Financial modelling

Question 1

What is a financial model?

Answer 1

A financial model is a forecast of a companies expenses and income formatted in a spreadsheet.

Question 2

What are the 4 key things a financial model tells you?

Answer 2

1. Internal Rate of Return (IRR)
2. Equity multiple
3. Profit
4. Amount needed to invest.

Question 3

What are the 5 rules of financial modelling?

Answer 3

1. use clean formatting
2. keep assumptions separate
3. never hardcore numbers instead of formula
4. never hardcore assumptions into formula
5. keep the formula the same along a row.