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Financial Modeling Examples

Updated on May 8, 2024
Article byNiti Gupta
Edited byNiti Gupta
Reviewed byDheeraj Vaidya, CFA, FRM

Top 9 Examples of Financial Modeling

Financial modeling is used by the financial analysts for several purposes like cost and benefit analysis of a new proposed project or analyzing the impact of change in economic policy on stock’s performance or for the valuation of the business and its comparison with competitors in the market. Some of the examples of financial modeling include three statement modeling, DCF Modeling, Merger Modeling, IPO Modeling, LBO Modeling, Option Pricing Model etc.

Financial Modeling Examples

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In this article, we discuss the top 9 financial modeling examples –

#1 – Three Statement Modeling

In the 3 statements model, the income statement, balance sheet, and cash flow statement all are linked together with the excel formulae, and this helps in the analysis of historical financial statements and forecasting future statements. Forecasting of financial statements will help financial analysts to understand how the company will perform after taking into consideration a variety of assumptions.

#2 – Discounted Cash Flow (DCF) Modeling

The DCF Valuation modeling is done taking three statement model as a base and is used to calculate the value of the business or the company’s net present value (NPV) of the future cash flow. The DCF modeling takes the projected cash flow from 3 statement model and discounts them to their present value after making necessary adjustments.

#3 – Merger Finance Modeling

This type of modeling is used to analyze the merger and acquisition decision of two companies. A merger happens when two companies come together under mutual agreement, whereas an acquisition happens when one company overtakes others in return for some cash price.

#4 – Initial Public Offering (IPO) Model

This model looks into the market with the help of a comparable company’s analysis to understand how much the investors will be ready to pay for the company’s stock in an IPO.

#5 – Leveraged Buyout (LBO) Modeling

A leveraged buyout is the acquisition of one company by another company with the help of borrowed funds. Leveraged buyout modeling helps in the determination of the value that the buyer would be ready to pay and the level of debt that would be needed to be raised. It also calculates the present and future cash flow of the company to be purchased.

#6 – Sum-of-the Parts Modeling

This financial model is used to calculate the value of each division in the organization separately to determine its worth if any other company acquires it. The sum of the parts method is calculated through different types of analysis methods like discounted cash flow (DCF) model, asset-based valuation, market value, etc. Each part is then added together to derive the value of the sum of the part (SOTP).

#7 – Consolidation Modeling

Consolidated modeling is prepared by consolidating all 3 financial statements, i.e. income statement, balance sheet, and cash flow statement of different business units into one.

#8 – Budgeting and Forecasting Modeling

The financial analysts perform the budget modeling to determine the budget for the cost and income of the company for the upcoming time. Budgets are generally prepared on a monthly or quarterly basis. They depend upon historical income statement for input purposes. Whereas, the financial analyst does forecast modeling to prepare a forecast against the budget. Many times budget and forecasting modeling is done on the single tab together, and other times they are done separately.

#9 – Option Pricing Model

The financial analysts use the option pricing model to determine the theoretical value of an option, i.e. the value of an option after taking all the known input under consideration. It helps financial analysts in deciding the fair value of an option. It is a mathematical model prepared based on mathematical formulas.

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This has been a guide to top 9 examples of financial modeling including three statement modeling, DCF Modeling, Merger Modeling, LBO Modeling, IPO Modeling, Options Pricing Model etc. You can learn more about finance from the following articles –