FINANCIAL MODELLING GUIDE
How to Build a Downside Case
A downside case combines adverse assumptions into one internally consistent cash-flow scenario.
In this guideWhat the analysis measuresCalculation frameworkUnderwriting reviewHow to use the result
What the analysis measures
Change revenue, cost, timing, financing and exit assumptions that could deteriorate together. Avoid selecting unrelated extremes solely to make the case dramatic.
Calculation framework
Run the same schedules as the base case so timing, debt and covenant effects recalculate. Do not apply a haircut only to the final return.
Underwriting review
Review peak equity, liquidity shortfall, covenant breach, maturity balance and recovery as well as IRR and value.
How to use the result
Use the downside to define mitigants, reserves and decision conditions. State which assumptions are evidence-based and which are policy choices.