What is Voluntary Compliance? Voluntary compliance is an assumption under which the U.S. tax system operates. It is the principle for which all the taxpayers will cooperate with the tax system, filing an honest and accurate annual return autonomously. Voluntary compliance does not mean that there are no tax-related laws or rules. It means that…
What Software is Used in Financial Modeling? Before we discuss Excel vs. automation in financial modeling, let’s take a look first at how software is used to build financial models. Financial modeling involves creating an abstract representation of an actual or projected financial event. Thus, a financial model is a mathematical tool that can be…
Top Time-saving Tricks for Financial Modeling Top time-saving tricks for financial modeling – Financial modeling is a very important financial activity and skill that every individual in finance should learn. It is the process of creating an illustration of a company’s performance, as well as a forecast of how it will likely perform in the…
CFI’s free Financial Modeling Guidelines is a thorough and complete resource covering model design, model building blocks, and common tips, tricks, and best practices for designing and building robust, world-class financial models. Many of the models we encounter today are poorly designed, difficult to maintain, and hard to follow. Given their central role in the…
What is a Capital Investment Model? Most companies make long-term investments that require a large amount of capital invested in the initial years, mostly in fixed assets such as property, machinery, or equipment. Due to the significant amount of cash outflows required, companies perform a capital investment analysis to evaluate the profitability of an investment…
What is Top-Down Forecasting? Top-down forecasting is a method of estimating a company’s future performance by starting with high-level market data and working “down” to revenue. This approach starts with the big picture and then narrows in on a specific company. This guide will provide examples of how it works and explain why it’s commonly…
What is Bottom-Up Forecasting? Bottom-up forecasting is a method of estimating a company’s future performance by starting with low-level company data and working “up” to revenue. This approach starts with detailed customer or product information and then broadens up to revenue. This guide will provide examples of how it works and explain why it’s commonly…
What is Break-Even Analysis? Break-even analysis in economics, business, and cost accounting refers to the point at which total costs and total revenue are equal. A break-even point analysis is used to determine the number of units or dollars of revenue needed to cover total costs (fixed and variable costs). What is the Break-Even Analysis…
What is the DCF Terminal Value Formula? Terminal value is the estimated value of a business beyond the explicit forecast period. It is a critical part of the financial model, as it typically makes up a large percentage of the total value of a business. There are two approaches to the DCF terminal value formula:…
What is Financial Modeling? Financial modeling is one of the most highly valued, but thinly understood, skills in financial analysis. The objective of financial modeling is to combine accounting, finance, and business metrics to create a forecast of a company’s future results. A financial model is simply a spreadsheet, usually built in Microsoft Excel, that…
