This note is part of the Pier Review reference material.
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Main role: Mapping direct to indirect
It is an intentional feature of Pier Analysis that its approach is different from most company research**. Much the largest is that it focusses on cash flows** and presents those cash flows are shown in direct form**, something Pier Analysis believes is indispensable to truly understanding a business’s performance.
The accounts of nearly every company present them in an indirect layout, which is much harder to understand or discern trends in, and Pier Analysis goes to some trouble to recast them in direct form. This recasting is the role of the Spread worksheet, which maps the headings in a company’s annual reports to a standard layout favoured by specialists who use project finance to raise money for infrastructure projects.
Secondary role: Showing which figures go where
An additional function of the Spread worksheet, the one that gives it its name, is that it spreads out the figures source from the annual accounts in in the indirect layout, to show which figures fall where after mapping to the preferred direct layout.
The indirect layout is down the left side; the direct headings are along the top. Since that arrangement consumes both the horizontal and vertical dimensions of the page, it is not possible to use the horizontal dimension to show successive periods of time, as is the case on most other worksheets in the model. Just one year at a time can be spread out. Which one it is is determined by the input at cell D5 **.
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Previous worksheet: Balance sheet. Next worksheet: Direct cash flow