#### Overview of this book

Financial modeling is a core skill required by anyone who wants to build a career in finance. Hands-On Financial Modeling with Microsoft Excel 2019 explores terminologies of financial modeling with the help of Excel. This book will provides you with an overview of the steps you should follow to build an integrated financial model. You will explore the design principles, functions, and techniques of building models in a practical manner. Starting with the key concepts of Excel, such as formulas and functions, you will learn about referencing frameworks and other advanced components for building financial models. Later chapters will help you understand your financial projects, build assumptions, and analyze historical data to develop data-driven models and functional growth drivers. The book takes an intuitive approach to model testing and covers best practices and practical use cases. By the end of this book, you will have examined the data from various use cases, and have the skills you need to build financial models to extract the information required to make informed business decisions.
Preface
Free Chapter
Section 1: Financial Modeling - Overview
Introduction to Financial Modeling and Excel
Steps for Building a Financial Model
Section 2: The Use of Excel - Features and Functions for Financial Modeling
Formulas and Functions - Completing Modeling Tasks with a Single Formula
Applying the Referencing Framework in Excel
Section 3: Building an Integrated Financial Model
Understanding Project and Building Assumptions
Asset and Debt Schedules
Cash Flow Statement
Valuation
Model Testing for Reasonableness and Accuracy
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# Introduction to the cash flow statement

Profit and loss accounts are different from the cash flow statement in that they do not wait for the cash implications of a transaction to be settled before the transaction is recognized. For example, if you make a sale of N100,000 and the customer has received the goods or services but has not yet paid, there is no cash movement.

However, both you and the customer recognize that a sale has been made—indeed, ownership and custody of the goods have been transferred, so the profit and loss account will record this as a credit sale, increasing turnover by N100,000, and to complete the double entry, a receivable is created under that customer's name to signify that they owe you N100,000. This is the accrual basis of accounting, which says that income should be recorded in the period in which it is earned, and expenses should be matched...