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

What this book covers

Chapter 1, Introduction to Financial Modeling and Excel, shows you the basic ingredients of a financial model and what are my favorite definitions of a financial model. You will also learn about the different tools for financial modeling that currently exist in the industry, as well as those features of Excel that make it the ideal tool to use in order to handle the various needs of a financial model.

Chapter 2, Steps for Building a Financial Model, helps you to devise a systematic plan to observe that will allow you or any other user to follow the flow from the beginning to the end of your model. It will also facilitate the building of your model and provide a useful roadmap for troubleshooting any errors or discrepancies that may arise.

Chapter 3, Formulas and Functions – Completing Modeling Tasks with a Single Formula, teaches you the difference between formulas and functions. You will learn the functions that make Excel ideal for modeling. You will also learn how to combine functions and where to get help with constructing your formulas where necessary.

Chapter 4, Applying the Referencing Framework in Excel, shows you what makes Excel come alive. The referencing framework is what makes Excel dynamic and enables the creation of integrated financial models. A sound knowledge of referencing in Excel can significantly speed up your work and is priceless for reducing the amount of boring repetition. You will learn in an uncomplicated manner how to use relative, absolute, and mixed referencing.

Chapter 5, Understanding Project and Building Assumptions, shows the measure of the importance of this topic, because about 75% of your modeling time should be spent on getting to know and understanding the project. As mentioned a number of times, there are different types of model. Which model you use will depend on the nature and purpose of your project, as well as your target audience. When building your assumptions, you will need to interview all those in a position to give informed and accurate growth projections for the various aspects of the entity's operations.

Chapter 6, Asset and Debt Schedules, shows us how to prepare an asset schedule to incorporate additions and disposals and current depreciation charges. You will also prepare a debt schedule to reflect projected additional finance and debt repayments as well as interest charges.

Chapter 7, Cash Flow Statement, covers the cash flow statement and explains how it is used in financial modeling. We will learn how to generate this as efficiently as possible.

Chapter 8, Ratio Analysis, teaches you how to compute performance indicators to give an idea of the projected financial health of the company. You can then compare this with historical ratios and determine whether this is consistent with your projections. The ratios will be divided into the following categories: liquidity, profitability, returns, and gearing.

Chapter 9, Valuation, shows us the various types of valuation methods and their advantages and affinity to different models. We will learn about the most accurate method, which is the discounted cash flow method.

Chapter 10, Model Testing for Reasonableness and Accuracy, provides a way to consider a range of alternatives to some of our key assumptions. Since we have been careful to format our input cells differently, we can quickly identify those inputs that have a significant impact on our final result, change them, and see the effect this has on our valuation. Finally, we look at the presentation of our results with the help of charts.