Using Funding Methods

You can use the standard funding method or the target capital structure funding method.

Before using a funding method, make sure you set options for funding accounts. See Setting Options for Funding Accounts.

For more information about funding plans, see Funding Options Strategies.

To use a funding method:

1. Open a model.
2. In the Account View, from the Actions menu, click Funding Options.

3. Select a funding method to use. By default, the funding method is Standard.

   • Standard funding method—applies cash surpluses and funds cash deficits for funding accounts regardless of funding category (debt, preferred equity, or common equity) providing a unified funding priority plan across all funding account categories. You identify additional funding account characteristics and the funding of deficits or receiving cash surpluses.
   • Target Capital Structure funding method—applies cash surpluses by funding accounts category: debt, equity, and preferred. You can create target level and prioritize the order of funding categories (for example, target debt-to-total capital). Strategic Modeling calculates each category target level and applies surpluses to deficits in each category based on priority.

   Apply Cash Surplus to and Fund Cash Deficit with columns display the order in which accounts are processed.

   Within each set of funds (cash surplus and cash deficit), you see First, Next, and Last:

   • First lists zero-based accounts, for which a decrease to zero is a Use (for Surplus) or Source (for Deficit) of fund.
   • Next lists user-added accounts.
   • Last lists excess accounts.

4. If you selected Target Capital Structure, select the funding account category: Debt, Equity, or Preferred. If you select Allocate Preferred as Debt, all preferred accounts are debt, and Preferred is unavailable from the list.

5. In the Apply Cash Surplus to and Fund Cash Deficit sections, add, re-order, or delete accounts in the Next category to indicate the order in which to process accounts. For more information, see Order of Repayment and Funding.

   • To add an account, click , select the account, and then click Add.

   • To delete an account, select it from the list and click .

   • To reorder accounts, select the account and click or .

6. Click Save and Close.

7. From Account Groups, select Funding Options to see the funding accounts.
8. Click Calculate.

9. Use the Funding Analysis report to review the results of your funding strategy.

Note:

Funding Options never attempt to balance funding during historical or actual periods, so you may see non-zero values in Net Funds Flow Source (Use) (v3040) in historical or actual periods.

Funding Options balance all input periods that are neither historical nor actual periods. These are typically called input forecast periods, but actual periods may occur in what are typically forecast periods.

When there is a forecast leaf period (a non-aggregate period) that is not an input period because its values are interpolated using inputs from a period-to-date or trailing period, Funding Options balance that period unless it is the last period before the input period-to-date or trailing period that is driving it’s values.