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
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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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Valuation

There are two main approaches to valuation, which are as follows:

• Relative approach: In this approach, you have the following methods:
• The comparative company method of valuation: This method obtains the value of a business by looking at the value of similar businesses and their trading multiples, the most common of which is enterprise value (EV) and earnings before interest, tax, depreciation, and amortization (EBITDA), where EV is divided by EBITDA.
• The precedent transaction method: Here, you compare the business to other similar businesses in the industry that have recently been sold or acquired. Again, you can use multiples to derive a value for your business or company.
• Absolute approach: This approach estimates all future free cash flow of the company and discounts it back to today. It is called the discounted cash flow (DCF) method. Essentially, the approach...