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Financial Modeling Terms

Financial Modeling Terms & Definitions

The most common financial modeling terms and definitions are: (1) Hardcodes – manually entered numbers, (2) Assumptions – independent variables in a model, (3) Three Statement Model – a fully linked income statement, balance sheet, and cash flow statement, (4) Capex – capital expenditures, (5) WACC – weighted average cost of capital, (6) DCF – discounted cash flow analysis, (7) Sensitivity Analysis – measuring changes in dependent variables based on changing assumptions, (8) LBO – a leveraged buyout using as much debt as possible, (9) Cash Sweep – when all excess cash is automatically swept towards some other use, (10) IRR – the internal rate of return from all cash flows of an investment.

Additional Questions and Answers

CFI is the official global provider of financial modeling and valuation analyst FMVA Designation. 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 answers for you to explore further:

  • What is are the types of financial models?
  • What is sensitivity analysis?
  • What is bookkeeping?
  • What are the most common valuation methods?

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.

financial modeling questions and answers

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