Modeling and Projecting Financial Statements

Overview

We deliver training at all levels from basic to advanced. We combine subject expertise, teaching ability, industry experience, and technical skills to deliver training optimized to your needs.

Our modeling training is targeted to two distinct groups with some overlap between them. We offer modeling for investors and bankers outside a company who build models for valuation and credit risk analysis using public data. We also offer training for financial planning and analysis groups that have access to internal data and build detailed models for planning and control. For related Excel skills, please click here.

External valuation and credit risk

Our modeling training covers the following topics:

Major parts of a model

  • Inputs or assumptions
  • Equations representing financial statement relationships
  • Intermediate outputs: Income statement, balance sheet, and cash flows
  • Summary metrics
  • Final outputs
  • Sensitivity tables and scenario analysis
  • Checks

Modeling mindsets

  • Sales-driven models: Income-statement based businesses
  • Asset-driven models: Balance-sheet based businesses

Major steps in building a sales-driven model

For a discussion of financial institutions, please click here.

  • Sales and sales growth
  • Operating expenses
  • Taxes on operating income
  • Operating assets, i.e., non-financial assets such as receivables, inventories, prepayments, and PP&E
  • Operating liabilities, i.e., non-financial liabilities such as accounts payable, accrued expenses, and deferred revenues
  • Deriving enterprise free cash flows
  • Assessing funding needs and borrowing capacity
  • Financial liabilities (aka debt) and interest expense
  • Financial assets held for liquidity and interest income
  • Equity
  • Any iterative plugs needed
  • Valuation and credit risk metrics
  • Sensitivity analysis

Advanced topics

  • Modeling mergers and acquisitions
  • Modeling deferred taxes
  • Modeling companies with loss carryforwards and credit carryforwards
  • Modeling alternative tax structures in mergers and acquisitions
  • Modeling share-based compensation such as stock options and restricted stock
  • Modeling bonds and convertible debt
  • Modeling pensions and health-care liabilities

Internal financial planning and analysis

In addition to the topics listed above, we cover the following areas:

Modeling internal tasks

  • Projects
  • Detailed capacity planning
  • Prioritizing inputs

Designing efficient models and integrating modeling built by multiple teams

  • Modular design
  • Deciding the number of worksheets for a model
  • Consistent labeling and terminology
  • Reducing errors and ambiguities in large models

Ensuring consistency across models in an organization

  • Using Excel styles for consistent formatting
  • Storing styles in add-ins used company wide
  • Macros and toolbars to apply the styles