Chapter 6: Understanding Project and Building Assumptions

In financial modeling, there is no one-size-fits-all. Financial models can vary widely in size, purpose, and complexity. A valuation model is vastly different from a loan repayment model. A model that's created to expand a business will be different from one that's created to dispose of a business. A model that's created to give someone a rough idea of the value of a business will be far less complex than one that's created in support of a private placement or an initial public offering of the shares of the business. It is imperative that you understand the scope and purpose of the model you have been asked to prepare. No matter how impressive your model is, it is of no use if it doesn't meet the requirements of the user.

In this chapter, you will learn how to analyze projects and learn what the purpose of a project is. You will also learn how to create assumptions about the reasons for historic growth...