[MUSIC] We're almost there. So we just did the forecast of the P&L. Agree we didn't finish because of this financial expenses think that it's related to the balance sheet. We will look at that in a moment. Now what we're going to do is look at the forecast of the balance sheet. But first, we're going to look at the theory part. But theory like, how do we do a forecast of the balance sheet before we go into this specific case of poly panel where we put hands on and looking into the numbers. So forecast of the balance sheet. We want to fill in all the items for 08-09 and 10. In the big balance sheet that we have for poly panel as you agreed, right. So we have all these columns here. Three columns that we have to fill all the numbers. Now this can seem a little tedious. If someone gives it to you done then you say, well that's fine, but if you have to do it yourself from scratch. It's a little painful right because you don't even know where to start. Now what I suggest instead of going to poly panel by the way we are interested in as we said before if the company is able to pay back we will see that specifically in the line of credit. Now what I suggest is that. We first look at the simple things. So what is the simplest form of a balance sheet? Well what are the main items here? Well we have assets and liabilities, and in the assets side, we have basically cash, receivables, inventory, fixed assets, or noncurrent assets, total assets. And in the other side, we have bank credit, payables, long-term debt, and equity. So basically, those eight items are the ones that we have to forecast. How do we do a forecast of the eight items? Now, one thing, the bridge that joins the P&L and the balance sheet is sales. So I would ask you, one of the items in the balance sheet that depend most directly on sales here? You would agree with me, that those are receivables, inventory and payables. So how can we do a forecast of the receivables? Very simple. Receivables depend on the sales and the days of collection. Do you agree with me? So let's say that we don't know what are going to be the days of collection next year, but we could say, well we know the days of collection this year. So the best approach would be to take the days of collection of this year. So if we take that policy last year do you remember it was 81 days. If we keep the same days then days of collection in year t+1 would be the same as days of collection in year t. Now we know that. On the other hand we know the daily sales of t+1, because we just did a forecast of the P&L. Agree? So if you rearrange then receivable in t plus 1 would be equal to the days of collection in t times daily sales in t+1. So once we've done the forecast of the sales and we used the same policy, then we have the receivables for the following year. Very simple. And the same applies to inventory. So we could do the inventory exactly the same. The formula is very similar but we have daily COGS underneath. Now if we just keep the same policy as last year for days of inventory and we know, because we have forecasted the sales and we have also forecasted the daily COGS. Then inventory next year is going to be date of inventory last year, times the daily + 1, which comes from the forecast of the From the previous clips, right? So, we can put a mark there, and then we know what is inventory for next year. Now the last thing would be payables to suppliers, right? Exactly the same right, days of payment is equal to payables over daily COGS I agree it should be daily purchases and as we said before for simplicity we're going to use COGS but it's very similar. Using the same policy as before, we get to the same exactly the same formula. That payables in t+1 would be days of payment in t times daily costs in t+1. With that in mind, we have everything that depends on sales. But I'm going to give you a short cut. So it turns out that if you do not change. The policies, the days of receivables, days of inventory and days of payment. If you don't change that, then receivables in the future are going to grow with sales. So if sales grow 25% receivables in the future would be receivables last year times 1.25. So it's going to grow with sales. In other words another way of computing receivables, inventory and payables is basically mulitpling receivables times the growth of sales. If we do not change the policies, right? So it's a short cut, it's very simple it is quicker than doing the other formula, right? And we will get this right. [MUSIC]
