Operating Model vs. DCF
A DCF model values a company based on it's cash flows.
A 3-statement model (AKA, an Operating model), gives a projection of a company's financial statements.
How do a 3-statement model and a DCF model relate? Is it such that you use a 3-statement model to get a projection of a company's cash flows, and then plug those projected cash flows into a DCF to get a valuation?
Yes, you have the right idea. Your free cash flows will flow from the cash flow statement (for the most part), but the rest is typically on its own - assumptions of discount rates, growth rates, exit multiples, etc.
You basically build the op model first and then on top of that a DCF. So the op model is just 3 interconnected statements. DCF then picks the right cells from that (to calculate FCF) and then discounts those to PV.
Unde dignissimos voluptatibus maxime voluptatem sed. Rerum quia ea laborum sint. Ea totam libero labore rerum.
Quaerat nostrum ab dicta totam similique. Fugit maiores rem est autem ea velit. Officia aperiam hic perspiciatis praesentium qui.
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...