Book Image

Hands-On Financial Modeling with Excel for Microsoft 365 - Second Edition

By : Shmuel Oluwa
Book Image

Hands-On Financial Modeling with Excel for Microsoft 365 - Second Edition

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 Excel for Microsoft 365 explores financial modeling terminologies with the help of Excel. Starting with the key concepts of Excel, such as formulas and functions, this updated second edition will help you to learn all about referencing frameworks and other advanced components for building financial models. As you proceed, you'll explore the advantages of Power Query, learn how to prepare a 3-statement model, inspect your financial projects, build assumptions, and analyze historical data to develop data-driven models and functional growth drivers. Next, you'll learn how to deal with iterations and provide graphical representations of ratios, before covering best practices for effective model testing. Later, you'll discover how to build a model to extract a statement of comprehensive income and financial position, and understand capital budgeting with the help of end-to-end case studies. By the end of this financial modeling Excel book, you'll have examined data from various use cases and have developed the skills you need to build financial models to extract the information required to make informed business decisions.
Table of Contents (19 chapters)
1
Part 1 – Financial Modeling Overview
4
Part 2 – The Use of Excel Features and Functions for Financial Modeling
8
Part 3 – Building an Integrated 3-Statement Financial Model with Valuation by DCF
15
Part 4 – Case Study

Understanding relative valuation – comparative company analysis

Relative valuation relies on the theory that, in general, similar companies will produce similar results. This may be a bit simplistic, but in a discipline that involves a lot of assumptions and estimates, relative valuation is popular among analysts as it provides a plausible way to arrive at the value of a business that is quick and simple. The actual calculations are straightforward. The difficulty is in identifying comparable companies. The main criteria to consider are as follows:

  • Industry – With reference to your major source of income, identify the appropriate industry to which the company belongs and look for examples within that industry class.
  • Size – The relationship between size and profits is not exactly linear. A company with twice the asset base will not necessarily make twice as much profit. There may be economies of scale and access to restricted benefits as a result of...