Financial Modelling Simple Guide.pdf

FINANCIAL MODELINGFLOW Tushar Kore Understand how numbers tell the story of a business A Simplified Guide for Everyone in Finance... Tushar KoreWhat is Financial Modeling?. Financial mod

FINANCIAL MODELING

FLOW

Tushar Kore

Understand how numbers tell the story of a business

A Simplified Guide for Everyone in Finance

Tushar Kore

What is Financial

Modeling?

Financial modeling is creating a structured

Excel model to project a company’s financial

performance

It helps in valuation, budgeting, fundraising,

and decision-making

Used for:

Valuation (DCF, Comps, LBO)

Budget Forecasts

Scenario Analysis

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3-Statement Model – The

Core

1.Income Statement – Profits 2.Balance Sheet – Position

3.Cash Flow Statement – Liquidity

The heart of financial modeling = 3 financial

statements linked together

All 3 are connected dynamically

Assumptions / Drivers Historical Financials Forecasted IS, BS, CF Schedules (Depreciation, Debt, WC) Valuation (DCF/LBO)

Output Summary

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Financial Model Structure

Typical Tabs in a Model:

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Step 1 – Input Historical

Financials

Collect 3–5 years of historical data

Key Inputs:

Revenue, COGS, Gross Profit Operating Expenses, Depreciation Net Income, CAPEX, Working Capital

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Step 2 – Build Assumptions Sheet

This is your control center

Typical Assumptions:

Revenue Growth (%)

Gross Margin (%)

Expense Growth (%)

Tax Rate

Depreciation / Capex as % of sales

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Step 3 – Forecast Income

Statement

Project revenue to net profit using assumptions

Key Formulas:

Revenue = Base Year × (1 + Growth%) Gross Profit = Revenue × Gross Margin Operating Income = GP – Opex – Depreciation Net Profit = EBIT – Interest – Tax

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Step 4 – Forecast

Balance Sheet

Connect assets, liabilities & equity

Main Items:

Cash = Linked from CF

AR/AP = % of revenue/purchases

PPE = Last year PPE – Dep + Capex

Equity = Retained Earnings + Capital

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Step 5 – Forecast Cash

Flow Statement

Shows how cash moves in business

Sections:

1.Operating Cash Flow

2.Investing Cash Flow

3.Financing Cash Flow

Ending Cash = Opening Cash + Net Cash Flow

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Step 6 – Create Supporting Schedules

For accurate projections, build:

Depreciation Schedule

Working Capital Schedule

Debt & Interest Schedule

Capex Schedule

These link back into IS, BS, CF

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Step 7 – Link All

Statements

Time to connect everything.

IS → Net Income → CF

CF → Closing Cash → BS

Depreciation/Interest → Flow from Schedules

Retained Earnings → Net Income – Dividends

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Step 8 – Run DCF Valuation (If Needed)

DCF = Intrinsic Valuation

FCFF = EBIT × (1 – Tax) + Dep – Capex –

Change in WC

Terminal Value = FCFF × (1 + g) / (WACC – g)

Enterprise Value = PV(FCFFs) + PV(Terminal)

Use WACC for discounting

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Scenario & Sensitivity

Analysis

Add multiple cases:

Base, Bull, Bear

Sensitize: Revenue growth, margins, WACC,

terminal value

Create data tables or charts for IRR, EV changes,

etc

T H E E N D

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