#### 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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# Understanding the meaning and benefits of ratio analysis

A ratio is calculated by dividing one item by another—for example, profit divided by turnover. However, you should not pick items from financial statements at random and divide them; you should select items whose ratio will be meaningful and provide information that will aid decision-making. In the example of profit divided by turnover, this ratio, otherwise called the profit margin, tells you how much profit is generated for every Naira of turnover.

Ratios are usually expressed as percentages, but also as percentages as they apply to times or days. A profit margin of 20% means that after all relevant deductions, the company retains 20% of its turnover as profit. In other words, the profit for the period is 20% of the turnover. The ratios on their own are useful in directing the attention of management and section...