Building a financial model is only the first step. A model also needs to be reviewed to check whether the formulas, assumptions, links and outputs make sense.

Even a small error in a formula can affect several parts of a financial model. This is why model review and quality checks are important skills for finance professionals.

A Financial Modelling and Valuation Course can help students understand not only how to create models but also how to review, troubleshoot and improve them.

Why Financial Model Review Matters

Financial models often contain multiple worksheets and interconnected calculations.

For example:

Assumptions → Revenue Schedule → Income Statement → Cash Flow → Valuation

If an error appears in the revenue schedule, it may affect several outputs later in the model.

A review process helps identify these issues before the model is used for analysis or decision-making.

CFA Institute highlights model structure, linking schedules, separating assumptions and calculations, and building models that are easy to audit as important financial modelling practices.

Checking the Model Structure

The first step is understanding how the model is organized.

A well-structured model may have separate sections for:

• Assumptions

• Historical financials

• Revenue forecast

• Cost forecast

• Supporting schedules

• Financial statements

• Valuation

• Outputs

This makes it easier for another person to understand how the model works.

Reviewing Assumptions

The next step is checking the assumptions.

Questions may include:

• Are the assumptions clearly identified?

• Are historical trends considered?

• Are growth rates reasonable?

• Are cost assumptions consistent?

• Are important business drivers included?

• Are assumptions separated from calculations?

The objective is not necessarily to prove that every assumption is correct. Instead, the reviewer should understand the logic behind the assumptions.

Checking Formula Consistency

Formula consistency is another important part of model review.

Suppose a revenue formula is correct for one year but accidentally refers to the wrong cell in another year.

The model may still calculate without showing an obvious error.

Therefore, reviewers need to compare formulas across periods and identify unexpected differences.

Checking Financial Statement Links

In an integrated model, the income statement, balance sheet and cash flow statement should connect appropriately.

For example, depreciation may affect:

• Income statement through depreciation expense

• Balance sheet through fixed assets

• Cash flow statement through adjustments to operating cash flow

Similarly, debt can influence interest expense, cash flow and the balance sheet.

Understanding these relationships is a core part of financial modelling.

CFA Institute describes three-statement modelling as a structured approach that links financial statements and supporting schedules.

Checking for Balance Sheet Errors

One basic check is whether:

Assets = Liabilities + Equity

If the balance sheet does not balance, the model needs to be investigated.

The problem could come from:

• Incorrect formulas

• Missing links

• Wrong assumptions

• Incorrect opening balances

• Errors in supporting schedules

Balance sheet checks can therefore act as an important warning signal.

Reviewing Valuation Outputs

A financial model may eventually be used for valuation.

At this stage, the reviewer should check whether the valuation is consistent with the model's assumptions.

For example:

• Are projected cash flows linked correctly?

• Are valuation assumptions clearly stated?

• Are the selected multiples appropriate for the analysis?

• Are enterprise value and equity value being treated correctly?

• Are sensitivity tables working?

Valuation involves judgement as well as numerical calculations. CFA Institute notes that valuation models need to be applied appropriately and that inputs and assumptions require careful consideration.

Using Sensitivity Checks

A useful way to review a model is to change important assumptions and observe the outputs.

For example, if revenue growth changes from 10% to 5%, the model should show a logical impact on:

• Revenue

• Profit

• Cash flow

• Valuation

If changing an assumption produces an unexpected result, the formulas or model structure may need to be checked.

Making a Model Easier to Understand

A good financial model should not only work; it should also be understandable.

Useful practices can include:

• Clear worksheet names

• Consistent formatting

• Clearly labelled assumptions

• Logical formula flow

• Simple outputs

• Appropriate checks

• Avoiding unnecessary complexity

The purpose is to make the model easier for another person to review and use.

How a Financial Modelling and Valuation Course Can Help

Students can learn model review through practical exercises rather than only theoretical explanations.

A structured learning process may include:

1. Building a model

2. Introducing or identifying errors

3. Checking formulas

4. Reviewing financial statement links

5. Testing assumptions

6. Running scenarios

7. Checking valuation outputs

8. Improving model presentation

This approach helps learners understand what can go wrong and how to troubleshoot it.

The WallStreet School's Financial Modeling & Valuation program focuses on hands-on model building, valuation and practical finance case studies.

Who Should Learn Financial Model Review?

This skill can be useful for:

• Finance students

• Financial analysts

• Investment banking aspirants

• Equity research professionals

• Corporate finance professionals

• Valuation professionals

• Anyone building complex Excel models

Even beginners can benefit from learning model review because it encourages them to think about accuracy and logic instead of simply completing formulas.

Conclusion

Financial modelling is not complete when the formulas are entered. Reviewing the model is equally important.

A Financial Modelling and Valuation Course can help learners understand how to check assumptions, formulas, financial statement links, scenarios and valuation outputs. These skills can make models more reliable, easier to understand and more useful for financial analysis.

For anyone looking to develop practical finance skills, learning how to build, review and improve a financial model provides a more complete understanding of financial modelling and valuation.