Financial modeling is an iterative process and follows these standard steps: (1) enter three to five years of historical financial information, (2) analyze the historical performance, (3) generate assumptions about future performance, (4) use the assumptions to forecast and link the income statement, balance sheet, and cash flow statement, (5) perform discounted cash flow analysis, (6) perform sensitivity analysis, and (7) audit and stress test the model.
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In order to become a great financial analyst, below are some additional questions and answers for you to explore further:
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