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

Understanding scenario analysis

In sensitivity analysis, we selected a few inputs or drivers and changed them, while keeping all other variables the same. This showed us the isolated effect that each of the selected inputs has on share price. However, in practice, this is rarely the case. Variables do not change in isolation. What you generally have is a number of variables changing as a result of a certain set of circumstances, or a scenario. Scenario analysis usually looks at two or three sets of circumstances, most likely, worst-case and best-case scenarios.

For each scenario, you would assume alternative values for selected variables. In selecting the variables, you would concentrate on those inputs or drivers that are the most subjective. Scenario analysis involves substituting all the selected variables for a given scenario in your model and examining the effect this has...