Financial Model – II

A financial model generally includes cash flow proections, depreciation sechedules, debt service,
inventory levels, rate of infalation, etc. it may also quantity the financial impact of the firm’s policies
and of restrictions or covenants imposed by investors and/or lenders. A cash budhet (whether
computed by hand or with spreadsheet program)

Financial modelling is the construction of a spreadsheet models that illustrate a company’s likely
financial results in financial terms. Financial models can simulate the effects of specific variables so
that the company can plan a course of action should they occur.

Best Model – Business Line

Easy to understand – enlist process mapping

Control checks to avoid errors

Easy to work eith but not struggling even for simple results

It should attempt to address major issues but not unnecessarily in others to waste time

Clear understanding on the objective of the model

Easy to accommodate changes whenever required – adopt compartmentatilzation

Model should adopt blocks of inputs and outputs – preferably colouring.

Relative referencing and absolute referencing in ms excel. Partial abosolute referencing.

MY Khan PK Jain multiple role of valuation on equity share valuation

Bond pricing model and equity valuation model

Loan amortization model

Components,

Loan amortization schedule explores the

Beginning Principal

Annuity

Interest payment (out of installments)

Principal repayment

Closing principal