Financial Modeling and Valuation

What Is Financial Modeling and Valuation?

Financial modeling and valuation is the practice of forecasting the free cash flow (FCF)Free Cash Flow (FCF)Free Cash Flow (FCF) measures a company’s ability to produce what investors care most about: cash that's available be distributed in a discretionary way of a business into the future and discounting it back to its net present value (NPV) at the weighted average cost of capital (WACC)WACCWACC is a firm’s Weighted Average Cost of Capital and represents its blended cost of capital including equity and debt. The WACC formula is = (E/V x Re) + ((D/V x Rd) x (1-T)). This guide will provide an overview of what it is, why its used, how to calculate it, and also provides a downloadable WACC calculator. Alternative valuation methods include comparable company analysis and precedent transactions. These methods are used to value companies for mergers, acquisitions, and capital raisingCapital Raising ProcessThis article is intended to provide readers with a deeper understanding of how the capital raising process works and happens in the industry today. For more information on capital raising and different types of commitments made by the underwriter, please see our underwriting overview..

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CFI is the official global provider of financial modeling and valuation analyst FMVA DesignationFinancial Modeling CertificationFinancial Modeling Certification - earn your certificate as a Financial Modeling and Valuation Analyst (FMVA)® for careers in investment banking, FP&A,. CFI’s mission is to help anyone become a world-class financial analyst and has a wide range of resources to help you along the way.

In order to become a great financial analyst, below are some additional questions and answersKnowledge for you to explore further:

What is are the types of financial models?Types of Financial ModelsThe most common types of financial models include: 3 statement model, DCF model, M&A model, LBO model, budget model. Discover the top 10 types of Excel models in this detailed guide, including images and examples of each. Financial modeling is performed for many reasons including to value a business, raise money
What is sensitivity analysis?What is Sensitivity Analysis?Sensitivity Analysis is a tool used in financial modeling to analyze how the different values for a set of independent variables affect a dependent variable under certain specific conditions. Sensitivity Analysis is performed in Excel to asses risks, measure potential outcomes, and plan for an uncertain future
What is bookkeeping?Accounting
What are the most common valuation methods?Valuation MethodsWhen valuing a company as a going concern there are three main valuation methods used: DCF analysis, comparable companies, and precedent transactions. These methods of valuation are used in investment banking, equity research, private equity, corporate development, mergers & acquisitions, leveraged buyouts and finance

Example Excel Model

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Financial Modeling and Valuation

What Is Financial Modeling and Valuation?

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Example Excel Model

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