As a Financial Analyst, forecasting is a topic you need to feel confident discussing in depth. This question gives you the opportunity to share your experience and your analytical skills. Test your business market knowledge by thinking back on the research you have done for companies in the past.
Use what you have learned to impress the interviewer by showing that you understand the different models and when to use them. Accuracy will be dependent upon if you are using the right model with the right situation. Share the factors that you take into account, such as operations, financial results, the company's position in the marketplace and the different characteristics of the current market.
The most used profitability models are:
- Historical Model
- Trends Based Model
- Analytic Model
- Financial Model
"I have worked primarily with startups, so I have found using the financial model and looking at trends is most effective. For companies with a more stable financial background, I would use the historical model. It really depends on the company; however, I have found the analytical model to generally be the least accurate. In the end, most models still heavily lean on educated guesswork."