Financial Modeling and Valuation: A Practical Guide to Investment Banking and Private Equity

PART One

Financial Statements and Projections

Financial modeling is the fundamental building block of analysis in investment banking. We will take a look at Walmart and analyze its financial standing, building a complete financial model as it would be done by Wall Street analysts.

The goals of this section are:

1. Understanding financial statements

a. Concepts

b. Historical analysis

c. Making projections

d. Model flow between the statements

2. Ability to build a complete financial model of Walmart

It is recommended that a financial model be built in six major components:

1. Income statement

2. Cash flow statement

3. Balance sheet

4. Depreciation schedule

5. Working capital

6. Debt schedule

The first three are the major statements: income statement, cash flow statement, and balance sheet. The latter three help support the flow and continuity of the first three. It is also not uncommon to have even more supporting schedules depending on the required analysis. Notice the first six tabs in the model template (“NYSF—Walmart—Template.xls”). Each reflects the six major model components. Please use the template and follow along as we build the model together.