What is financial modelling?

A financial model is a tool that combines key accounting, finance, business metrics and management’s strategic goals to forecast a business’ financial performance into the future.

For existing companies, forecasts are typically based on a company’s historical performance, assumptions about the future and makes use of the 3 main statements an income statement, balance sheet, cash flow statement and supporting schedules.

A financial model is usually built-in Excel although there are some systems that can also be used. Financial models can either be built vertically or horizontally.

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