Financial analysis is a process that helps identify a business's financial health and how it will affect future decision-making. Economic analysis can be broken down into three different parts: cash flow, profit and loss statement, and balance sheet. These three components are all used to help achieve higher yields, lower risks, and better decisions in the long run.
The financial analysis also includes understanding the current state of finances, identifying risks & market trends, evaluating potential strategies to achieve goals, forecasting cash flows overtime periods relevant to management decision making, analyze performance relative to budgets or forecasts, assessing capital structure alternatives, and investment opportunities.
Types of Financial Models
Financial Modelling courses teach you all these complex processes. One must consult professionals for the same. Types of financial models:
Three Statement Model
This model stands for income statement, balance sheet, & cash flow statement. It’s the basic setup for financial modeling and links these statements into one dynamic financial model. This is used to base complex financial models like discounted cash flow, merger models, and other financial models.
Budget Model focuses heavily on income statements & is used to prepare the budget together for the coming year(s). This model is designed to be based on monthly or quarterly figures.
This model is used to predict outcomes regarding demand & supply, sales, consumer behavior, etc. The model generates a forecast to compare the budget model. Budget & forecast models act as a combined workbook depending on the output and are sometimes separately used.
Discounted Cash Flow Model (DCF)
This method analyses the present value of an investment/company/cash flow by adjusting future cash flows to the time value of money, assessing the current fair value of assets/investment.
Merger Model (M&A)
The financial statements of buyer & seller in an acquisition are combined to deduct the effects of the deal. The merger model ascertains whether there exist benefits to an amalgamation. Depending on complexity, requirements & availability of data, it takes an hour to prepare a simple merger model.
Importance of Financial Modelling for Start-ups:
- It helps in quantify & validate the business plan & model. Preparing a financial model helps in finding out whether your ideas are feasible in a sustainable operating business.
- During the fundraising process, investors ask you for a financial plan. Every investor follows a different approach; confident investors require deeper details. A financial model provides quantifiable data; a start-up must always prepare one.
- Financial Modelling becomes vital for a start-up as it presents the exact financial situation of the start-up. It also helps provide the investors with the real-time financial situation & shows them how you are spending money.
Learn and Grow with Imarticus Learning:
There are various ways that financial analysts can learn how to do financial analysis, including certification programs, undergraduate degrees with specialization, online finance courses focused on finance or accounting with some analytical focus, and certificates in economic analysis.
If you are confused about what to learn in finance, get guidance at Imarticus Learning. We offer a range of Financial Analysis courses, including MBA and Financial Analysis Prodegree, that helps aspirants achieve their goals.
Imarticus Learning offers certification programs designed by industry experts to prepare aspirants for the industry. These financial analyst courses are practical, engaging, and interactive and help enhance my skill-set in finance and accounts.
Professionals tailor these courses and make use of proper data analytics applications efficiently. Financial modeling courses include theoretical & practical knowledge through workshops with industry experts, which provides an excellent opportunity to learn and explore.