Financial Analysis and Modeling Using Excel and VBA

Chapter 25. How to Build Good VBA Models

In Chapter 1: Introduction to Financial Analysis and Modeling I discussed the steps one takes to build models using both Excel and VBA and stressed that it is best to start developing good model building habits from the very beginning. In this chapter I cover three important topics that will help you start developing good models efficiently from the beginning. I then conclude with a discussion of how you should work through the models in this book for maximum benefit.

Attributes of Good VBA Models

While VBA models can be widely different from one another, all good ones need to have certain common attributes. In this section I briefly describe the attributes that you should try to build into your models. Some of these apply to Excel models as well. I am including them both here and under Excel so that you can have comprehensive lists of the attributes at both places.

Realistic

Most models you develop will be directly or indirectly used to make some decisions. The output of the model must therefore be realistic. This means that the assumptions, mathematical relationships, and inputs you use in the model must be realistic. For most "real-world" models, making sure of this takes a lot of time and effort, but this is not a place where you should cut corners. If a model does not produce realistic outputs, it does not matter how good its outputs look or how well it works otherwise.

Error-Free

It is equally important that a model be error-free. You must ...