Financial Modeling |Best Practices and Steps

Financial Modeling is a tool that can be used to forecast a picture of a security or a financial instrument or a company’s future financial performance based on the historical performance of the entity. Financial Modeling includes preparing of detailed company specific models which are then used for the purpose of decision making and performing financial analysis. It is nothing but constructing a financial representation of some, or all, aspects of the firm or given security. OR it is mathematical model of different aspects of financial health of a given company and this model can be made on a simple not book paper or in excel, with later it is easily possible to analyse the impact of different assumptions or change in value of various variables hence gives the more flexibility. Financial modeling is a mirror which shows whether

An Organization is in need of additional funds (debt or equity) or not
how a business will react to different financial situations or market conditions
In which company we should make investment for better returns i.e. comparative analysis
Analyzing and defining the risk level
Has the company had a change in direction that is loss of customers, expansion etc.
Identifying of Strategic and Business Plans through finding strengths and weaknesses.
It’s a technique to value and analyze Firms, IPOs and FPOs
A good financial model should

Be relatively simple
Focus on key cash flow drivers
Clearly convey assumptions and conclusions
Evaluate Risks
Financial Modeling forms a core of various other Finance areas like Equity Research,Investment Banking, Credit Research etc. If you are searching for a Financial Modeling Online Course/Training then you may consider one of our Financial Modeling courses here