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Financial M

A financial model quantitatively represents a company's past, present, and future business operations through accounting and financial data. It integrates key components like an operating budget, financial budget, income statement, balance sheet, cash flow statement, and other analyses. The document provides an overview of what a financial model is and the typical sections included, like budgets, financial statements, cash flow analysis, sensitivity analysis, contribution margin analysis, ratios, valuation, and capitalization, to quantitatively model a company's financial plans and activities. Sample template sections are shown as a guide for building out a full financial model over the course of the book.

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45 views

Financial M

A financial model quantitatively represents a company's past, present, and future business operations through accounting and financial data. It integrates key components like an operating budget, financial budget, income statement, balance sheet, cash flow statement, and other analyses. The document provides an overview of what a financial model is and the typical sections included, like budgets, financial statements, cash flow analysis, sensitivity analysis, contribution margin analysis, ratios, valuation, and capitalization, to quantitatively model a company's financial plans and activities. Sample template sections are shown as a guide for building out a full financial model over the course of the book.

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akbar2j
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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K

FINANCIAL MODELS A financial model is a quantitative representation of a company's past, present, and future business operations. This quantitative representation is expressed through the use of accountingthe language of business. Finance, which may be broadly defined as the science of managing money and other assets, is based on accounting. As such, it is important to recogni e the central role accounting, or the enumeration of business transactions, plays in building financial models. !hile this boo" does not cover or address accounting concepts in any level of detail, it is worth noting that the consolidated financial statements #$alance %heet, &ncome %tatement, and %tatement of 'ash Flows( represent the product of a series of accounting transactions. A financial model is a required component of any business plan. Anyone interested in starting a new business, starting a new line of business within an existing company, assessing the operations of an existing or proposed business, and)or comparing the operations of two or more businesses, among other tas"s, should "now how to build, use, and modify a financial model. !hile there are a variety of approaches to building financial models, this boo" will focus on the inclusion of the following sections in a financial model* #+( a ,aster $udget #which is made up of an -perating $udget and a Financial $udget(, #.( the consolidated financial statements #$alance %heet, &ncome %tatement, and %tatement of Free 'ash Flows(, #/( a free cash flow analysis, #0( a sensitivity analysis of the model's outputs versus inputs, #1( a contribution margin analysis, #2( a financial ratios analysis, #3( a valuation analysis, and #4( a capitali ation chart. For the sa"e of illustration, sample templates for each of these sections are shown below. 5lease note that no numbers)values have been inserted into these templatesover the course of this boo", & will wal" through the process of filling in all of these templates one step at a time. A financial model integrates all of the components of a ,aster $udget into a wor"ing model of a company's planned financial activities for a given time period. As this represents a significant amount of information, the components of a financial model are presented in several figures. As discussed earlier, the components of the ,aster $udget are bro"en into the two primary budgetsthe -perating $udget and the Financial $udget. 5lease note that the areas shaded in gray in the screenshots represent the areas in which & will fill in values to build a financial model over the course of this boo". These figures are presented as a road map for the next several chapters of the boo".

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