Book Image

Hands-On Financial Modeling with Microsoft Excel 2019

By : Shmuel Oluwa
Book Image

Hands-On Financial Modeling with Microsoft Excel 2019

By: Shmuel Oluwa

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.
Table of Contents (15 chapters)
Free Chapter
Section 1: Financial Modeling - Overview
Section 2: The Use of Excel - Features and Functions for Financial Modeling
Section 3: Building an Integrated Financial Model

Items not involving the movement of cash

In arriving at PAT, a number of items not involving the movement of cash have been considered, which now have to be reversed in order to arrive at an accurate figure for cash flow, as shown here:

The obvious candidate for this is depreciation. The relevant cash flow occurs at the time the asset is purchased. However, we don't charge the total cost to the profit and loss account all at once; the correct accounting treatment is to allocate the original cost over the useful life of the asset.

This periodic allocation of cost is called depreciation and clearly does not involve the movement of cash. Since it has been deducted as an expense in arriving at our profit, we need to add it back to the PAT, as shown in the preceding screenshot. We also add back interest charged to PAT. Although this is cash flow, it is the cost of debt finance...