Task-2 Financial Modeling and Analysis

VCE Summer Internship Program 2021
Smart Task Submission Format
[ Download This Format in .DOCX format and then Edit it and SUBMIT]
Intern’s Details
Name P. Bala Sai Saroj Ram
Email-ID 2201194@ipeindia.org
Smart Task No. 2
Project Topic Financial Modeling and Analysis
Smart Task (Solution)
Task Q1: While preparing a financial model what are the assumptions we need to take. Please list down the
list of assumptions with the values, assuming the project will be set up in India.
Task Q1 Solution:
The following are the primary categories that the assumptions must address:
1. Economic factors including GDP growth, industrial expansion, inflation, interest rates, and so forth.
2. Exchange rates, especially if your business conducts foreign trade.
3. Potential adjustments to the tax laws in each market where your organisation conducts business.
4. Modifications to the company's markup and pricing practises. You must make a single price forecast
variations in raw resources or items traded on exchanges.
5. Potential business expansion plans, including whether you want to construct a new factory or operate
a new store. For your HR department to manage their spending appropriately, it is a good idea to let
them know in advance about your intentions.
6. Additional important risk factors for the business.
At the very least some of the projections you'll need for budgeting should be modelled in spreadsheet.
Then, if required, you will be able to swiftly alter the underlying assumptions, automatically recalculate all
the model's figures, and assess many possible future scenarios.
500 Words (Max.)
Task Q2: Explain the function of revenue, cost and debt sheet of the financial model.
Task Q2 Solution:
Based on the past performance of the entity, financial modelling is a technique that can be used to predict the
future financial performance of securities, financial instruments, or corporations. Making a financial model
that will help someone make better financial decisions is the aim of financial modelling. The option may be
influenced by potential future cash flow, the debt load of the business, and other variables. The impact of
ST Solution Page 1 https://techvardhan.com

each of these factors can be felt when determining if a project or investment in a company is feasible. The
revenue, cost, and debt sheet functions of the financial model are as follows:
A. REVENUE SHEET'S FINANCIAL MODEL FUNCTION

The revenue sheet's functions are as follows:
1. Calculate the project's entire revenue.
2. All income elements are anticipated.
3. To list the many revenue sources or indicators for the project.
4. To understand the returns on different investments.
5. To comprehend the project's escalating financial success.
B. COST SHEET FUNCTION IN FINANCIAL MODEL-

The cost sheet's functions are as follows:
1. A rough estimate of project completion expenses.
2. Calculation of the project's capital expenditures, or CAPEX.
3. Project OPEX or operating expense estimation.
4. Recognize each cost unit's proportion to the overall cost.
C. USE OF DEBT SHEET –

The debt sheet's operations include the following:
1. To forecast interest costs.
2. Estimating interest payments
3. The projected principal balance of the debt
500 Words (Max.)
Task Q3: Explain in detail the various steps involved (with the importance) in the fin flows sheet. Why and
what the bank needs to check before financing the project.
Task Q3 Solution:
The following steps are necessary to prepare a fin flow sheet:
1. Projection of project information – The first step in creating a fin flow sheet is to include all project
detail. This will help to illustrate the project's funding mix of debt and equity, as well as the debt
service coverage ratio. Additionally, it will be the area where I have been working on a project.
2. Assumption projection must be considered when creating the financial model. Several assumptions
must be considered while creating the financial model. The fin flow sheet will then be updated to
reflect these assumptions. This will help us when we perform various calculations in the next stages.
3. Estimation of net income for various time periods – The third stage involves estimating net income,
which is then calculated by estimating total revenue or expenses incurred during the period, deducting
all operating or non-operating expenses from the revenue, and finally adding taxes.

4. Calculating the entire project cash flow from equity funding is another crucial stage.
5. Calculating the DSCR and the final project cash flow—The final project cash flow from equity is
subtracted from the principle and interest amount to determine the debt service coverage ratio, or
DSCR, and the project's final cash flow.
6. Results discovery- The following step is to determine the internal rate of return (IRR) from equity
investment, the debt service coverage ratio (DSCR) minimum or average, and the IRR (internal rate of
return) from the project.
The bank constantly aims to comprehend the client's capabilities, and in order to understand the project firm's
capabilities, the bank looks at the company's entire history and profile. The following should be done by a
bank before financing a project:
1. Overview of the company and management.

2. Financial data that has been audited for the last three years.
3. Supplemental security data.
4. Projections of cash flows for the following five years.
5. The bank loan and repayment plan for the company.
6. All business contracts relating to the project.
7. Corporate Memorandum and Articles of Association with Incorporation Certificate.
8. A copy of each banker's most recent one-year bank statement.
9. Statements of net worth and personal guarantees from the directors.
10. Any other papers that the banker deems necessary.
500 Words (Max.)

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VCE Summer Internship Program 2021

Smart Task Submission Format

Smart Task (Solution)

500 Words (Max.)

ST Solution Page 1 https://techvardhan.com

A. REVENUE SHEET'S FINANCIAL MODEL FUNCTION

B. COST SHEET FUNCTION IN FINANCIAL MODEL-

C. USE OF DEBT SHEET –

500 Words (Max.)

ST Solution Page 2 https://techvardhan.com

1. Overview of the company and management.

500 Words (Max.)

ST Solution Page 3 https://techvardhan.com

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