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

Incorporating built-in tests and procedures

A financial model, by its nature, is full of formulas and calculations. Although most of them are simple, their volume and repetitiveness create exposure to errors that could cause the most accomplished modeler nightmares trying to track them down.

The following are some of the procedures to adopt in your model to reduce this exposure:

  • Hardcoded cells
  • Balance checks
  • Cash and cash equivalents
  • Entering values only once
  • Using one formula per row

Let's look at each of these procedures in detail:

  • Hardcoded cells: Hardcoded cells should be distinguished by using a blue font. The significance of hardcoded cells is that they are the primary input number cells, which contain data that is fixed and will not change (unless it is to correct an error or modify an assumption) and should therefore be formatted in such a way that the cells are easily identified. An example of this is historical information....