Financial Modeling — Microsoft Excel
In this article, we will delve into the intricacies of financial modeling in finance using excel and in this we will stepping into the world of financial modeling and discussing how it works and why we used in accounts and finance.
What is Financial Modeling
Financial modelling is the process of creating a summary of a company’s expenses and earnings in the form of a spreadsheet Microsoft Excel, that can be used to calculate the impact of a future event or decision.
Financial modelling is a tool for determining likely financial outcomes based on a company’s historical performance and assumptions about future revenue, expenses,
and other variables. It relies on financial forecasts, It takes a forecast’s assumptions and plays them out using a company’s financial statements to show how those statements may look in the future. As models are created from financial statements, they most often generate results for a month, quarter, or year. A financial model is simply a tool that’s a built in spreadsheet software, such as MS
Excel, to forecast a business financial performance into the future. The forecast is typically based on the company’s historical performance and assumptions about the future and it requires preparing an income statement, balance sheet, cash flow
statement and supporting schedules known as a three statement model.
Use of Financial Modelling:
The output of a financial model is used for decision making and performing financial analysis, whether inside or outside of the company. Inside a company, executives will use financial models to make decisions about the listed below.
- Growing the business.
- Raising capital (debt/equity).
- Valuing a business.
- Selling, buying or divesting, investing assets and business units.
Conclusion
Finally, we will take a test drive of learning of financial modeling in accounting and finance and along with that we also understanding how important it is, in finance and why finance professionals used by solving common eye hidden mistakes and errors, when they work in any type of financial project.
