Financial modelling consists of building a financial representation of some or all aspects of your company’s operations in form of an Excel spreadsheet.
Those models can be used to predict and analyse the impact of different assumptions and variables on your financial results. For example, you can build a model that shows how an increase in suppliers’ prices or income tax can affect your profits.
Different types of financial models
Financial models range from very simple tables to very complex multi sheet files. Some of the most commonly used financial models among our clients are:
Three Statement Model
It links profit and loss, balance sheet and cash flow statements allowing managers to test different assumptions. It’s used for forecasting financial results.
Discounted Cash Flow Model
It´s often used for business valuations. It estimates the value of a company today, based on the projections of how much money it will generate in the future.
It´s used by companies that have two or more business units or product groups to test different scenarios within those units and see how it would affect the business as a whole.
They are used for cost control, cash flow planning, project management, resource allocation, production planning, business expansion, new product development, etc.