From the course: Financial Modeling Foundations

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Cash flows in the valuation model

Cash flows in the valuation model - Microsoft Excel Tutorial

From the course: Financial Modeling Foundations

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Cash flows in the valuation model

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- [Instructor] One of the tasks that you'll probably run into if you're trying to build a financial model is the need to value the firm. This is going to start with determining what the cash flows for that firm are going to be. Now, that sounds simple enough, right? We could just look at the statement of cash flows. But the reality is, it's a bit more tricky than you might think. I'm in the 04_02_Begin Excel file. Now, what we've got here is our three-statement financial model, and I focused on the statement of cash flows as well as our various assumptions over time. In order to evaluate the value of this firm, we're going to need to determine the free cash flow for the company. The free cash flow is going to be driven by the cash from operations for the firm, less what the firm thinks it's going to need to spend on capital expenditures. This is one of the assumptions that we'll often have to make in order to build an effective valuation model. So in this case, the firm is projecting…

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