Way to Create best FInancial Model through iBanking Training

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A Primer to Creating a Financial Model
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Building a financial model is indeed a bit
difficult task to accomplish with flying colours.
Every game has its rules, so does financial
modelling. All you have to learn is its rules and
you will definitely earn the brownie points. In
this article, we are discussing a streamlined
method to creating a financial model. If
diligently followed, the method would help you
avoid the common errors and achieve the desired
result in a single attempt.

• It is basically a 5-step method, which includes
  stages like
• Comprehend business requirements
• Call out assumptions
• Apply business logics
• Validate scenarios
• Document

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Each stage involved is discussed at length below-

• Step 1 Comprehend business requirements
• When you head out for creating a financial model,
  the first thing you are required to do is
  understand the business requirements at the
  outset. If you miss out on this state, your
  financial model would lead you and your
  organization to nowhere.
• In order to ascertain the business requirements,
  you need to find out answers to following
  questions
• What does your business expect from this model?
• What are the levers in control of business
  owners? What is beyond their control?
• What are constraints (resources/budgets/capacity)
  ?
• How well are various departments connected?
• Once you have a sound understanding of what your
  business needs, and agree on the set of inputs,
  put all the data acquired on a excel sheet
  separately.

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Step 2 Call out assumptions At second stage,
you need to define granularity of a financial
model. This is usually determined by
level??country level, product line level or
product level your business wants to play
on. Step 3 Apply business logic Once you are
done with granularity, now it is time to apply
logic to the model. This means you need to
translate your business understanding into
numbers. Learn financial modelling valuation
methods through the well-researched online
tutorials from iBanking Training.
Step 4 Validate scenarios Once the framework of
the model is ready, you need to validate
different scenarios. Here you have to test
different boundary conditions when business logic
would no longer hold true. It would be better if
you define the minimum and maximum values for
various inputs.
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• Step 5 Document
• At last, you need to put all the needs,
  calculations, granularity and limitations in a
  document. The main purpose of the documentation
  is to ensure that anyone from the business or
  outside it- would understand the model without
  any difficulty.
• In a document, you are needed to include the
  following points
• Background
• Business need
• Scope of the model
• Problem statement
• Areas out of scope of modelling
• Limitations
• References (if any)
• Business logic and calculations

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This is a five-step method to creating a business
financial model. You can learn financial
modelling skills from online tutorials by
iBanking Training to understand the stages
involved in an efficient manner.
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