Operating Model

Summary

The Macabacus operating model implements key accounting and tax concepts, and is a foundational building block for our merger and LBO models. Advanced concepts include deferred taxes, equity method accounting for investments, Dividends Received Deduction (DRD), net operating losses (NOL), pay-in-kind (PIK) interest, alternative minimum tax (AMT), and more.

This operating model is an Excel template that encapsulates essential accounting and tax concepts.

An operating model lays out the operational and tactical blueprint of a business. It illustrates how the organization functions, creates, and delivers value, and ultimately, how it fulfills its strategic objectives. The Macabacus operating model, offers a simplified and efficient method to capture these complex elements in a digestible format.

Here’s a brief rundown of some of the advanced concepts implemented in this operating model template:

• • Deferred Taxes: These are future tax liabilities or assets that arise due to the difference in recognition of income and expenses for tax and accounting purposes.
  • Equity Method Accounting for Investments: This is an accounting technique used by firms to assess the profits earned by their investments in other companies.
  • Dividends Received Deduction (DRD): A deduction received by a corporation on the dividends paid to it by other corporations in which it has an ownership stake.
  • Net Operating Losses (NOL): These are losses incurred by a business when its allowable tax deductions are greater than its taxable income.
  • Pay-In-Kind (PIK) Interest: A form of payment in which the interest payment is made by increasing the principal amount instead of paying cash.
  • Alternative Minimum Tax (AMT): A tax that prevents taxpayers from using certain types of deductions to lower their tax bill.

Using Excel templates provide an efficient and error-free way of applying these complex concepts in business analysis. These models are essential tools for financial analysts, offering a more precise understanding of a company’s operations. They are especially valuable during merger and LBO analysis, where understanding a company’s operations at a granular level can significantly influence the success of the transaction.

However, an operating model, even if it’s an Excel template, is not a one-size-fits-all solution. It should be customized to the specific needs of a business to accurately represent its operational dynamics. Whether you’re a financial analyst or a business owner, understanding and leveraging an operating model like Macabacus can equip you with vital insights to drive your business forward and make informed decisions.

Download the template