PUJA PRASAD

@pujaprasad

Types of

Financial
Models
 PUJA PRASAD
@pujaprasad

Meaning:

Financial modeling is the process of

creating a mathematical representation
(or model) of a company's financial
situation.

It involves forecasting future financial

performance based on historical data,
assumptions about the future, and known
variables.
 PUJA PRASAD
@pujaprasad

Types:

Budgeting Model: A budgeting model forecasts

revenue and expenses over a specific period, typically
for a company's operational planning and control. It
helps in setting financial goals and managing cash
flow

Forecasting Model: A forecasting model predicts

future financial outcomes based on historical data
and assumptions. It can be used for revenue
forecasting, expense forecasting, or overall financial
performance projections
 PUJA PRASAD
@pujaprasad

Valuation Model: Valuation models estimate the

value of a business, asset, or investment. Common
valuation models include Discounted Cash Flow
(DCF), Comparable Company Analysis (CCA), and
Precedent Transactions Analysis (PTA)

Merger and Acquisition (M&A) Model: An M&A model

evaluates the financial implications of mergers,
acquisitions, or divestitures. It assesses the potential
synergies, costs, and financial impact on the
combined entity
 PUJA PRASAD
@pujaprasad

Leveraged Buyout (LBO) Model: An LBO model

analyzes the acquisition of a company using a
significant amount of borrowed funds, usually
through debt. It evaluates the returns to equity
investors and debt repayment capabilities

Capital Budgeting Model: A capital budgeting model

assesses potential investments in long-term assets or
projects. It calculates metrics such as Net Present
Value (NPV), Internal Rate of Return (IRR), and Payback
Period to determine feasibility and profitability
 PUJA PRASAD
@pujaprasad

The Three-Statement Model: The Three-Statement

Model integrates the Income Statement, Balance
Sheet, and Cash Flow Statement to project financial
performance, showing how operations impact
profitability, financial position, and cash flows

Initial Public Offering (IPO) Model: The IPO Model

forecasts financials, determines valuation, and plans
share offerings for companies going public. It sets
offering size, prices shares, allocates proceeds, and
ensures regulatory compliance
 PUJA PRASAD
@pujaprasad

Credit Risk Model: A credit risk model evaluates the

likelihood of a borrower defaulting on debt
obligations. It uses financial ratios, credit scores, and
other factors to assess creditworthiness and
determine risk levels

Sensitivity Analysis Model: A sensitivity analysis

model assesses the impact of varying assumptions or
inputs on financial outcomes. It helps in
understanding the sensitivity of financial models to
changes in key variables
THANK YOU FOR READING!
FOLLOW FOR MORE INSIGHTS AND UPDATES

PUJA PRASAD
@pujaprasad