Gyaanleikh

What are Financial Models? Financial models are essential tools in corporate finance used to project a company’s future financial performance. These models help in making informed business decisions and are tailored to specific situations. Here, we’ll explore the most common types of financial models used in the industry. Common Types of Financial Models 1. 3-Statement Financial Model The 3-statement financial model is the backbone of most financial modeling. It includes: Income Statement: Shows profitability through revenue, expenses, and net income. Cash Flow Statement: Adjusts net income for non-cash charges and changes in net working capital, detailing cash flows from operations, investing, and financing. Balance Sheet: Displays assets, liabilities, and shareholders’ equity. This model uses historical financial data to project future performance, requiring assumptions about growth rates and margins. 2. Discounted Cash Flow (DCF) Model The DCF model estimates a company’s intrinsic v...

When does a financial model called a good model? A financial model is called a good model when everything can be controlled from one sheet. Why So? once you are ready with the model and now you have to change something and you change that all the changes comes out to be a error in the model will cost you a lot of time. One thing that need to be kept in the mind is that the model should be a least number driven model, that is may be driven from one unit and change in that one unit to even 99 can give you exact correct figure correlating with 99.  I usually call it a assumption sheet where all the main data is feed it through which I can drive the whole model. How can I drive the whole model from one sheet, here you see the beauty of a financial model comes from this! You should make the model in such a way that all the interlinked values main source is this assumption sheet or you can also call it a formula sheet.  And it should not be your model, it should be a model that anyo...

The content written in this blog is actually based on my limited knowledge been grasped at meetings and small responsibility given to me in the company. My note- Today is Saturday 5 days left to complete 2 months for training! What is a financial model? Basically they are the projections based on few assumptions, but these assumptions are not totally an amount which are only assumed but are based on factual and previous history of similar projects taken by experienced consultants. (This is for future project) Financial modelling is a numerical representation of some or all aspects of a company's operations. (This is for past and present operation) These projections are very large but the fun fact is they are derived from very small information which are contained in assumption sheet. My mentor told me if you have manually change anything in the model then it's not a good model the only things need to be changed should be changed only in assumption sheet. What are the main compo...