FINANCIAL MODELLING

To combine accounting, finance, and business metrics to create an abstract representation of a company in EXCEL, forecasted into the future. 

What is Financial Modeling?

A financial model is basically a device that is underlying Excel to conjecture a business' monetary presentation into the future. The forecast is ordinarily founded on the organization's verifiable execution, and presumptions about the future, and requires setting up a pay explanation, monetary record, income proclamation, and supporting timetables (known as a 3-explanation model). From that point, further developed kinds of models can be constructed like limited income investigation (DCF model), utilized buyout (LBO), consolidations and acquisitions (M&A), and awareness examination


  • It is an activity of preparing any entity’s future financial statement 

  • These future financial statements are known as financial models 

  • Show a prediction about the future financial performance of a company 

  • Income statement: show the sales from our business minus the costs, leaving us with the profits. 


 

What do we use them for?

  • To anticipate the future, and make change 

  • To analyze new opportunities 

  • To raise new investment capital (for unprofitable growth business ).

  • Future operational performance 

    • no. of employees required to hire 

    • breakeven unit 

  • Future financial performance 

    • Estimation of revenue 

    • Estimation of profits 

  • Capital expenditure to be incurred 

    • Estimation of cost of the project 

  • Funds required to fulfill future obligations 

  • working capital financing 

  • equity financing      

  • Cash flow / free cash flow generated 

    • free cash flows to the firm

    • free cash flow to the equality 


  • Enterprise value or equity value 

  • Analyzing certain ratios 

    • profitability ratios 

    • liquidity ratios 

  • Analyzing trends of a business 

    • upward growth, static growth, downward growth, no growth, and negative growth.

    • performing scenarios /stress analysis 


Steps to create a Financial Model 


Components of a financial model (income statement )

  • Step 1: building the revenue plan

  Need: products, orders, prices, new vs returning customers.


  • Step 2: Building the cost of sale 

   Need: costs directly related to delivering the product.

      

  • Step 3: operating expenses 

  Need: all fixed costs of the business.


  • Step 4: calculating profit margin 

  Need: gross profit, operating profit, net profit.  



ANOTHER WAY 


  1. Input historical financial information into excel 

  2. Determine the assumption that will drive the forecast.

  3. Forecast the income statement 

  4. Forecast capital assets 

  5. Forecast capital structure 

  6. Forecast the balance sheet 

  7. Complete the cash flow statement 

  8. Prepare output sheet 






TYPES OF FINANCIAL MODELS 

  • Three statement model 

  • Merger model 

  • DCF (DISCOUNT CASH FLOW MODEL ) model

  • Sum of parts models 

  • Leveraged buyout model 

  • Comparable company analysis 

  • Initial public offering model 

  • Option pricing model 

JOBS AFTER LEARNING FINANCIAL MODELLING 

There is a wide range of sorts of experts that form financial models. The most normal kinds of professional tracks are


  • Corporate finance 

  • Investment banking 

  • Equity research 

  • Management consultancy, portfolio management firms 

  • Private equity funds, hedge funds, venture capital funds 

  • Transaction advisory firms 

  • Commercial banks / non-banking finance companies 

  • Financial due diligence firms 

  • Research and outsourcing companies 


What You Will Learn In Financial Modeling

  • Succeed alternate routes and works as often as possible utilized in financial modeling

  • Succeed in settings and arranging best practices for financial modeling

  • Creating model plugs via the revolver and cash sweep

  • Dealing with circularities in the model

  • Building a completely incorporated 3-explanation model utilizing laid out determining and plan shows schedule conventions.

  • Balancing the model and inserting automated checks

  • Perform sensitivity & scenario analysis

  • Instructions to productively look at models for blunders, precision, and respectability

Constructing An Income Statement And Balance Sheet

Toward the finish of this module, you will have a strong comprehension of how to develop a income statement and balance sheet:

  • Explain the format of the income statement and balance sheet

  • Define various financial statement terms (e.g. accounts receivable, prepayments, etc.)

  • Record financial statement transactions (e.g. invoicing, raising equity, buying inventory, etc.)

  • Prepare a balance sheet and simple income statement


Constructing A Cash Flow Statement

We investigate the design of the income explanation, make sense of the distinctions between the cash flow statement and the pay explanation, and  prepare a cash flow statement from scratch. Toward the finish of this module, you will have a strong comprehension of how to develop an income explanation:

  • Frame the organization of the income articulation

  • Explain the difference between profit and cash

  • Set up a straightforward income proclamation utilizing the balance sheet and income statement


Financial Mathematics Course

This module course shows the way that various financial mathematics formulas can be utilized to  conduct a detailed analysis of a bunch of information or potentially factors.

  • Time value of money

  • Bond pricing and yields

  • Statistics & financial mathematics


Advantages Of Joining Finominal Education For Financial Education

This module course shows the way that various financial mathematics formulas can be utilized to  conduct a detailed analysis of a bunch of information or potentially factors. This  FINANCIAL EXAMS  Training courses with an excellent opportunity to equip exceptionally well for the FINANCIAL EXAMS and pass the exam in your first attempt. To know more call or WhatsApp us on 9650353883. Finominal Education is an ideal platform to acquire financial skill. Our knowledgeable resources furnish the hopefuls with a sound and serious climate and endeavor to grant information to acquire execution results.

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