Hey,
I have this M&A Business Modelling internship interview at one of the Big 4 coming up and I will have to do an:
Integrated Financial Model.
I have never done one of these but I know what it is. I'll get raw data and I'll have to build an interconnected system where I connect the:
Balance Sheet (Asset = Liability +Equity)
Income Statement (Revenue -> Net Income)
Cash Flow Statement (Operation, Financing, Investing flows)
Now how exactly does one do this? Do you think I'll have to start from scratch or will there be a predefined model with all the formulas? I'm guessing I'll have to build everything myself.
Do I simply build all 3 statements and include the formulas so that everything ties back, and then enter pieces of data one by one?
For info, the company will be a Gym. Are there any particular things I should look out for?
Really really want this internship.
Thanks guys
You've answered most of your own questions. I would argue, though, that you're not just connecting a 3-statement... that's a little too easy. And the raw data you'll get will probably be in the form of some key 3-statement lines anyways. You'll probably be asked to complete an X-year projection (X is usually 5, because anything further out isn't worth it).
Since the company is a gym, I'd take care to pay attention to the metrics involved with any service-based product. Customer attrition (how many people will buy a subscription and then drop out before the reporting period is over), customers who forget to cancel subscriptions (thus leading to increase in revenue for a short period of time), service upkeep vs. user fees (for example, if I bought a gym membership and went every day of the week, that's a lot of upkeep costs for the gym but I still pay a flat rate), etc.
It's a lot to think about, but just realize that a lot of these are assumptions. As long as you can justify your assumptions, you'll be fine.
Thanks for your response.
So if X is 5, I'll receive 5 years worth of data, correct? Sorry but I'm really new to this.
Do you know where I can find a template that I can hopefully memorize for the interview day? That would help me a lot I think. I really haven't got a club how to build this thing..
I don't get the assumptions part. I thought I was only going to receive numbers.
No, you'll probably receive current year data and then data from 1 or maybe 2 years back. You'll be in charge of projecting revenues, costs, etc. for the next X years (where X is usually 5, but can range anywhere from 3 to 10 depending on your industry).
You'll look at historic data and add in your own assumptions for growth rates to project a 3-statement for the upcoming years.
For example: say that the customer attrition rate has been decreasing the past 3 years. For example's sake, let's assume that in 2011 the attrition rate was 10%, in 2012 it was 8%, and in 2013 in was 6%. What would be a reasonable rate to use for 2014? The attrition rate affects your revenue growth rate year-to-year (if 10% of your new customers during a financial period are not coming back for the next one, then your growth rate is hindered by these lost potential customers). So you would solve for a reasonable revenue growth rate and use that to estimate a revenue for 2014. Since revenue is tied to other lines on the balance and income sheets, you now have another piece of the puzzle.
Do you have access to BIWS or Wall Street Prep? Go through some of their modules for projection-building.
I don't work in the finance industry and it's been 2 years since I've touched the nitty-gritty of these models, so maybe others could chime in on this?
Also keep in mind I have no idea what firm you're interviewing for, so this could be totally off. PM me with your firm name and I might be able to help more.
Thanks man! Really helpful stuff
I just need to find a template or something I can memorize. I only have a day to learn this, at least the basics.
Unfortunately I do not have access to BIWS or Wall Street Prep...
Is there a reason you waited until 2 days before to learn this stuff.....?
14 hours work days and 4 other interviews to prepare for.
Iste exercitationem magni quia id aut omnis numquam. Sed minima autem praesentium et earum. Voluptate omnis ipsum officia quidem et ad.
Porro ratione laborum nihil quis ea est. Maxime cupiditate sed voluptatem non sed.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...