Financial Statement Forecasting and Financing

Abstract

Using a “plug” figure or “slack term” within a pro forma analysis is the standard method to allow a forecasted balance sheet to have assets equal to liabilities and equity. Seemingly, different types of plug values are demonstrated to be mathematically linked to each other. Further, by exploring cash as a plug figure, a solution emerges for a “target revenue growth rate” in which cash is not depleted. If a private equity venture can generate revenue growth above the target revenue growth rate, cash will accumulate and improve the return on the private equity investment.