Financial Modeling Definition

Definition of Financial Modeling

Financial modeling is the process of building a projection of a company’s operating and financial performanceThree Financial StatementsThe three financial statements are the income statement, the balance sheet, and the statement of cash flows. These three core statements are into the future in the form of a ‘model’ using Excel. The model can then be used for budgetingBudgetingBudgeting is the tactical implementation of a business plan. To achieve the goals in a business’s strategic plan, we need some type of budget that finances the business plan and sets measures and indicators of performance., planning, operations, valuation, capital raising, mergers and acquisitions, and almost any other corporate activity. The models are built by financial analysts and require a strong understanding of accounting, financeFinanceCFI's Finance Articles are designed as self-study guides to learn important finance concepts online at your own pace. Browse hundreds of articles!, Excel, strategy, and logic.

Additional Questions and Answers

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 answersKnowledgeCFI self-study guides are a great way to improve technical knowledge of finance, accounting, financial modeling, valuation, trading, economics, and more. for you to explore further:

What 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
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
What is bookkeeping?AccountingOur Accounting guides and resources are self-study guides to learn accounting and finance at your own pace. Browse hundreds of guides and resources.
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

Example Excel Model

Below is a screenshot from one of CFI’s online analyst training and certification courses, offered 100% online.

To learn How to Build an Excel Model step-by-step, click on the image below.

Analyst Certification Program