Financial Modeling Steps

List of Financial Modeling Steps

Here is a list of the most important financial modeling steps: (1) enter 3-5 years of historical financial information into Excel, (2) calculate the historical ratiosFinancial RatiosFinancial ratios are created with the use of numerical values taken from financial statements to gain meaningful information about a company, trends, and analysis for the company, (3) make assumptions about how the business will perform in the future, (4) forecast the income statementIncome StatementThe Income Statement is one of a company's core financial statements that shows their profit and loss over a period of time. The profit or loss is determined by taking all revenues and subtracting all expenses from both operating and non-operating activities.This statement is one of three statements used in both corporate finance (including financial modeling) and accounting., balance sheet, and cash flow statement, (5) calculate free cash flow to the firm, (6) perform discounted cash flow (DCF) analysisDCF Analysis InfographicHow discounted cash flow (DCF) really works. This DCF analysis infographic walks through the various steps involved in building a DCF model in Excel. to value the company, (7) conduct sensitivity and scenario analysis, (8) perform error checking and stress-test the model, (9) create charts, graphs and tables, and (10) present the results of your analysis and recommendations.

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