HowtoBuildaFinancialModelCourseObjectives•Constructafullyintegratedcashflowmodel.•Understandtheimportanceofcashinadistressedenvironment.•Recognizecommonsourcesofinformationusedinfinancialmodeling.•Utilizeanintegratedmodelasamanagementtool.•Identifyvariousmethodsofimprovingacompany'scashflowThismaterialisthepropertyofSmallBusinessAdvisoryPractice(SBAP)and,assuch,solelyavailableforusebySBAPanditsapprovedclients.Purpose&UseofFinancialModeling•AudienceConsiderations:Makesurethatyouareawareoftheaudienceforthefinancialmodel.Thiswillhelpdeterminethepurposeandthestructurerequired.•LevelofDetail:Itisimportanttoevaluateatwhatlevelofdetailthemodeladdsthemostvalue.Basically,agoodmodelerseesthemodelnotastheend,butratheroneofhis/hertoolsofanalysis.OnecouldmakeamodeltoodetailedandlosecontrolofitsfunctionalityModelneedstostayflexible!•Limitations:–Lackofpredictabilityinmanyfactors–Needtotestmodeloverperiodoftimeandevaluatethevariancesinordertoidentifyweaknessesandevaluateeffectiveness–Model-buildingisacontinuallyevolvingprocess–FinancialProjectionisNOTaBudget•NoTwoModelsWillbetheSame:Almosteverymodelisuniqueandthereisnoonerightway3ThismaterialisthepropertyofSmallBusinessAdvisoryPractice(SBAP)and,assuch,solelyavailableforusebySBAPanditsapprovedclients.StructureofaProjectionModel:AParadigmTheflowchartbelowdepictsageneralstructureforafinancialmodel,fromsourcedatatotheoutputs.SourceDataAssumptionsPageOpeningBalanceSheetIncomeStatementBalanceSheetGAAPCashFlowReceiptsandDisbursementsValuation&Ratios4ThismaterialisthepropertyofSmallBusinessAdvisoryPractice(SBAP)and,assuch,solelyavailableforusebySBAPanditsapprovedclients.CommonSourcesofInformationThefirststepistogatherallavailablesourcesofinformation.Thesewillhelpyoutounderstandthebusinessanddevelopthepreliminarystructure.•HistoricalMonthlyFinancialStatements•GeneralLedgers•DetailedOperatingBudgets•CapitalBudgets•LoanAgreements•Contracts,Agreements,EtcThismaterialisthepropertyofSmallBusinessAdvisoryPractice(SBAP)and,assuch,solelyavailableforusebySBAPanditsapprovedclients.