchase

  • Will factor in share repurchase later
  • Calculate remaining line items:
  • Leave interest expense / income blank
  • Will complete later with interest  schedule

A Simplified Equity Schedule 



Equity Schedule – Overview



  • Line-items
  • Input selected historicals


  • Share repurchase, option proceeds, and new shares from exercises options
  • Dividends and future equity balance
  • Full blown Equity Schedule Items and Flow

Flow of equity schedule:

Beginning equity balance

Add: Net income

Add: Issuance of shares

Less: Repurchases

Less: Dividends paid

Less: Options Proceeds

Add/Less: Effects of exchange rates on cash


Share repurchase assumptions

1. Flow of share repurchase assumptions:
2.Current year EPS
3.Assumed current year EPS multiple
4.Project share price
5.Project shares repurchased
6.Multiply (3) and (4) to calculate the rupee amount in shares repurchased


ESOP (Employees Stock Ownership Plan) related assumptions


Treasury Stock Method (TSM)

a)The net of new shares that are potentially created is calculated by taking the number of shares that the in-the-money options purchase.
b)Then subtracting the number of common shares that the company can purchase from the market with the option proceeds.
c)This adds to total number of shares and lower EPS in future years.


Linking Equity Schedule

Link ending balances calculated in the shareholder’s equity schedule to the balance sheet.


Link repurchases, options, dividends to cash flow statement.


Equity Schedule & Cash-Flow



The highlighted region comes from the Equity schedule.


Equity Schedule & Balance Sheet



Calculating Shares Outstanding

1)Enter historical share information:

  • Basic shares: actual and average
  • Effect of options
  • Diluted shares: average


2)Reference repurchases shares and new shares from exercised options:

  • Calculate projected basic shares (actual)
  • Calculate average basic and diluted shares
  • Reference projected shares to Income Statement

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Units 10/14