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Just to add on for a further clarification, I am new to Modano and have recently gone through the Videos and different functions of it. Currently, I am trying to prepare and replicate an exiting Financial Model using Modano, where the original model had indirect cashflows, just wanted to clarify if there is any option to choose between Direct and Indirect Cash flows. Thanks
Hi Arsalan,
All the cash flow statements within the Modano content libraries are direct, primarily because we find them to be much cleaner when building modular workbooks.
Havings said that, the modules within the Modano content library are provided as a starting point only, so you can edit them or build your own as required to meet your needs and preferences.
I've attached an example - based on the basic annual forecast model example on the Modano website - which shows how you might edit the direct cash flow statement to make it indirect. I've done this fairly quickly as an example only, because if you were to do it properly I'd recommend making broader changes to related modules - such as including the opening balance sheet in the forecast balance sheet module - and then building it up on a movements in cash basis. In this example, I've done a combination of adjustments and simply adding back arruals and subtracting cash, so it's really a semi-direct cash flow, for want of a better description.
Personally, I would leave the direct cash flow statement as the default cash flow statement, then build a custom indirect cash flow statement module, which feeds off the direct cash flow statement, income statement, balance sheet and any other required modules, to present an indirect cash flow statement for informational purposes only - i.e. I would not use an indirect cash flow statement as the primary cash flow statement in your model.
Having only an indirect cash flow statement also makes things challenging such as calculating the change in cash (pre-financing and tax paid) for interest on cash calculation purposes, and not doing it properly is likely to cause a circular reference, which is something I avoid like the plague.
You can always buy some support credits if you'd like to speak directly with one of the Modano Implementation team, as they spend all day, every day helping users credit and edit custom modules.