What Our Financial Models Will Include
In this blog, we will be building financial models from the ground up. The financial models will serve as a generalized example that can be adapted to meet the needs of most businesses. Here are the key elements that the financial models will encompass:
- A Master Budget
- Consolidated Financial Statements: (1) Income Statement, (2) Cash Flow Statement, (3) Balance Sheet
- Free Cash Flow Analysis
- Sensitivity Analysis
- Contribution Margin Analysis
- Financial Ratios Analysis
- Valuation
- Capitalization Chart
Overview of the Master Budget
The master budget typically covers an operating period of one to five years, and can be considered a medium-term budget. The master budget is comprised of two key elements: (1) Operating budget, (2) Financial budget. In turn, the master budget drives the three key financial statements: (1) Income Statement, (2) Cash Flow Statement, (3) Balance Sheet. There are many additional ancillary statements that are produced from the master budget as well.
Operating Budget
The operating budget is intended to encompass the profitability of the business and consists of the following elements:
- Sales & Collections
- Cost of Goods Sold
- Inventory
- Operating Expenses
- Income statement
Financial Budget
The financial budget is intended to track large outlays of capital (i.e. capital expenditures), changes in the balance sheet and to track budgeted cash position. Here are the key elements:
- Capital Expenditures
- Cash Budget
- Balance Sheet
Tags: financial models, Master Budget
