What is Financial Modelling?

While it may seem self-explanatory, it is a good idea to clarify: What is "Financial Modelling"?

In the most general sense, Financial Modelling is the process of building a structure (a "model") that will help you with financial decisions regarding a company, an investment, or a project.

Almost always, the goal is to forecast an integrated set of financial statements (income statement, balance sheet, and cash flow statement), plus some analyses based on those statements. As this reflects the overall development of the business, this is also often referred to as Business Modelling. This is the kind of financial modelling that this website focuses on. In the context of a business plan, the business plan assumptions would be the financial model's input values, and the financial model's output statements would be included in the business plan.

A broader view of financial modelling includes topics such as valuations, asset price time series, financial derivatives, econometric analyses, etc. This website, however, refers to specific cases such as these only when it is necessary for some business model case studies.

This website offers you a number of articles and tutorials. A good place to start is this article: Building a Financial Model Step by Step. If you want to understand who offers financial modelling advice to corporate clients, have a look at this article: The Financial Modelling Industry.


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