Importance of Financial Modelling

Financial Modelling helps to forecast a business’ financial performance into the future based on historical data and assumptions. 

At Anup N. Amatya & Associates, professional Financial Consultants and Business & Management Consultants, we help our clients to develop appropriate Financial Models to forecast future outcomes with alternate business strategies.

Hierarchy of Financial Modelling

  • Three Statement Model– Income Statement, Balance Sheet, Cash Flow Statement
  • DCF Analysis– Discounted cash flow analysis to value a business
  • Scenario Analysis– Estimate changes in the value of a business in different possible scenarios
  • Sensitivity Analysis– Evaluate how sensitive investment is to changes in drivers
  • M&A Analysis– Evaluate the attractiveness of potential merger, acquisition or divestiture
  • Capital Raising– Analyze the pro forma impact of raising debt or equity
  • LBO Analysis– Determine how much leverage can be used to purchase a company

Good models unmistakably separate inputs, processing, and outputs


  • Unambiguously identified
  • Should only ever be entered once


  • Processing should be transparent
  • Broken down into simple steps & Easy to follow


  • Quickly accessible

Financial Modelling – Inputs


  • Accurate
  • Reasonable data ranges
  • Easy to use
  • Easy to understand
  • Easy to update data

Achieving objectives:

  • Enter each data once
  • Use colour to different inputs and outputs
  • Use data validation & conditional formatting & use comments

Financial Modelling – Processing


  • Easy to maintain
  •  Accurate processing
  • Transparency

Achieving objectives:

  • Break down complex calculations
  • Use comments and annotations
  • Use formatting & Calculate final figures for the output reports

Financial Modelling – Outputs


  • Provide key results to aid decision-making
  • Easy to understand
  • Unambiguous

Achieving objectives:

  • Make outputs modular
  • Consider creating a summary section with only the most important, key model outputs

Financial forecasting framework (for Three Statement
Financial Modelling)

  • Assumptions & drivers – Historical ratios and figures which drive the forecast
  • Income statement – Summarizes the company’s profit and loss
  • Balance sheet – Displays the company’s assets, liabilities and shareholders’ equity
  • Cash flow statement – Reports the cash generated and spent by a company
  • Supporting schedules –Breaks down longer calculations such as PP&E & debt schedule

Sample Models:

For more details, Contact Us, or follow the links below.

Founder & Senior Consultant: Anup Narsingh Amatya

how can we help you?

Please contact us at our office or submit a business inquiry online.

Anup N. Amatya & Associates truly helped us achieve our financial goals. Their thorough understanding of our business model and market trends ensures that our financial standing is stable.

, Anupam Traders

business & financial consultants