Financial Modelling

Financial Modelling

Financial Modelling is a tool used to forecast a picture of a company’s future performance based on historical performance or start-up nature of company. Financial Modelling includes detailed company-specific models which are used for decision making and financial analysis.
It is a mathematical model of different aspects of the financial health of a given company and made on in excel so it’s easily possible to analyse impact of assumptions or change in value of variables hence giving it more flexibility. Financial modelling highlights:

  1. An organization is in need of funds (debt or equity)
  2. How business reacts to different financial /market situations
  3. In which company to make investments
  4. Company has analysed and defined risk
  5. Company had any change that caused loss of customers
  6. Strategic and Business Plans finding strengths and weaknesses
  7. Value to analyse Firms, IPOs

A good financial model should

  • Be relatively simple
  • Focus on key cash flow drivers
  • Clearly convey assumptions and conclusions
  • Evaluate Risks