We have finally completed our financial model on the Chocolate business, and here are the steps. I am concluding this Financial Modeling series in one summary post.
- The first thing you do in creating your Financial Model, is to create an Income Statement (also known as a Profit and Loss statement)
- You will need to move on to the Interest Schedule and the Debt Schedule in order to complete your P&L
- With your P&L in place, you move on to the Balance Sheet
- You can then create the Cash Flow Statement as well. Once this is done, you loop it back to finish your Balance Sheet
- Then to test your Financial Model and also to check how your numbers are doing as compared to the industry, you put together the Financial Ratios
- The next step is to break down your Return on Equity using the DuPont Analysis
- Lastly, to check how long your business model can sustain without any further infusion of funds, you check the Sustainable Growth Rate (SGR)
Well, it was interesting to discuss how to create this sweet model for a Chocolate manufacturing business. I sure had fun creating and discussing this model with you!
At this point, I would also like to point out that the complexity of a model also depends on how many factors you are willing to consider, how many plans are you willing to drill-down to and most importantly how realistic are you about the business.