Equipment Leasing Company – Case StudySadaf Abbas
Background: Equipment Leasing Company
Now a very good client owning an equipment leasing company started as a straightforward judge of my up-work feedback history. Impressed by my impressive up-work clientele and my success rate; yet critical about one feedback that was wrongfully attributed to my profile. But this client did the right thing, he inquired!
Upon my explanation of true facts, the client offered me the contract to build a dynamic and robust Financial Model for the client’s Equipment Leasing company. The client had already worked out much of the critical information for the model. And also knew exactly what he wanted in the financial model. All he needed was a financial modeling expert with specific experience in the equipment leasing industry.
The Equipment Leasing Company owner was having doubts about his workings’ accuracy. And the excel formatting of his own model was also not looking professional to the client. This made him approach us to build a well-presentable and highly advanced yet simple to use financial model. Since we have done such work several times in the past. This too was a very interesting job.
Oak Business Consultant became the advisor in this project for the financial model for the Equipment Leasing company. The critical part was to take the specific work of the client. And after careful analysis, we also had to incorporate all the data provided by the client as the building block.
The client provided us the details like the interest rates applicable and the business model of his company. He also provided us the number of equipment leased per quarter and the terms of the contract with his customers and vendors. He had a basic idea of the revenue model and specific costs associated with the equipment purchase and taxes.
Hence, we built a financial model with the following services.
We built input assumptions of initial investment, followed by Assets and operating expenses to forecast the expected costs. In this Equipment leasing business, the variable cost increases as the transactions increase, like the purchase of new equipment using a mixture of equity and debt.
We took the expenses and revenue growth based on the prior data of the company.
In the first section of the Financial Model straight after the input sheet, we took the Unit Metrics information provided by the client to construct a robust and dynamic revenue model for the business.
The number of expected clients in each quarter and the quarterly growth rate was also provided by the client. We made sure all the calculations are accurate and in-fact we did find a discrepancy in the calculation of the cost of the units purchased. Since the Client was using 2 different calculations at different places to calculate an amount.
After compiling the revenue and expenses, we calculated the monthly and yearly income statements. We added a payroll sheet and Operating expenses sheet linked with inputs and the Income statement.
Depreciation and Amortization
Oak Business Consultant prepared the depreciation schedule because this project requires a significant investment in equipment purchased for leasing out and other Fixed Assets.
Cash Flow Statement
We built a cash flow analysis, which was linked with Income Statement and input assumptions. So that there was no need to add in the sheet, and the sheet change instantly.
Then we build a third and last financial statement, i.e., a Balance sheet. The balance sheet and the cash flow statement and the input sheets are all linked.
Graphs speak more than numbers because they help both the investor and Entrepreneur see the graphical representation of the projection.
We provide the following graphs in the dashboard sheet.
Being an Investor, you always want the comparison of the equity against the Investment. So, we helped them to determine the company’s worth based on his future earnings. We provided them discount cash flow, Net present value (NPV), Internal rate of return (IRR), also, we provide an analysis of the Investment vs. equity comparison.
When the business is in the initial stage, sensitivity analysis can predict the actual market or scenario when the company does lots of marketing. We did a sensitivity analysis for a client, having 3 kinds of situations for sales, i.e., Low, Moderate, and optimistic, and analyzed the outcome in different circumstances. It really helps the client to gain knowledge of what if a business could not achieve its sales target.