Finance Concepts

It is important to understand a company's cost structure. All companies have two major types of costs: fixed costs and variable costs. If the costs are modeled correctly, when a company doubles its revenue by doubling volume, its profit will more than double! This is a critical concept called operating leverage that is important to capture in a financial model.

Creating an accurate debt schedule is essential for robust financial modeling. Here is how you can effectively set up long-term debt:

Mastering the essentials of tax modeling is critical for any financial modeler. By understanding key components such as the tax rate, Earnings Before Tax (EBT) for accounting reporting, and Taxable Income (ie. EBT) for government reporting, modelers can ensure the accurate calculation of the Current and Deferred Tax values that appear on the financial statements. For those dealing with more complex scenarios, additional tax schedules and adjustments may be needed to provide deeper insights into tax assets and liabilities. At FMI, we believe a strong foundation in financial modeling principles, including income taxes, allows professionals to make informed decisions and add value to their teams and clients.

Effective financial modeling requires a solid grasp of various depreciation methods to accurately forecast asset values and expenses. Mastering these methods is crucial for creating dynamic and accurate financial models that drive informed decision-making. Here are key types of depreciation calculations you should know.

Working capital is a key indicator of a company’s financial health and operational efficiency. It represents the difference between a company’s current assets and current liabilities. Managing working capital effectively ensures a company can meet its short-term obligations and invest in its growth.