What is Financial Modelling?

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What is Financial Modelling? 2017-02-03T03:25:45+00:00

What is Financial Modelling?

Financial modelling is the process of building a financial model – a complex spreadsheet that has a financial aspect.

Generally, a financial model will consist of inputs, assumptions about how the inputs affect outputs (i.e. formulas and calculations), and outputs or reports.

What do you Model?

Common subjects of a financial model include:

  • an entire company;
  • an individual business unit; or
  • a project.

What do you use a Financial Model for?

Financial models are used in business to make decisions.

We’ve built financial models for clients for a variety of purposes. Some look forward into the future while others look backwards at what has already occurred:

  • Valuing e.g. when someone buys or sells a business.

  • Forecasting performance under a variety of scenarios e.g. business planning, project

    economics, business cases, financial product calculators, etc.

  • Analysing sensitivities and risks e.g. what happens to profit if sales go up/down by 10%, what

    are the risks in this project, etc.

  • Managing e.g. operations budget for next year, analysis of sales or costs, process monitoring.

  • Reporting e.g. management reports, key performance indicators (KPI’s), dashboards and

    scorecards.

Financial modelling requires a high level of skill in finance, accounting, and spreadsheet design best practices.

What Software do you use?

We build financial models for clients using either Microsoft Excel, a tool most commonly used for financial modelling, or Invest for Excel which is Europe’s leading financial modeling software.