Financial Modeling Course & 3 Models Of Financial Statement


Added on  2019-09-30

29 Pages4909 Words192 Views
Course topics1

2Course Topics Financial modelingOverviewFinancial modeling has become the course of advanced finance, excels skills and comprehensive knowledge used to understand financial models. Financial modeling here in this course helps the reader to gain an in-depth understanding of every element of the complex financial structure. Investment banking considers financial modeling to forecast the assumption of strong future performance in finance. How the company or a proposed project is expected to look forward in the upcoming years. Financial model used for multiple situations such as valuing a business, value company’s assets, pricing policy, merger and acquisition (consolidation), etc. the areas influence by financial modeling are: Risk management, valuing business, valuing assets, merger and acquisitions, option pricing, budgeting and forecasting, capital acquisition, capital raising.A financial model helps the reader to know who builds them. Investment bankers, equity research analyst, credit analyst, risk analyst, data analyst, portfolio managers, investors, and management. Financial modeling major use in these following factors done: Forecast, pricing strategies, valuation of assets or enterprise equity price for company's, merger and acquisition effect, leverage buy out, corporate models of finance, option pricing, etc.The following course aims to cover information about financial modeling. The introduction part explains about the financial modeling and the three models of financial statement in the subject of building financial statements.

3Course Topics This course learns financial modeling: Financial modeling course: The advanced course on financial management where sector modeling of banking, real estate, capital goods, petrochemical, telecommunication, etc.The financial modeling example is meaningful for the reader to go through an entire topic. Examples help to understand better. Financial modeling examples are distinguishing in their typeand complex situation. These models are widely used models for valuing the business, sensitive analysis, and comparative analysis. Includes other financial models also, risk forecast, pricing policy, synergies effect. The various examples of financial models serve their frameworks such as specialties, users and requirements.Why do we use Excel?To forecast a particular company's operations is very complex to do. Every business is different and requires a distinct set of calculations and assumptions. Excel is a customizable and most flexible drive available. Alternatives are available in software's but it can be too stiff and not understandable as excel does to understand each line.IntroductionA financial model used excels to build estimate business performance in finance in the future. The estimation simply leads to the company's past performance, presumptions about future and requirement in preparation of income statement, cash flow statement and balance sheet and three statement models. From the thesis, the latest models of various types can be made such as

4Course Topics discounted cash flow analysis, leveraged buyout, mergers and acquisitions, and sensitive analysis.Financial model output is used to make decisions and financial analysis performance, both insideand outside of the company. Company inside executives will consider the financial model in decision making: 1.Capital raising in debt or equity form2.Acquisition of business assets 3.Business growing organically included new stores opening, entering into new market segments.4.Estimation of future and budgeting.5.Value relevance in business6.Allocation of capital prioritizing projects.Objectives of financial modelingThe main objective of the financial model is the success of foreign investment made by investors. Financial modeling helps corporate management in decision making and also financial analysis preparation:1.Valuing a business2.Capital raising3.Business growth4.Acquisition making5.Selling assets and divesting business units6.Allocation of capital

5Course Topics 7.Forecasting and budgetingWhat characteristics have a sound financial model?The good financial model implies:Understandability: The transparencies of designs used are easy to understand.Reliability: Control checks used to error-free excel so that errorEasy to use: Instead of too much struggling to make simple results from the bad model using the financial model one can produce the analysis.Key issues: The key issues focused on the financial model are not to waste much time in immaterial items development.Keywords: NPV -This keyword stands for net present value used in financial modeling for the present value of cash flows. PB ratio- Price- to- book- ratio compares the firm’s book value and market value. PE ratio means the price earning ratio calculates the earning per share and price per share. DCF stands for discounted cash flow analysis. LBO stands for leverage buyout. EBITDA stands for earnings before interest, taxes, depreciation, and amortization uses the company's earnings before interest, taxes, depreciation, and amortization are deducted. EBT is used for earning before tax. XNPV function used to calculate net present value in excels.

6Course Topics How to build financial modelsFinancial modeling is complex and easy also. Looking for a financial model seems complex, whereas financial modeling is an addition of simpler and small schedules. The main schedules include the income statement, balance sheet, and cash flows. Also, other schedules are working capital, intangibles, depreciation schedule, shareholders equity, long term items, debt schedule, etc.Historical results and assumptionThe first step of the financial model building is to withdrawing the previous income statements of the firm. The statements are designed in excel format to cover the information of the financial statement. The forecasted decision for the historical period calculates the growth rate (revenue), variable cost, fixed cost, inventory days, gross margins, etc.Balance sheetThrough the income statement, a balance sheet can make. Calculation covered the account receivable and payable and accounting should be done according to them.Supporting schedulesDebts schedule and interest schedules are prepared in this step. The debt schedule releases the past recorded data and increases debts and deducts the payment done. Interest is calculated on the remaining balance.Completing the income statement and balance sheet

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