What is Financial Modelling? | How can you learn | Nandini Agrawal

Finance-Focused Summary (Financial Modeling)

Purpose of Financial Modeling

Financial modeling converts historical financial statement data into future projections to estimate a company’s future financial performance—such as revenue, costs, profits, and related financial statement line items.

Core Concept

• Financial statements (e.g., balance sheet, P&L/Income Statement) document past performance.
• Financial modeling uses that history, combined with industry knowledge, to forecast what the company’s statements are likely to look like in future years.

Typical Inputs Used (From History)

• Last ~5 years of data (explicitly referenced as “last 5 years,” with projection examples covering FY24 and FY25)
• Year-on-year revenue growth
• Cost structure as a % of revenue
• Ratios and metrics derived from items like operating expenses and assets

Framework for Building Future Projections

1. Start with historical metrics (e.g., revenue growth, cost % of revenue).
2. Apply industry outlook/knowledge to adjust assumptions for future years.
3. Populate projected values for:
   • Projected revenue
   • Projected profit
   • Projected balance sheet items, including assets, liabilities, cash balance, and share capital

Relationship to Valuation

Financial modeling supports valuation because valuation depends on future earnings/earnings power, not only last year’s profit. The model’s projected earnings are then used to determine what an investor should pay.

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Valuation Methods Mentioned

• Discounted Cash Flow (DCF)
• Price/Earnings (P/E) method
• Net Assets method

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Learning Guidance (Skills, Not Market Calls)

Suggested Learning Pathway

• If you don’t understand financial statements first, start with a book: “Interpretation of Financial Statements” by Fernando Buffett.
• Then use articles for broader learning.
• Prefer structured courses if you want a step-by-step plan.

Course Example Referenced (upGrad Campus)

• A structured, live learning course designed by PW Trust
• Highlights learning Excel, working with tables, and using “new age tools”
• Mentions:
  • tracking progress
  • a certificate for CV value
  • a placement assistant
  • mock interviews with industry experts

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Key Numbers / Timelines Mentioned

• Time horizon: Model from FY24 through FY25 (future projection years referenced)
• Historical window: Use the data from the last 5 years of the company

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Disclosures / Disclaimers

• No explicit “not financial advice” disclaimer was included in the provided subtitles.

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Tickers / Assets / Sectors

• None mentioned.

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Presenters / Sources

• Presenter: Nandini Agrawal
• Referenced author/book: Fernando Buffett (“Interpretation of Financial Statements”)
• Referenced education providers: upGrad Campus; PW Trust