Financial Modelling

Financial Modelling is the process of creating a summary of a company's expenses in the form of a spreadsheet which is used to calculate the impact of a future event or decision. Financial modelling is used in strategic planning to test various scenarios, calculate the cost of new projects, decide on budgets and allocate corporate resources. A model is as good as the inputs and assumptions that go into it. 

Financial models are built for the use of financial analysts to explain or anticipate the impact of events on a company's stock, to show the effect of internal factors such as changes in strategy or business model and external factors such as changes in economic policy or regulations.

Examples of Financial Models:
Discounted Cashflow (DCF) analysis, Sensitivity analysis, Three Statement Model, Merger Model, Leverage Buyout(LBO), Initial Public Offering (IPO), Option Pricing, Budget Model.

Information Included in a Financial Model

Income statement, Balance sheet, Cash flow, Valuation, Sensitivity analysis, Supporting schedules, charts and graphs.

Skills Required to be a Financial Modelling Expert 

As a financial analyst you need to have an eye for details, this helps in creating clear and smooth data models.
Be familiarised with accounting skills.
Be able to critically think and solve problem.
A good financial analyst should be communicates result from the analysis.
Time management is as important in any field and it is required of financial analyst to be able to manage time by mastering relevant excel shortcuts and skills.

References 

[1] BULB, 'Write to Earn. Read to Earn' (online, 2022) <https://www.bulbapp.io/>