Financial Modelling is an exercise where an analyst prepares a detailed company specific financial statement forecast for some decision making purposes like valuation, financial statement analysis, M&A and project financing.
In other words, Financial Modelling is the process to make Financial Statement projections with the help of assumptions. In an integrate Financial Model, when you change the assumptions, you will see the effect of change on Cash flows, profitability and ratios.
So a standard financial model will include Historical financial statements, Historical analysis, assumptions, working schedule for projection of Revenue, expense, basic & diluted EPS, working capital, capital expense, depreciation & amortization, shares & equity, debt & cash flow statement and ratio analysis.
Types of Financial Models:
1. Single Tab Financial Model:
A single tab Financial Model is one in which all Financial Statements (Historical and Projected), assumptions and schedule calculations have been presented in one sheet. Single tab financial model is prepared when it is a small size Financial Model and does not require multiple sheets for better presentation.
2. Multiple Tab Financial Model
A multi tab Financial Model is one in which there are many excel worksheets in which the Financial Model is prepared. Most of the time a Multiple tab financial model is prepared to show different sections of model on different sheets.