Financial Statement Modeling

What Is Financial Statement Modeling?

Financial statement modeling is the process of connecting the three financial statementsThree Financial StatementsThe three financial statements are the income statement, the balance sheet, and the statement of cash flows. These three core statements are intricately in Excel using formulas and functions. The process creates a three-statement model, which can then be used in more advanced types of financial analysis, including 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., mergers and acquisitions, and leveraged buyouts (LBO)Leveraged Buyout (LBO)A leveraged buyout (LBO) is a transaction where a business is acquired using debt as the main source of consideration. An LBO transaction typically occur when a private equity (PE) firm borrows as much as they can from a variety of lenders (up to 70-80% of the purchase price) to achieve an internal rate return IRR >20%. Linking the statements requires a solid understanding of accounting, finance, and Excel.

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

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