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Case study: Financial modelling for TechStars Inc. Background: TechStars Inc. is a SaaS company offering software services through both subscription and usage - based models.
Case study: Financial modelling for TechStars Inc.
Background:
TechStars Inc. is a SaaS company offering software services through both subscription and usagebased models. The company is seeking an FP&A Analyst to develop a comprehensive fiveyear financial model covering the income statement, balance sheet, and cash flow statement.
Assumptions:
Subscription revenue stream:
TechStars offers monthly and annual subscription plans. Monthly subscribers pay $ per month, while annual subscribers pay the full amount upfront with discount. Assume that all annual contracts are up for renewal on Janst of each year.
Usagebased revenue stream:
This is estimated to be $month per active subscriber during high demand seasons, which happens at the last month of each quarter. And for it to be $ the rest of the year.
User growth and retention:
The company anticipates a user growth of annually for both monthly and annual subscribers and the churn rate is expected to be every year.
Costs and expenses:
Cost of sales is expected to be around of subscription revenue. The company is working on a cost optimization project which be lunched in year and is expected to reduce the cost of sales by
General and administrative costs are expected to grow by every.
Sales and marketing costs are expected to increase proportionally with revenue growth.
Capital expenditure and investments:
Capex is projected to be of the previous year revenue and depreciation is of previous year fixed assets ending balance.
R&D is expected to be of revenue and amortization is estimated to be of the previous year's R&D ending balance.
Working capital:
Accounts receivable and accounts payable are assumed to grow proportionally with revenue.
Working capital days are expected to remain stable over the forecast period.
Interest and taxes:
Interest expense is based on a fixed rate of on outstanding debt.
The tax rate is estimated to be of taxable income.
Base year numbers End of period:
Number of monthly subscribers:
Number of annual subscribers:
Total revenue: $
Gross margin:
General and administrative: $
Sales and marketing: $
Depreciation: $
R&D amortization: $
PP&E balance: $
R&D balance: $
Accounts receivables: $
Accounts payable: $
Cash: $
Share capital: $
Longterm debt: $to be paid by end of year
Requirements:
a Building the financial model
Develop a detailed income statement projecting revenue, COGS, gross profit, operating expenses, EBITDA, depreciation, interest, taxes, and net income for each year.
Create a comprehensive balance sheet displaying assets, liabilities, and equity for each year, considering Capex, depreciation, debt, and equity financing.
Construct a cash flow statement operating investing, financing for each year, reconciling with changes in the balance sheet accounts.
Perform sensitivity analysis on user growth rates and subscription churn rates to assess their impact on financial statements.
Summarize key findings and insights derived from the financial model, presented in a clear and organized manner.
Show only table of projection of year and explain why Dont forget churn rate, growth rate, G&A S&M R&D Dep, Capex, and tax rate
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