Boost Your Investment Strategy: Understanding Key Financial Models
Financial Models are a spreadsheet-based abstraction that helps to forecast a company’s future financial performance. It is a mathematical model designed to represent the performance of a financial asset or portfolio, project or any other investment. The forecast is based on the company’s historical performance and assumptions about the future. Financial Model requires preparation of Income statement, balance sheet and cash flow statement known as the three-statement models. In this article we will be discussing in brief the most common types of financial models in Investment Banking viz. DCF (Discounted Cash Flow), LBO (Leveraged Buyout), M&A(Merger & Acquisition) and the three statement models. MERGERS & ACQUISITION (M&A) Mergers & Acquisition are a more advanced model used to evaluate the purchase of a target company focusing on dilution (decreasing)or accretion (increasing) analysis. In other words, M&Amodel is used for determining the potential benefits an