Basic Financial Modeling – Part 1 of 3

Below is a free-to-watch video module on basic financial modeling.  A financial model is a tool used to forecast a business’s results and is designed to be able to evaluate multiple scenarios.  Investment bankers are expected to be experts in financial modeling.  This video is one of three video modules in our series: Basic Financial Modeling.  Click here for part two of this series. Click here for part three.

This video was taken from our Certified Investment Banking Associate (CIBA) program which is the investment banking certification and training program hosted on our platform.

Video Transcript Summary of Basic Financial Modeling:

  1. The first step is to forecast Income Statements (IS) to the EBITDA.
  2. Forecast key balance sheet items.
  3. Setup cash flow statement including operating and investing activities.
  4. Link capital improvements from cash flow to PP & E line  on the balance sheet and link depreciation on the balance sheet to its line on the IS.
  5. Perform depreciation calculation on IS.
  6. Setup debt and interest schedule including: interest rates, beginning balances, new borrowing, amortization of new or existing borrowing, and ending balances and interest amounts.
  7. Link interest to IS.  Continue IS forecast through bottom line.
  8. Link debt balances to balance sheet.
  9. Input line of credit borrowing repayment calculation on cash flow statement and link its activity to debt schedule.
  10. Finally, link ending cash from cash flow statement to top of balance sheet, calculate interest earned on cash on income statement.  
This is only part one of a series on basic financial modeling.  Click here for part two of this series.  Click here for part three.

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