Module VI· Three-Statement Model MechanicsIntermediate
Question
How do you model D&A in a three-statement model?
Answer
Simple method: forecast D&A as a percentage of revenue, percentage of PP&E, or in line with historical trend. Better method: use a PP&E schedule where depreciation comes from existing asset base plus new capex by useful life. Link D&A to the income statement, add it back in cash flow, and subtract it from PP&E / intangibles on the balance sheet.