Companion files

Financial Modeling from First Principles

Build a Three-Statement Model, DCF, Debt Schedule, and LBO in Excel from One Integrated Case

Julian R. Sterling

The four Excel workbooks that go with the book. One company, Alder Ridge Components, carried from its reported statements to a five-year forecast, a revolver and a cash sweep, a DCF and a leveraged buyout. Every figure the book prints comes from these files, and fourteen checks read PASS in all three scenarios. The same operating plan is worth 230.6 million to a buyer who discounts it and returns 2.35x to a sponsor who levers it; read with the wrong debt schedule, it returns 3.10x. The error lab shows you how that happens.

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The four workbooks

• Chapters 1 to 17

  The complete model

  Thirteen sheets in dependency order: Historical (2024 and 2025 reported, the 1.2 million plant consolidation cost added back, the opening balance sheet), Scenarios (one selector, base, downside and upside), Operations (three product lines built from units and price), Working Capital, Fixed Assets, Debt (term loan, revolver, minimum cash, sweep), Statements (income statement, balance sheet and an indirect cash-flow statement that ties to it), DCF, LBO, LBO Debt and Checks.

  Base case: DCF enterprise value 230,620,021, equity value 209,400,121; LBO at 10.0x with 4.5x of debt, exit at 9.0x, MOIC 2.35x, IRR 18.7 per cent. Downside: 0.82x, and a revolver draw of 3.8 million in 2027 that the model funds and repays by 2029.

  Download43 KB

• Chapters 2 to 17, Chapter 20

  The blank build

  The same workbook with its 693 formula cells emptied. Historical, Assumptions, Scenarios and Checks stay intact, so the checks are live while you build. A Progress sheet counts the cells still empty on each sheet; the Instructions sheet gives the build order. The target is the same answer as the complete model, to the dollar.

  Download38 KB

• Chapters 12 and 18

  The error lab

  A full copy of the model with eight defects behind switches: a working-capital sign, a missing depreciation line, typed cash, a sweep that ignores minimum cash, capital expenditure counted twice, tax on EBITDA, a terminal value grown twice, and exit net debt read from the wrong capital structure. Six of them break a check. Two do not, and those are the ones a reviewer has to find by reading. An Audit Register to fill in, and a Guide with the answer.

  Download49 KB

• Chapter 19 and Appendix C

  The ninety-minute test

  A separate, simpler case on the same company: revenue growth of 5 per cent, an 18 per cent margin, debt held flat. Inputs, a build area and an answer key: enterprise value 156,282,391 and equity value 135,062,491 at 31 December 2026, with three checks and the timing convention stated.

  Download15 KB

Conventions used throughout

Dates	2026 is the base year; forecast 2027 to 2031; valuation and deal close at 31 December 2026; exit at 31 December 2031.
Discounting	End of year, WACC 10.0 per cent, terminal growth 2.5 per cent. The 2026 cash flow is already in the 31 December 2026 net debt and is not discounted again.
Interest	On opening balances, so the workbook has no circular reference.
Depreciation	Rate applied to opening PP&E plus half of the year’s capital expenditure.
Inputs	Scenarios (base inputs and adjustments), the LBO inputs block and Historical. Nothing is typed inside a formula.

Opening the files

The workbooks open in Microsoft Excel, LibreOffice Calc, Google Sheets and Numbers. They use no macros and no add-ins, so nothing needs to be enabled or trusted. If your spreadsheet asks to update links on opening, decline: there are none.

Also by Julian R. Sterling

The other books with companion files. The full list of titles is on the author page.

• Credit AnalysisOne borrower, four defensible EBITDAs, and the add-back argument worth fifty times the covenant headroom.
• Breaking Into European Defence ProcurementThe money and the instruments, the 35 per cent content test, and proposal economics.
• Closing the DealTwo defensible bridges 20.70 million apart, a peg worth 7.00 million, and the six choices that remove 6.60 of a 12.00 earn-out.
• CMBS and CRE CLOsWhere the loss actually lands, from appraisal reduction to realised severity, and what the B-piece is really being paid for.
• How to Read a Commercial LeaseThe three refinements chapter 19 names and never performs, and the renewal rate below which the mark-to-market is worth nothing.
• How to Read a Credit AgreementWhere the default actually comes from, the cure that costs 5.5 times the other, and the capacity nobody adds up.
• How to Read a Limited Partnership AgreementWhat the clawback actually collateralises, and why every dollar won on the tax clause lands in the uncollateralised column.
• How to Read a Private Funds Financial StatementsThe Harbourgate reporting pack, five worked cases, and rebuilding your own account.
• How to Read a Real Estate Loan AgreementThe cure ratio in closed form, the four-point window in which the cheap cure works, and the cure sized to the wrong threshold.
• Insurance Capital for Asset ManagersWhy the same fund costs two insurers different amounts, and what opacity costs a manager in euros.
• Logistics and Industrial Real EstateNet effective rent, the ageing asset, and the development letting decision.
• Office Real EstateA six per cent yield that returns 3.2 per cent once the re-letting cycle is paid for, and the headline-to-net-effective rent arithmetic.
• Operational Due Diligence in Private EquityThe rating model built and then broken, and why refining a rubric weakens it.
• Personal Finance for BeginnersWhat a minimum payment really does, and what the snowball and the emergency fund actually cost.
• Private Equity Investor RelationsWhat a fund has returned, read six ways — and the eleven-point gap between them.
• Private Equity Real EstateBoth worked waterfalls to the dollar, the two capital stacks, and the arithmetic of the promote made changeable.
• Private Markets PerformanceThirty-one of the thirty-three figures chapter 19 publishes reproduce exactly — and the two that do not are named rather than quietly adopted.
• Raising a Real Estate FundThe chapter 17 funnel run on a calendar — when the first close actually lands, and why more travel does not help.
• Real Estate FinanceFour people look at one building and reach four numbers; the lender is whole only above 105,109,489, twelve per cent below today’s value rather than forty.
• Real Estate Financial ModelingProperty, development and fund models built line by line, and the modelling test worked end to end.
• Real Estate Fund ManagementThe waterfall of 6.11, the build-to-core of 8.7 and the proceeds gap, reproduced as live formulas rather than asserted.
• Real Estate Joint VenturesThe JV waterfall and promote, the complete venture, and failure to fund.
• Real Estate Transaction Due DiligenceWhat the diligence cost, which workstreams paid for themselves, and the investigation the book skips, priced.
• REIT Analysis and ValuationFFO of 532.0, AFFO of 381.0, net asset value and dividend safety — every figure a formula you can change.
• Retail Real EstateThe occupancy cost of every unit in a centre, the sixteen per cent of the rent roll no tenant can sustain, and the right-size-convert-or-hold decision priced.
• Sale and LeasebackA €179.5 million transaction end to end, with rent cover measured on the entity that actually signs the lease.
• Self-Storage Real EstateThe cohort engine behind a 590-unit store, and the rate increase on existing customers priced against the move-outs it causes.
• Senior Living and Healthcare Real EstateThe resident engine of a seventy-bed home, the payor mix, and a rota costed at the employer's real hourly rate.
• Significant Risk TransferThe bank's ceiling and the investor's floor derived independently, and the narrow band of prices at which both can say yes.
• Stock Market Investing for BeginnersWhat compounding and fees actually cost, with figures — and a calculator for your own.
• Student Housing Real EstateRevenue per available bed against the rate card, the letting campaign week by week, and the cost base of a 520-bed scheme.
• The AIFMD II HandbookThe reverse stress test computed, and the facility term that moves it more than any asset.
• The Asset-Based Finance HandbookThe borrowing base off a live loan tape, the Meridian transaction, and trigger design.
• The CBAM Compliance HandbookWhat 2027 really costs, how big the buffer should be, and the term the surrender formula counts twice.
• The Co-Investment PractitionerWhat dilution really costs, what a pay-to-play clause is worth, and how much to hold back.
• The Continuation Fund HandbookThe Thalia transaction, the bid funnel, and the fees behind the roll decision.
• The Data Center Development HandbookThe underwrite computed: the levered return the chapter never builds, and what a twelve-month slip costs.
• The Distressed Debt InvestorWhere the fulcrum security actually breaks, and what an 80-cent recovery is worth once composition and time are priced.
• The ESG Manager in Private EquityThe exit in equity and IRR, the line the book drops, and the half-turn nobody controls.
• The EU AML HandbookThe back book sized, and the month beyond which no headcount recovers a one-year window.
• The Evergreen Fund HandbookWhat the sleeve costs, and the headline IRR at which a closed-ended fund merely ties.
• The Family Office ProfessionalWhat an office costs, and the level of wealth at which building one starts to pay.
• The Fund Finance ProfessionalChapter 8 builds the reported-to-eligible NAV bridge; chapter 9 computes every ratio without it. Two points at every state — and what a subscription line does to the IRR.
• The Growth Equity InvestorWhat a pro rata cheque really costs, and the band where defending your ownership loses money.
• The Infrastructure Investment AnalystDebt sculpted to a coverage floor, and one asset valued twice to the last decimal.
• The Private Credit InvestorThe two coverage ratios are not measured on the same thing: the erosion is 47.7 per cent, not the 28.7 the headline implies.
• The Private Equity Fund Controller PlaybookThe book defines IRR, DPI, RVPI and TVPI, tells you to update them at the exit, and prints not one value. Computed: a 1.833× deal inside a fund at 0.892 TVPI.
• The Private Equity Operating PartnerThe value creation bridge built in full, and who actually made the return.
• The Private Fund Compliance OfficerThe grey zone as basis points, a broken deal four ways, and how many items you must test.
• The Private Markets Limited PartnerWhat a co-investment programme really saves, and the loss rate that erases it.
• The Private Markets Valuation SpecialistThe book describes its illustrations without numbers on purpose. These files close the chain, with every step visible.
• The Private Wealth FundraiserThree peaks, years apart, and the signature that tells a forecast miss apart.
• The Real Estate Asset ManagerBusiness plans, leasing, and what deferring the work on a building actually costs.
• The Real Estate Debt InvestorThe margin against the return on capital, the floor priced, and what prepayment protection buys.
• The Real Estate Development ManagerThe residual appraisal, the worked scheme, land diligence and the risk register.
• The Real Estate Secondaries InvestorAn eighteen per cent discount to net asset value that is really 9.18 once the reported value is unsmoothed.
• The Venture Capital AssociateWhat defending a position costs, and how many companies a reserve pool actually defends.
• Treasury ManagementFive people quote the cash balance of one company on one morning, from 214,000,000 to 68,400,000, and all five are right.
• Energy TradingA position report that is 91.7031 per cent hedged and correctly computed, on a book that is short 2,542,000 MWh — and a margin call of 198,400,000 the next morning.
• Financial Risk ManagementA fund inside every limit that cannot meet a redemption — and the number that decides it is the one with no currency attached.
• Business ValuationThree advisers land 26.8 per cent apart on one company, and the whole gap turns out to be 1.96 points of perpetual growth.
• Quantitative FinanceThree models agree to a quarter of one per cent about a number that one unobservable input moves a hundred and three times as much.
• Asset ManagementFour people quote four returns for one mandate, all correct and 2.7017 points apart — forty-eight times the manager’s net skill.
• Alternative InvestmentsA manager reports 13.29 per cent and the endowment earns 6.26 — both correct, and only a third of the advertised advantage arrives.
• Venture CapitalOne company out of twenty-eight returns 56.7 per cent of the fund, and half the capital goes in after the decision — at half the return.
• Machine Learning for FinanceFive people quote the accuracy of one credit model, all five are right, and the number that decides how much money it makes is none of them.
• Commercial Real Estate InvestingThe equity earned 8.6647 per cent and the investor received exactly 8.0000 — the preferred return, and nothing above it.
• Mergers and AcquisitionsThe board paper says the deal creates 13,436,667 of value. The arithmetic says it destroys 17,530,855. Nobody is lying.
• DerivativesThe treasury report says the hedge cost 1,233,698. That is the interest differential, not a cost.
• The Private Equity Secondaries InvestorThe seller’s floor beside the buyer’s ceiling — and the zone that usually is not there.
• Construction Cost ControlA contract sum of 26,301,102 became a final account of 29,153,363 on the building that was drawn — and 85.8 per cent of what was lost was knowable on the day it was signed.
• Pricing StrategyA list price of 148.00, a pocket price of 112.51, and the nine deductions in between — with what one point of price is actually worth.
• Trade FinanceSix routes to payment on one 4,200,000 export order cost between 178,040 and 223,268, a spread worth 14.8 per cent of the margin, and a day of buyer credit costs 1,031.76.
• Cost AccountingOne factory costed twice on the same 13,440,000 of overhead, and 4,053,091 moves between four product families.
• The Project Finance HandbookTwo infrastructure deals modeled end to end, and one of them does not work.
• Contract ManagementA bid 5.50 a unit cheaper, signed on paper worth 9.81 a unit more — and 94.68 per cent of it was knowable on the day of signature.
• Capital MarketsFour defensible readings of one bond, the cost of an issue under each convention, and the placement discount computed at a constant discount.
• Financial RegulationThree ratios pass and the fourth is in breach by 1,956.0 million: the output floor, the liquidity buffer after encumbrance, and the loan split.
• Bank ManagementFour defensible readings of one balance sheet, the deposit beta measured two ways, and the liquidity that lasts 3.9 days.
• The Real Estate WorkoutFour ways out of one broken loan, discounted to today, and the 58.7 cents at which a payoff beats enforcement.