Financial Modeling Topics | Knowledge Base (2024)

3-Statement Model

What is a 3-Statement Model? The 3-Statement Model is an integrated model used to forecast the income statement, balance sheet, and cash flow statement of a company for purposes of projecting its forw...

A/P Days

What is A/P Days? A/P Days counts the average number of days it takes for a company to fulfill an invoice from suppliers or vendors for orders placed using credit.

A/R Days

What is A/R Days? TheA/R Daysmeasures the approximate number of days in which a company needs to retrieve cash from customers that paid using credit.

Amazon Valuation Model (AMZN)

What is the Valuation of Amazon? Amazon (NASDAQ: AMZN) is an e-commerce company that offers online retail shopping and advertising services to consumers, as well as serving enterprises through Amazon...

Average Revenue Per User (ARPU)

What is ARPU? The Average Revenue Per User (ARPU) quantifies the amount of revenue generated on average from each customer. The implied ARPU can be calculated by dividing the total amount of revenue g...

Balance Sheet Forecasting Guide

How to Forecast the Balance Sheet Our Balance Sheet Forecasting Guide provides step-by-step instructions on how to forecast the key line items and how to balance a 3-statement model.

Balance Sheet Projection Guide

In a finance and investment banking interview, candidates will almost certainly be asked questions that test their understanding of the relationship between the balance sheet income statement, and cas...

Calendarization

What is Calendarization? Calendarization is the adjustment of a company’s financial data and operating performance to align with the calendar year-end date, i.e. December 31.

DCF Model Lesson (Part 1)

DCF Quick Lesson: Video Tutorial (2-Part Series) Learn the building blocks of a simple one-page DCF model consistent with the best practices you would find in investment banking. As a side benefit, th...

DCF Model Lesson (Part 2)

DCF Quick Lesson: Video Tutorial (2-Part Series) Learn the building blocks of a simple one-page DCF model consistent with the best practices you would find in investment banking. As a side benefit, th...

Debt to Asset Ratio

What is Debt to Asset Ratio? TheDebt to Asset Ratio, or “Debt Ratio”, is a solvency ratio used to determine the proportion of a company’s assets funded by debt rather than equity.

Defensive Interval Ratio (DIR)

What is the Defensive Interval Ratio? TheDefensive Interval Ratio (DIR)is a near-term liquidity ratio used to count the number of days that a company can operate using its liquid assets on hand. The...

Financial Modeling Guide

What is Financial Modeling? Financial Modeling is a tool to understand and perform analysis on an underlying business to guide decision-making, most often built in Excel. In practice, the most common...

Financial Modeling Techniques

2017 Update:Click here for thenew Ultimate Guide toFinancial Modeling Conventions and Best Practices. Financial Modeling Techniques Because financial modeling requires a great deal of spreadsheet w...

Income Statement Forecasting Guide

How to Forecast the Income Statement Forecasting the income statement is a key part of building a 3-statement model because itdrives much of the balance sheet and cash flow statement forecasts. In th...

Inventory Days

What is Inventory Days? Inventory Days measures the average amount of time in which a company’s inventory is held on hand until it is sold.

Is Wall Street Prep Worth It?

Is Wall Street Prep Worth It? Trainees that complete Wall Street Prep’s Premium Package or live seminars are eligible for Wall Street Prep’s Certification in Financial & Valuation Mode...

Last Twelve Months (LTM)

What is LTM? LTM stands for “Last Twelve Months” and measures the performance of a metric, most often revenue, as of the trailing twelve-month period.

Monthly Cash Flow Forecast Model

What is a Monthly Cash Flow Forecast Model? The Monthly Cash Flow Forecast Model is a tool for companies to track operating performance in real time and for internal comparisons between projected cash...

Non-GAAP Earnings

What are Non-GAAP Earnings? Non-GAAP Earnings are reported by public companies along with their GAAP financial statements. The Generally Accepted Accounting Principles (GAAP) are the standardized set...

Non-Recurring Items

What are Non-Recurring Items? Non-Recurring Items are gains and losses recognized on the income statement that must be adjusted, as they are neither part of ongoing core operations nor an accurate ref...

NVIDIA Valuation Model (NVDA)

What is the Valuation of NVIDIA? In the following post, we’ll build a DCF valuation model for NVIDIA (NASDAQ: NVDA) to determine its intrinsic value and implied share price. NVIDIA, a pioneer in graph...

Overhead Rate

What is Overhead Rate? TheOverhead Rate represents the proportion of a company’s revenue allocated to overhead costs, directly affecting its profit margins.

Plowback Ratio

What is the Plowback Ratio? ThePlowback Ratio is the percentage of a company’s earnings retained and reinvested into operations as opposed to being paid out as dividends to shareholders.

Return on Sales (ROS)

What is Return on Sales? TheReturn on Sales (ROS) is a ratio used to determine the efficiency at which a company converts its sales into operating profit.

Revolver Debt

What is Revolver Debt? In most 3-statement models, the revolver, or "revolving credit line", acts as a plug to ensure that debt automatically gets drawn to handle projected losses. Cash does the same...

Rolling Forecast Best Practices

How Does a Rolling Forecast Work? A rolling forecast is a management tool that enables organizations to continuously plan (i.e. forecast) over a set time horizon. For example, if your company produces...

Types of Financial Models

What are the Different Types of Financial Models? So, “What are the Different Types of Financial Models?”. The types of financial models constructed on the job are directly related to the...

Wall Street Prep (WSP) vs. Wall Street Oasis (WSO)

Wall Street Prep vs. WSO: Financial Modeling Courses Wall Street Prep pioneered the Financial Modeling Self Study Program in 2003 for students and professionals pursuing careers in finance. The progra...

Wall Street Prep vs CFI and WSO

Many students and professionals considering a career in investment banking, equity research, or private equity think about enrolling in a financial and valuation modeling training program. Prior to 20...

Working Capital Turnover

What is Working Capital Turnover? TheWorking Capital Turnover is a ratio that compares the net sales generated by a company to its net working capital (NWC).

Year to Date (YTD)

What is Year to Date? YTD stands for “year to date” and represents the time period from the beginning of the fiscal year to the present date.