Financial modelling is an exercise in either asset pricing or corporate finance, an exercise of quantitative nature. Saying it differently, it is about translating a set of hypotheses about the behavior of markets or agents into numerical predictions. To show you an example, based on the hypotheses that dollar will grow constantly the next year, a rise of the trade deficit will be 5%.

IN ecommerce:no need to manually enter data,chieve high level of accuracyprovides accurate picture of inventory availble to sudtomers as well as ecommerce store, they get updated infromation like order shipped,order confirmed.
lean six sigma;
benfits of lean and six sigma
with 99.99%of value(standard deviationn of 6)
lean is a process of elimiating uses pull mechansim. what customer wants we craete and focuses on waste. 7 types of waste. over production, over procesisng, rework, tranporatition , motion,witing, inventory,

six sigma to achieve 6 sigma level of performance,
3 elemets required in aprocess:
customer-customer satisfactioj
process-proces performance, identify gap between customer expectation ad our process, look at roces from sutomer perscpective

dmaic-data driven quality management fpr process improveemnt.define , measure, analyse,improve,control
dmadv-data drivenuality strategyy fpr designing products and processes.define,measure,analyse,define,verify
dfss-daat driven qaulity startagey for re designing a product .

elimiate defects in a process..ur project performs at six sixma process improveemnt by integrating lean and six sigma.
define lean in the context of organization goal and objectives.our purpose- integrating communities around tye world on commerce, sustained b trust,and isnpired by oportunyi,
ur values,-we belive people.recognize and resptect everybody,everyone has soething unique,treat otyers as they want them to teat u,honest open work environmet.
we had a visual management rortocube for metrics recording, suggestion forms,.our gol was to increase theproblem finding and problem solving cpabilty of our cs agents.
for the forecast period we have buil don revenue yet

next we assume workimg capital which covers accounts recievable, acounts payable, inventorydays(turning iinventory)
assumtions: historical working capital assumption. calculate receivable days on historical basis.accounts receivable on the balambce sheet divided by the annualised reveune(revenue in a months time multiply 12) times 365 days per year.
assuming inventory: take annual inventory n balance sheet and divide it by annual cost of goods sold.(multiply by 12)multiply by 365 days per year.
assuming accounts payable: accounts payable divide by cost of goods sold (multiply 12) X 365.

iwe get info about what what business would do.

adter fillingthe assumption statemnt:

(income statemnt expressed in 10000)

Step 2: fill in the income statemt=

FORECAST FUTURE TREND- what direction business is takeing, hwat direction is business doig inc or dec and by what rate. base year is 100%(we base everything on the base year)

trend percentage=analysis year dollar amount/base year dolar amount
horizontal analysis..

identify stock market trend: rally-upmove

Financil modeling:

components of income statement:
revenues(sales),expenses(cogs,opertaing expense(r&d,marketing and marketing),sales adminstrative and expenses),ebidta(how uch cash flow a business is actually generaying,how it si doing as relative to its peers ),deprication and amortization,

it identifies all thedrivers,riska nd demonstrates of financial return of the investmemt
key evaluation metrics-understanding the financial model, anddoing financial analysis
2 metrics:
a.customer metrics- average nukber ofcustomers(customers who have ordered in the last 12 months),churn rate(%of cutomers not active in the ;ast 12 onths0,average order value(number of orders orderedper itemsprice item),lifetime vlue(npv of customer margin per customer),customer acqusition cost(cost to acquire customer),total addressable market(aveage vlue of goods, services in the market),eerage revenue eper user(total revenue didvide by numbr of users),net promoter score(survey fo how likely the customer wil refer)
b. financial -gross merchansie alue(valu eo items sold on site),gross progfit /margin(some comapnaies include shiping while calculating margin),sell through rate%of inventory sold over period of time),ev/ctive customers(equity+debt/avtive customers), ev/retutn,ev/profit, ev/ebidt
lifetie value/customer qcquisition cost=5 times is a good number.

now building model:
a.sumptions-HAS HARD INPUTS,we make assumptions to calcuate profits. it is build up through various channels-mail,organic search,paid search,affilaites for order build up.first we aasumeconversion rates(% of customers per 100 visit), then # oforders placed by a particular channel, #items per order, item value(fullretail),markdown %, discount%, profit margin%.we calculate customers OPENING BALANCE+NEW CUSTOMERS. we make assumptions about variable cost(marketing-cost per click,bychannel fulfilemt-shipping,abour/handling)), fixed cost(fulfilmnt,salaries, tehcnology ,other). we mke assumptions about working capital which includes account payable, accounts receivable, inverntory days), capital exp(technology, equipmemt),capital assets(depriction), financing(lineof credit, equity, dicidednde.
since it is startupt has no email,most of it went through paid serach and affiliates which was approximately 5000, then we assumption for assumption rate