Equity Variables

This article explains Equity variables in Model Reef.

You will learn:

• What an Equity variable represents.

• How equity injections and opening equity positions are modelled.

• How Equity affects the Balance Sheet, Cashflow and valuation metrics.

• How Equity variables are used in transaction and fund modelling.

Equity variables record capital provided by shareholders or unit holders to the business.

1

What an Equity variable is

An Equity variable captures:

• New equity contributions into the business.

• Opening equity balances at the model start.

Examples:

• Seed, Series A, B, C funding rounds.

• Rights issues, secondary raises.

• Capital contributions from owners in private companies.

Model Reef treats all equity cash in as the same class for modelling purposes; it does not separately track share classes or dilution inside the core engine.

2

Equity variables in the Balance Sheet

In the Balance Sheet:

• Equity injections increase Share Capital and Cash.

• Opening equity positions are visible in the initial equity section.

• Retained earnings are tracked separately via NPAT and dividends, not through Equity variables.

This ensures a clear separation between capital contributed by owners and profits retained in the business.

3

Equity variables in the Cashflow Statement and Cash Waterfall

In the Cashflow Statement:

• Equity injections appear under Financing cash inflows.

• They increase cash but do not affect P&L.

In the Cash Waterfall:

• Equity cash in is shown in the financing section.

• It helps reconcile the change in cash available to equity holders.

Equity outflows, such as dividends, are handled by Dividend variables, not Equity variables.

4

Equity variables and valuation

Equity variables are important for:

• Equity IRR calculations, where the initial equity invested is compared to future free cashflows to equity.

• Money multiple and payback, where equity in is compared to distributions and terminal value.

• Assessing capital structure choices when combined with Liability variables.

In acquisition scenarios, the purchase price is usually modelled as an equity input with associated debt funding modelled via liabilities.

5

Limitations and scope

Model Reef does not attempt to fully model:

• Detailed share registers.

• Option or warrant instruments.

• Complex equity waterfalls with multiple share classes.

These are usually handled in separate cap table tooling, while Model Reef focuses on cash and economic outcomes.

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