Capital budgeting is an executive decision making technique that all good financial analysts should be familiar with, in order to ensure that their financial modeling and analysis skill set remains relevant and practical to business realities. Capital budgeting is essentially an assessment on whether a capital investment into a project or business asset is worth [...]
Vertical analysis, also known as common-sized statements, can be used by a good financial analyst to develop insights into the economic characteristics of different industries and of different firms in the same industry when building a financial model. Look at the illustration below: In Common-sized statements, various components of the financial statements are standardized by [...]
Always design a financial model for people who did not build it and for people with limited understanding of financial modeling and analysis techniques. This will help you ensure the usefulness and relevance of the financial model, and preserve its longevity long after you have completed the financial modeling exercise. In each financial model workbook, [...]
A good financial analyst will make intelligent use of spreadsheet functions that can help design and build financial models efficiently and accurately, minimize spreadsheet risk, and increase the confidence of users in the financial model. Certain spreadsheet functions are also very helpful in analyzing and making sense of large volumes of data, performing statistical analysis, [...]
Financial analysts often struggle to find a sound basis for forecasting future values for financial and operating results in a financial model. We have looked at the common qualitative and quantitative methods for forecasting before, and it will be useful for financial analysts to better understand the importance of having good quality historical data when [...]
