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Hands-On Financial Modeling with Microsoft Excel 2019

Book Description

Explore the aspects of financial modeling with the help of clear and easy-to-follow instructions and a variety of Excel features, functions, and productivity tips

Key Features

  • A non-data professional's guide to exploring Excel's financial functions and pivot tables
  • Prepare various models for income and cash flow statements, and balance sheets
  • Perform valuations and identify growth drivers with real-world case studies

Book Description

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.

What you will learn

  • Identify the growth drivers derived from processing historical data in Excel
  • Use discounted cash flow (DCF) for efficient investment analysis
  • Build a financial model by projecting balance sheets and profit and loss
  • Apply a Monte Carlo simulation to derive key assumptions for your financial model
  • Prepare detailed asset and debt schedule models in Excel
  • Discover the latest and advanced features of Excel 2019
  • Calculate profitability ratios using various profit parameters

Who this book is for

This book is for data professionals, analysts, traders, business owners, and students, who want to implement and develop a high in-demand skill of financial modeling in their finance, analysis, trading, and valuation work. This book will also help individuals that have and don't have any experience in data and stats, to get started with building financial models. The book assumes working knowledge with Excel.

Downloading the example code for this ebook: You can download the example code files for this ebook on GitHub at the following link: https://github.com/PacktPublishing/Hands-On-Financial-Modeling-with-Microsoft-Excel-2019. If you require support please email: customercare@packt.com

Table of Contents

  1. Title Page
  2. Copyright and Credits
    1. Hands-On Financial Modeling with Microsoft Excel 2019
  3. Dedication
  4. About Packt
    1. Why subscribe?
  5. Contributors
    1. About the author
    2. About the reviewers
    3. Packt is searching for authors like you
  6. Preface
    1. Who this book is for
    2. What this book covers
    3. To get the most out of this book
      1. Download the example code files 
      2. Download the color images
      3. Conventions used
    4. Get in touch
      1. Reviews
  7. Section 1: Financial Modeling - Overview
  8. Introduction to Financial Modeling and Excel
    1. The main ingredients of a financial model
      1. Investment
      2. Financing
      3. Dividends
    2. Understanding mathematical models
    3. Definitions of financial models
    4. Types of financial models
      1. The 3 statement model
      2. The discounted cash flow model
      3. The comparative companies model
      4. The merger and acquisition model
      5. The leveraged buyout model
      6. Loan repayment schedule
      7. The budget model
    5. Alternative tools for financial modeling
      1. Advantages of Excel
    6. Excel – the ideal tool
    7. Summary
  9. Steps for Building a Financial Model
    1. Discussions with management
      1. Gauging management expectations
      2. Knowing your client's business
      3. Department heads
    2. Building assumptions
    3. Building a template for your model
    4. Historical financial data
    5. Projecting the balance sheet and profit and loss account
    6. Additional schedules and projections
    7. Cash flow statement
    8. Preparing ratio analysis
    9. Valuation
    10. Summary
  10. Section 2: The Use of Excel - Features and Functions for Financial Modeling
  11. Formulas and Functions - Completing Modeling Tasks with a Single Formula
    1. Understanding functions and formulas
    2. Working with lookup functions
      1. The VLOOKUP function
      2. The INDEX function
      3. The MATCH function
      4. The CHOOSE function
        1. Implementing the CHOOSE function
    3. Utility functions
      1. The IF function
      2. The MAX and MIN functions
        1. Implementing the functions
    4. Pivot tables and charts
      1. Implementing pivot tables
    5. Pitfalls to avoid
      1. Protect sheets
    6. Summary
  12. Applying the Referencing Framework in Excel
    1. Introduction to the framework
    2. Relative referencing
    3. Absolute referencing
    4. Mixed referencing
    5. Implementing the referencing framework
    6. Summary
  13. Section 3: Building an Integrated Financial Model
  14. Understanding Project and Building Assumptions
    1. Understanding the nature and purpose of a project
    2. Conducting interviews
      1. Historical data
    3. Building assumptions
      1. General assumptions
      2. Profit and loss and balance sheet assumptions
      3. Profit and loss account growth drivers
        1. Year-on-year growth
        2. Compound annual growth rate
      4. Balance sheet growth drivers
        1. Days of inventory
        2. Debtor days
        3. Creditor days
    4. Summary
  15. Asset and Debt Schedules
    1. Understanding the BASE and corkscrew concepts
    2. Asset schedule
      1. The straight line method
      2. The reducing balance method
    3. Approaches to modeling assets
      1. The detailed approach
        1. Asset and depreciation schedule
      2. The simple approach
    4. Debt schedule
      1. The complex approach
      2. The simple approach
    5. Creating a loan amortization schedule
      1. Creating the template
      2. Creating the formulas
      3. Using the schedule
    6. Summary
  16. Cash Flow Statement
    1. Introduction to the cash flow statement
    2. Items not involving the movement of cash
    3. Net change in working capital
      1. Cash flow from investment activities
      2. Cash flow from financing activities
    4. Balancing the balance sheet
      1. Troubleshooting
      2. Circular references
    5. Creating a quick cash flow statement
    6. Summary
  17. Valuation
    1. Absolute valuation
      1. Free cash flow
      2. Time value of money
      3. Weighted average cost of capital
      4. Terminal value
      5. Calculating the present value
    2. Relative valuation – comparative company analysis
      1. Trading comparatives 
      2. Precedent transaction comparative
    3. Summary 
  18. Ratio Analysis
    1. Understanding the meaning and benefits of ratio analysis
    2. Learning about the various kinds of ratios
      1. Liquidity ratios
      2. Efficiency ratios
      3. Return on average assets 
      4. Return on average capital employed
      5. Return on average equity
      6. Debt-management ratios
    3. Interpreting ratios
    4. Understanding the limitations of ratio analysis
    5. Using ratios to find financially stable companies
    6. Summary
  19. Model Testing for Reasonableness and Accuracy
    1. Incorporating built-in tests and procedures
    2. Troubleshooting
    3. Understanding sensitivity analysis
    4. Using direct and indirect methods
      1. The direct method
      2. The indirect method
    5. Understanding scenario analysis
    6. Creating a simple Monte Carlo simulation model
    7. Summary
  20. Another Book You May Enjoy
    1. Leave a review - let other readers know what you think