Financial Modelling

What is Financial Modelling:
Financial Modelling is a valuation method where we use company’s overall information and will do some analysis on the performance based on relevant financial factors from which we get an estimated valuation of companies/projects.

In Financial Modelling you learn to gather overall information on companies and analyse company/industry performance based on various financial factors.

Financial ModellingAnalysis is then used to build financial model for a company, which in turn plays an important role in projecting a future financial performance
Based on this model, company investors can come to conclusion at a suitable valuation for the companies.
Such research analysis is used in the areas of equity research / investment banking / financial KPOs that are assisting equity research firms / investment bankers, financial advisory firms.

The Financial Statements Module Area is of three Module types:

1) Income Statement

2) Balance Sheet

3) Cash Flow Statement

1.Income Statement:
An Income Statement is generally used to calculate the Net Profit After Tax (NPAT) of a firm which is also referred as “Statement of Financial Performance‟ or “Profit & Loss Statement‟. It provides a summary of the expenses, costs and revenues of firm during an accounting period.

2. Balance Sheet:
A Balance Sheet provides complete picture of the company’s financial position, including the results of the Income Statement and Cash Flow Statement which is also referred as “Statement of Financial Position‟. It shows the status of a company’s assets, liabilities and owner’s equity at a point, usually the close of a month.

3. Cash Flow Statement:
A Cash Flow Statement breaks the analysis down according to operating, investing and financing activities which is also referred as “Statement of Cash Flows‟. It shows how changes in Income Statement and Balance Sheet accounts affect cash and cash equivalents during an accounting period.

Financial Modelling

Applications of Financial Modelling:
Investment Banking:
Financial Modelling helps Investment Banker in doing valuation of the company by estimating the revenues. On the basis of valuation, they recommend the buyer or seller on acquisition of new funds or investments in new funds respectively.

Credit Rating:
Financial Modelling provides Credit Analysts in collecting overall information, outstanding debts and forecasting future growth on excel sheet to determine the risk factor degree, which helps in giving rating.

Equity Research:
Financial Modelling helps analyst in inspect an organisation’s financial projections, competitor’s projections and other dynamics to conclude whether it is a risky or a smart investment.

Project Finance:
Financial Modelling helps in assessing the financial viability of a project and creating a funding plan through equity & debt components.

Financial Analysis:
By Financial Modelling, companies can build their financial models & asses their own finances for ongoing projects. It helps in implementing a funding plan through debt and equity structure.

Mergers & Acquisitions:
By Financial Modelling, we can do valuation of the company in which they want to merge or acquire by estimating the revenues, preparing debt schedule & doing competitor analysis.
Applications of Financial Modelling:
Investment Banking:
Financial Modelling helps Investment Banker in doing valuation of the company by estimating the revenues. On the basis of valuation, they recommend the buyer or seller on acquisition of new funds or investments in new funds respectively.
Financial Modelling is a valuation method where we use company’s overall information and will do some analysis on the performance based on relevant financial factors from which we get an estimated valuation of companies/projects

Hey!! This is Prudvi - Blogger @PakkaInfo Got to know about financial modelling from this article where the author explained it very well. For more info visit: Financial Modelling

Article Source: http://www.thearticlesbase.com/financial-modelling/

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