Financial Modeling In a Nutshell
  • Financial Modeling In a Nutshell
Originally published: 02/02/2017 09:58
Publication number: ELQ-27936-1
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Financial Modeling In a Nutshell

Financial Modeling Guide with Free Excel Model Sample

excelfinancefinancial modelfinancial modelingvaluation

A step-by-step guide on how to design and structure a Financial Model, including Scenario Analysis and Valuation.

I remember the first model I built in 2005. It was awful: terrible design, bad structure, calculations’ drawbacks, etc. Since that time I have made dozens of different models. There were one-page high-level models, “normal,” and complicated multi-scenario fully automated ones. They were used by large
corporations, start-ups, Private Equity Funds, and Investment companies. I have learned something since 2005 and wish to share some insights into financial modelling.

The financial model can be viewed as an attempt to forecast future business dynamics. It serves the goal of evaluating investment project or the whole firm.
The most common approach to doing it is to forecast Free Cash Flow (FCF). Quick remind - there are three different types of FCF: Free Cash Flow to Firm (Project), Free Cash Flow to Equity, and Cash Flow to Lenders, which is simply principal repayment.

Model Features:
1. Two scenarios tied to the prospective growth rate of business;
2. Growth rate reflects Occupancy rate of rooms;
3. Revenue is divided into three business segments: Rooms, Restaurant, and Other Services;
4. Costs include COGS, SG&A, Interest, and Depreciation;
5. Debt Repayment is based on annuity;
6. Two types of CAPEX: rooms-related and management software purchase;
7. Option to calculate results with or without potential acquisition;
8. Interest rate increases in case of acquisition due to increased default risk;
9. Two WACC calculation: based on firm's data and industry average;
10.Target's EBITDA normalization is based on Target's owner salary. The underlying assumption is that this expense will no longer exist after the

- Vladimir Baydin, PhD

This business tool includes
1 Word Document, 1 Excel Model Sample

Vladimir Baydin Ph.D. MB offers you this business tool for free!

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Further information

Create Financial Models

You want to perform: Forecasting, Valuation, Performance Indicators, Scenario Analysis

Budgeting, Financial Analysis


  • Allen Chng(last updated: 13/05/2018 01:21)
  • PV Kanthi Rekha(last updated: 12/05/2018 03:15)
  • Don Donowitz(last updated: 29/04/2018 07:34)
  • Gershon Koh(last updated: 24/04/2018 01:52)
  • Long Lê(last updated: 25/03/2018 17:04)
    Very well explained
  • Camron Miraftab(last updated: 13/03/2018 14:45)
  • Paya Danesh(last updated: 25/02/2018 09:47)
  • Mustafa Hashmi(last updated: 21/02/2018 04:47)
  • S Mash(last updated: 06/02/2018 16:00)
  • Reece P.(last updated: 04/12/2017 14:30)
  • Aaron Lane(last updated: 21/11/2017 06:43)
    Great insight and structural advice
    Thanks very much for explaining the key elements of financial models.
  • Kevin O(last updated: 27/10/2017 05:38)


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