What is Financial Statement Modeling?

Financial statement modeling is the process of creating a financial model that forecasts a company's financial statements, including the balance sheet, income statement, and cash flow statement. Financial statement modeling is typically done using spreadsheet software such as Excel and is used to forecast a company's financial performance based on a set of assumptions about the future.

Financial statement modeling is an important tool for investment bankers, as it allows them to forecast a company's financial performance and evaluate the financial impact of different transactions. It is also used by investors and analysts to assess a company's financial health and to make informed decisions about whether to invest in the company.

To build a financial statement model, investment bankers typically start by gathering historical financial data for the company, such as financial statements, budgets, and other relevant information. They then make assumptions about future growth, revenue, expenses, and other factors that will impact the company's financial performance. These assumptions are used to build a forecast of the company's financial statements.

The output of a financial statement model is a set of projected financial statements that show how the company is expected to perform financially based on the assumptions that have been made. These projections can be used to evaluate the financial impact of different business decisions and to assess the company's financial position.