Certified Financial Management Specialist Practice Exam

Which of the following components is NOT part of a financial model?

1. Income statement

2. Balance sheet

3. Cash flow statement

4. Sales forecast

The correct answer is: Sales forecast

A financial model typically includes the key financial statements that illustrate a company's performance and financial position. These essential components are the income statement, balance sheet, and cash flow statement. The income statement reflects a company's revenues, expenses, and profits over a specific period, providing insights into operational efficiency. The balance sheet showcases the company's assets, liabilities, and equity at a given point in time, helping to evaluate its financial stability. The cash flow statement details the inflows and outflows of cash, highlighting the company's cash generation and expenditure trends. On the other hand, a sales forecast, while important for planning and decision-making, is not a direct component of a financial model. Instead, it serves as an input that can influence other components but does not constitute a formal financial statement itself. The financial statements are grounded in historical data and incorporate various assumptions, including those from sales forecasts, to project future performance.