2. Objective
To combine accounting, finance and business metrics to create an abstract representation
of a company in excel, forecast into the future.
3. Uses of Financial Models
● Making business decisions at a company
● Making investments in a private/public company
● Pricing Securities
● Undergoing a corporate transaction such as M&A, capital raise
4. Who Builds Financial Models ?
There are many professions and career paths that require financial modeling. Here are
some of the most common ones are:
● Investment Banking (Analyst and Associates)
● Equity Research (Analyst and Associates)
● Private Equity (Analyst and Associates)
● Credit Analysts
● FP&A (Analysts and Managers)
● Corporate Development (Analysts & Managers)
5. Steps For Building a Financial Modeling
1) Historical data (At least 3 years of input)
2) Ratios and Metrics (margins, growth rates, asset turnover, inventory changes)
3) Assumptions (Build ratios and metrics into the future by making assumptions about
margins, growth rates,etc)
4) Forecast ( the three financial statements into the future using the assumptions)
5) Valuation ( using the Discounted cash flow analysis method)
6) Additional analysis (sensitivity, scenarios, charts, graphs, dashboards)