financial modelling and business valuation
Having a good knowledge of your company, its finances and its worth, and being able to project the success of others and certain projects, are two skills that are highly valuable to be successful in business. Learning business valuation and financial modelling then, can help you take a far more mathematical approach to your negotiations and your risk taking behaviours, leading you to more success and greater efficiency. But just what exactly are financial modelling and business valuation? Financial modelling first of all, is the process of using an abstract representation (through graphs and spreadsheets such as Excel etc) to aid in financial decision making. This can be used to represent the financial performance of a particular asset, in business valuation (more on that later), cost of capital, predicting future turnover, portfolio problems, interest rates, credit spread and risk assessment. These models can then help the individual to make decisions based on mathematically formulated predictions of various outcomes and current states. It should be recognised however that financial modelling is not an exact science (though the formulae used is), and that there are many uncontrollable events that can have an impact on the accuracy of the representations. In the financial services industry, the use and prominence of these modelling techniques is increasing greatly in multiple markets. Investment bankers for example employ these techniques to aid in guiding them through mergers and acquisitions, as well as in public offerings. Insurance companies too, and even pension funds, are using financial statements to identify assets for their portfolios. This widespread use demonstrates the usefulness of the tool, and how bringing it to your own financial department could help your business to thrive through smart choices. As stated, financial modelling can also be useful in business valuation, and this too is a worthwhile technique in itself. Here the business is evaluated in terms of its economic value and how intelligent an investment it would make based on certain assumptions. This then can help owners of that business decide on a deal when selling their company (and help guide the buyers too), or help them with internal disputes
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