ModeldrillRetained earnings roll-forward
A financial modeling exercise from Modeldrill. Solve it with a live spreadsheet grid in your browser, with Fill right and Fill down, and it is checked the moment you submit.
The task
Retained earnings link the income statement to the balance sheet. Fill dividends (row 7: the payout ratio in B2 times net income, and nothing in a loss year), closing retained earnings (row 8: opening plus net income less dividends) and the opening balance for later years (row 6).
What this exercise teaches
Net income flows into retained earnings and dividends flow out; that one roll-forward is the link between the income statement and the equity side of the balance sheet. A loss reduces retained earnings but pays no dividend, which is what MAX takes care of.
A hint if you get stuck
Dividends: MAX(0, net income times the locked payout ratio). Closing: opening plus net income less dividends. Each later opening balance points at the closing balance one column to the left.
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