From the course: Financial Modeling Foundations
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Characteristics of financial models - Microsoft Excel Tutorial
From the course: Financial Modeling Foundations
Characteristics of financial models
- [Instructor] There are three major types of models you may encounter on a regular basis. It's good idea to understand the differences between these models so you can figure out which one is right for your circumstances and the questions you're trying to answer. The three major models that you probably care most about are the Three Statement Model, the DCF Model, and the Buyout Model. Each of them has different characteristics and helps us to evaluate different questions. Now, there's a variety of different types of questions that we might ask around models. Could be, we're interested in valuation, could be, we're interested in a measurement of risk based on the model, or could be that we're interested in the range of possible outcomes in the future. Each of the models approaches these outcomes in a different way. From a valuation perspective, the three statement model allows us to use a present value of our free cashflow or multiples based on the projections of cashflows for the…
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