Financial Modelling

DR.KAUSTUBH ARVIND SONTAKKE

PROFESSOR OF FINANCE
CERTIFIED SPIRITUAL LIFE COACH
M. COM (GOLD MEDAL) MBA (FINANCE),
MBA (HRM), MA (ECONOMICS)
M. PHIL (FINANCE), PH.D. (FINANCIAL MANAGEMENT)
PH.D. (ACCOUNTANCY)
 DEFINITION OF FINANCIAL
MODELING
 Financial modelling is the process conducted to create a financial
representation of the entity. It is through this financial model the
financial analyst tries to forecast future earnings and the performance
of the company.
 Financial modeling is the process of development of models based on
Financial Management tools and Financial Statement analysis for
business decision making using techniques such as estimation,
projection, forecasting, etc. with the help of computer aided techniques
like Excel.
OBJECTIVES OF FINANCIAL
MODELING
 Financial forecasting
 Budgeting
 Procurement of capital
 Capital allocation
 Business valuation
 Mergers and acquisitions
 Other strategic business decisions like diversification,
expansion, etc.
ASSUMPTIONS

 Assumptions are the base for any financial model.

 It enables estimations, projections, forecasting, etc.
 Normally, major assumption include sales, capital expenditure,
etc.
 Key assumptions will vary by client and industry.
 It will be influenced by macro-economic factors.
 Thus, assumptions should be well-defined, reasonable and
logical.
 Bad assumption = Bad Financial Model = Bad Decision
 AREAS OF FINANCIAL MODELING
 Financial Statements and Analysis
 Income Statement
 Balance Sheet
 Cash Flow
 Ratio Analysis
 Common-size Analysis
 Comparative Analysis
 Trend Analysis
 Financial Management Tools
 Capital Budgeting (incl. sensitivity and scenario analysis)
 Cost of Capital
 Capital Structure
 Valuation and Risk Analysis
 CVP Analysis
IMPORTANCE

 Future projections
 Business planning
 Decision making
 Presentations
 Simplicity
LEARNING AND CASES

 Excel Functions – Case Study of MT Cars

 Cash Flow Analysis – Case Study
 Comprehensive Business Financial Modeling – Case Study
“Shizuka Ltd.” OR “F-Cars”
 Sensitivity Analysis – Case Study “Shri Ltd.”
 Services Modelling – Case Study of Keedzone Ltd.
All the Best

THANK YOU