The financial modeling process used to value a firm consists of a series of steps. These include which of the following:
A) Analyzing the target firm's historical statements to identify the primary determinants of cash flow.
B) Project three-to-five years (or more) of annual pro forma financial statements. This three-to-five year period is called the planning period.
C) Estimating the present value projected pro forma cash flows during the planning period.
D) Estimating the terminal value.
E) All of the above

Question

Quizplus · Accepted Answer

All of the listed steps are part of the financial modeling process used to value a firm. Analyzing historical statements helps to identify trends and drivers of cash flow, projecting pro forma financial statements allows for forecasting future performance, estimating the present value of projected cash flows during the planning period helps to determine the value of the firm during that time, and estimating the terminal value accounts for the value of the firm beyond the planning period.

The Financial Modeling Process Used to Value a Firm Consists