Financial Model Definition

Below please find a definition of “Financial Model”

Financial Analysis Training & Glossary TermsFinancial Model: Financial models represent the key financial and operational relationships in a company mathematically. Typically cash flow projections, inventory levels, rate of inflation and many other factors are defined in a financial model.

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Basic Financial Modeling – Part 3 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 three of three video modules in our series: Basic Financial Modeling.  Click here for part one of this series.  Click here for part two.

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



Video Transcript Summary of Basic Financial Modeling
:

  • The following are the final steps in the process for creating a basic financial model:
    • Setup debt and interest schedule including: interest rates, beginning balances, new borrowing, amortization of new or existing borrowing, and ending balances and interest amounts.
    • Link interest to IS.  Continue IS forecast through bottom line.
    • Link debt balances to balance sheet.
    • Input line of credit borrowing repayment calculation on cash flow statement and link its activity to debt schedule.
    • Finally, link ending cash from cash flow statement to top of balance sheet, calculate interest earned on cash on income statement.  
This is part three of our series on basic financial modeling.  Click here for part one of this series.  Click here for part two.  

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