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Financial modelling is a method to prepare a summary of the incomes and expenses of a company. Prepared in spreadsheets, these models help business owners to predict the financial future of their company.

Financial modelling is an exercise needed for corporate finance or asset pricing. With it, the fluctuations of the financial agents or markets get converted into numerical predictions. Generally, this prediction depends on future assumptions and the company’s historical performance.

It requires preparing schedules (namely 3 statement models), cash flow statements, balance sheets, and income statements. From here, one can create more advanced models such as consolidation, IPO, Leveraged Buyout, Discounted Cash Flow (DCF), and merger models.

Uses of a Financial Model
With the definition of financial modelling out of the way, it is essential to understand its usage. The utilization of such a system is widespread; executives use financial models inside a company to take decisions related to:
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