What are the Uses of Financial Models?
There are multiple uses of financial modeling in finance. It is a vital tool and its important uses are stated in our Financial Modeling case study help as follows:
- Real options
- Analysis and modeling of financial markets
- Financial analysis
- Option pricing
- Portfolio problems
- Preparing detailed spreadsheets regarding management decisions
- Business Valuation
- Project finance
- Cash flow forecasting
- Modeling the team structure of credit spread and interest rate
- Developing optimization models to control and manage the risk of any financial investment
Types of Financial Models
There are various kinds of financial models that are discussed below as follows:
Three Statement Model: It is the basic step regarding financial modeling. According to this model, the three statements such as balance sheet, income statement, and cash flow are linked with formulas. The objective is setting up so that all accounts get connected that can change the entire model.
DCF or Discounted Cash Flow Model: The DCF is built on a three statement model for valuing a company dependent on the NPVof the future cash flow. This model takes cash flows from a three statement model, makes the necessary adjustments, and uses an XNPV function.
Merger Model: The M&A model is an advanced model used for evaluating the proforma dilution/accretion of an acquisition or merger. The complexity level might differ greatly. It is commonly used in corporate development and investment banking.
IPO or Initial Public Offering Model: Corporate development professionals and investment bankers build IPO models for valuing their businesses in advance before going public. The model looks at the comparable company analysis along with the assumption of how much the investors shall pay for it. The IPO valuation model includes the IPO discount to make sure the stock are traded properly in the secondary market.
LBO or Leveraged Buyout Model: A leveraged buyout model needs complicated debt schedules. It is an advanced kind of financial modeling. An LBO is a challenging and detailed kind of financial model because the multiple layers of financing build circular references and need cash flows. This model is not common outside investment banking or private equity. We, at BookMyEssay have a team of Ph.D. writers who can also provide you with a top-notch financial modeling research paper writing solution.