VCE SUMMMER INTERNSHIP PROGRAM

FINANCIAL MODELING (INFRA)

NAME:- Anjana
COURSE:-BBA
 1.While preparing a financial model what are the assumptions we need to take. Please list down
the list of assumptions with the values, assuming the project will be set up in India.

• There is a whole range of assumptions and these will vary on the type of project and the industry. You will have
some generic economic and financial assumptions:

1. exchange rate
2. inflation
3. interest rate

• And then a very different set of industry and project-specific assumptions e.g. the assumptions for building a
shopping centre vs developing an eCommerce marketplace vs building a new ERP software system vs financial
model for delivering the Olympic Games vs SaaS startup vs expanding product ranges vs digital twin for business
optimisation simulations will each be very different.
• In order to get input on relevant assumptions, you need to be specific about the exact financial model. Not only the
type of industry and sector but also on the purposes and objectives of the financial model eg:

1. Internal management information

2. Venture capital
3. Bank loan
4. Listing on stock exchange
5. Due diligence for a sale or merger
 2.Explain the function of revenue, cost and debt sheet of the financial model.

FUNCTION OF REVENUE

A formula or equation representing the way in which particular items of income behave when plotted on a
graph. For example, the most common revenue function is that for total revenue in the equation y = bx,
where y is the total revenue, b is the selling price per unit of sales, and x is the number of units sold.

Total revenue is the full amount of total sales of goods and services. It is calculated by multiplying the total
amount of goods and services sold by their prices. Marginal revenue is the increase in revenue from selling
one additional unit of a good or service.
cost and debt sheet of the financial model.
 3.Explain in detail the various steps involved (with the importance) in the fin flows sheet. Why
and what the bank needs to check before financing the project.

Cash flow statement is not a substitute of income statement, i.e., a profit and loss account, and a balance
sheet. It provides additional information and explains the reasons for changes in cash and cash
equivalents, derived from financial statements at two points of time.

The procedure for preparing a cash flow statement is different from the procedure followed in respect of
profit and loss account and balance sheet. It is prepared with the help of financial statements.

The basic information required for the preparation of a cash flow statement is obtained from the following
three sources:

(i) Comparative balance sheets at two points of time, i.e. in the beginning and at the end of the accounting
period.

(ii) Income statement of the current accounting period or the profit and loss account.

(iii) Some selected additional data to extract the hidden transactions.

• The preparation of a cash flow statement involves the following steps:

• Step 1:
• Compute the net increase or decrease in cash and cash equivalents by making a comparison of these
accounts given in the comparative balance sheets.

• Step 2:
• Calculate the net cash flow provided (used in) operating activities by analyzing the profit and loss
account, balance sheet and additional information. There are two methods of converting net income
into net cash flows from operating activities: the direct method and the indirect method. These methods
have been discussed separately in this chapter.

• Step 3:
• Prepare a formal cash flow statement highlighting the net cash flow from (used in) operating, investing
and financing activities separately.
• Step 4:
• Make an aggregate of net cash flows from the three activities and ensure that the total net cash flow is
equal to the net increase or decrease in cash and cash equivalents as calculated in Step 1.

• Step 5:
• Report significant non-cash transactions that did not involve cash or cash equivalents in a separate
schedule to the cash flow statement e.g., purchase of machinery against issue of share capital or
redemption of debentures in exchange for share capital.