Financial modelling lecture 1

This is the second time we are having this class.

Financial modelling lecture 1

Debt to Equity Ratio has steadily increased to a higher level of 2. Step 3A — Revenues Projections For most companies, revenues are a fundamental driver of economic performance. A well designed and logical revenue model reflecting accurately the type and amounts of revenue flows is extremely important.

There are as many ways to design a revenue schedule as there are businesses. Some common types include: Sales growth assumption in each period defines the change from the previous period.

This is a simple and commonly used method but offers no insights into the components or dynamics of growth. Instead of a simple growth assumption, a price inflation factor and a volume factor are used.

This useful approach allows modeling of fixed and variable costs in multi product companies and takes into account price vs volume movements.

This method is appropriate for businesses which have simple product mix; it permits analysis of the impact of several key variables. Dollar Market Size and Growth: Market Share and Change in Share — Useful for cases where information is available on market dynamics and where these assumptions are likely to be fundamental to a decision.

Telecom industry Unit Market Size and Growth: This is more detailed than the preceding case and is useful when pricing in the market is a key variable. For a company with a price-discounting strategy, for example, or a best of breed premium priced niche player e.

These assumptions can be important for businesses where production capacity is important to the decision.

Financial Modeling in Excel (Free Training, Colgate Example)

In the purchase of additional capacity, for example, or to determine whether the expansion would require new investments. Examples include classic razor-blade businesses and businesses like computers where sales of service, software, and upgrades are important. Modeling the installed base is key new additions to the base, attrition in the base, continuing revenues per customer etc.

For example, revenues of professional services firms or sales-based firms such as brokers. Modeling should focus on net staffing, revenue per employee often based on billable hours. More detailed models will include seniority and other factors affecting pricing.

Store, facility or Square footage based: Retail companies are often modeled based on the basis of stores old stores plus new stores in each year and revenue per store.

This approach is applicable to airlines, hotels, movie theatres and other businesses with low marginal costs. We will use the sales growth approach across segments to derive the forecasts. Please see the below picture.

Financial modelling lecture 1

Now we can assume a sales growth percentage based on the historical trends and project the revenues under each segment. Simple but offers no insight into any leverage economy of scale or fixed cost burden Costs other than depreciation as a percent of revenues and depreciation from a separate schedule: This approach is really the minimum acceptable in most cases, and permits only partial analysis of operating leverage.

Variable costs based on revenue or volume, fixed costs based on historical trends and depreciation from a separate schedule:a.y. Slides Notes Whiteboard printouts a.y. Slides Notes Whiteboard printouts a.y. Slides Notes Whiteboard printouts a.y.

Slides Notes Whiteboard printouts. Financial Modeling in Excel Training – Read me First. Step 1 – Download Colgate Financial Model Template.

You will be using this template for the tutorial. Step 2 – Please note you will get two templates – 1) Unsolved Colgate Palmolive Financial Model 2) Solved Colgate Palmolive Financial Model Step 3-You will be working on the Unsolved Colgate Palmolive Financial Model Template.

business performance, liquidity, and financial structure. Cash flow forecasting techniques are then applied to to produce a cash flow (and earnings-based) financial valuation model.

Financial modelling lecture 1

Special topics include taxes, compensation, pensions, financial institutions (time permitting) Multiples valuation.

Session 1 Page 1 9/29/10 Material presented in four sections. Analytical and ratio techniques for understanding business performance, liquidity, and financial structure. Wharton's Business and Financial Modeling Specialization is designed to help you make informed business and financial decisions.

These foundational courses will introduce you to spreadsheet models, modeling techniques, and common applications for investment . First, the instructor lectures about academic concepts from the fields of Management Science and Finance (I hear). Second, the instructor applies these Session 1 Introduction to Financial Modelling and Spreadsheet Essentials Frameworks and concepts covered = Course mechanics.

Financial Modeling Training | Learn financial modeling step by step - Wall Street Prep