Introduction to Financial Modeling By using this method income statement, balance sheet and cash flow statement is prepared. In the present case by using financial modeling method budget and income statement is prepared. Model that is prepared is highly flexible and integrated in nature which is its big positive point. When one cell in input table will be altered then other values of the output sheet will also changed. Hence, it can be said that every time managers does not need to prepare new budget on paper. They can be changing values of input sheet can prepare new budget. You Share Your Assignment Ideas We write it for you! Most Affordable Assignment Service Any Subject, Any Format, Any Deadline Order Now View Samples Way or instruction for use of model In order to use this model following instructions will be followed. Inserting input data- In order to prepare budget on this spreadsheet it is very important to enter a value. User of this model can either directly enter values in input sheet section of this model or he may first enter values on paper and thereafter can copy same values in excel sheet. The approach user follow depend on the way in which he feel comfort. Get Help in Any Subject Our intention is to help numerous students worldwide through effective and accurate work. Assignments Sample Offers Toll Free No : +61 364132102 Percentage table- Second table in input sheet is a percentage table in which percentage of cash sale, credit sales, credit purchase and cash purchase will be entered. These cells are linked to the budget and with change in the values of cell in this table entire budget values will get changed. Thus, user in future if any change comes in projected cash and credit sales as well as purchase percentage must make changes in values of variables that are in the percentage table. Automatic carry forward of values on which credit and debit amount will be computed- This is third important table of the input sheet. Under this table formula of IF function of excel is inserted. In this table values of previous months are carry forward that are related to credit sales and purchase. In order to use this table it is instructed that user must double click on specific value and must change in last two values in formula. For example in case of facilities and room sales one month time is given to debtors. Hence, formula is =IF(C27>C26;C5) and if user think that credit period may change in future then he will make changes in last two values that are C26 and C5. When by replacing these values new cells name will be entered then model will automatically calculate credit sales and purchase. Hence, it is instructed that user must change only last two cell names.Instruction for use of budget cash flow model- In order to use this model it is instructed that user must not change any formula that is inserted in this model. All cells of this model are linked to input sheet. When values of input sheet will change each and every value in this model will change automatically. Hence, it is instructed to user of this model that any sort of change he must not done on this model. Instruction for use of P&L statement model- For making use of P&L statement model also it is instructed that user must not make any type of change in this model. All values of this model are linked to the budget model. Hence, change in budget model will directly affect income statement of the firm. Features built in model Flexibility- Flexibility is one of the most important feature of this model and under this model is prepared in such a way that new values can also be entered in to budget. It can be seen in the budget given in input table that additional column of other expenses is added in the table (Charnes, 2012). Same thing is added in the output budget sheet. If in future firm wants to add new things in budget then it can enter values in to column and row of other expenses. This model is not rigid and all cells are interlinked to each other. Thus, if change will come in one values all relevant values will automatically get changed. In order to do one change user of the model does not need to change several cells of the spreadsheet. He merely needs to make change in single cell in order to bring changes in values of all variables in which changes are required. Integration- Integration refers to the interrelationship between different cells. This model is highly integrated in nature and input as well as output sheet are highly integrated to each other (Libman, 2011). Along with this all cells in single output model are connected to each other. Thus, integration among cells is another important feature of this spreadsheet. Also Read: Method And Techniques To Manage Customer Relationship Management Analysis and Interpretation of Financial Performance of an Organization From analysis of budgeted figures it can be said that firm give good performance in its business. As cash surplus balance of the firm is increasing consistently. If we look at purchase value of food and drink purchase then it can be seen that their values are fluctuation consistent. Some times firm increase product sales but some times it increase product purchase. Sales of the firm is also fluctuating continuously. This means that firm in alignment to change in sales is bringing changes its purchase. This is the reason due to which firms cash balance is increasing continuously even its sales is fluctuating consistently. Hence, it can be said that firm is giving magnificent performance in its business. Net profit earned by the firm is also of high amount and it can be assumed that firm is earning good profit in its business. You Share Your Assignment Ideas We write it for you! Most Affordable Assignment Service Any Subject, Any Format, Any Deadline Order Now View Samples Conclusion On the basis of above discussion it is concluded that financial modeling is a very important method because by using same lots of time is saved easily. By using financial model all things that are related to problem are integrated easily and impact of change in one factor on the budget and firm profitability can easily be tested. Hence, it is concluded that financial model must be used by each and every type of manager. References Charnes, J., 2012. Financial modeling with crystal ball and excel. John Wiley & Sons Libman, A., 2011. [Online]. Finacial modeling techniques. Available through < https://www.wallstreetprep.com/blog/financial-modeling-techniques/>. [Accessed on 5th May 2016]. 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