Hands-On Financial Modeling with Excel for Microsoft 365: Build your own practical financial models for effective forecasting, valuation, trading, and growth analysis, 2nd Edition

✍ Scribed by Shmuel Oluwa

• Publisher: Packt Publishing
• Year: 2022
• Tongue: English
• Leaves: 347
• Edition: 2
• Category: Library

✦ Synopsis

Explore a variety of Excel features, functions, and productivity tips for various aspects of financial modeling

Key Features

• Explore Excel's financial functions and pivot tables with this updated second edition
• Build an integrated financial model with Excel for Microsoft 365 from scratch
• Perform financial analysis with the help of real-world use cases

Book Description

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.

What you will learn

• Identify the growth drivers derived from processing historical data in Excel
• Use discounted cash flow (DCF) for efficient investment analysis
• Prepare detailed asset and debt schedule models in Excel
• Calculate profitability ratios using various profit parameters
• Obtain and transform data using Power Query
• Dive into capital budgeting techniques
• Apply a Monte Carlo simulation to derive key assumptions for your financial model
• Build a financial model by projecting balance sheets and profit and loss

Who this book is for

This book is for data professionals, analysts, traders, business owners, and students who want to develop and implement in-demand financial modeling skills in their finance, analysis, trading, and valuation work. Even if you don't have any experience in data and statistics, this book will help you get started with building financial models. Working knowledge of Excel is a prerequisite.

Table of Contents

1. An Introduction to Financial Modeling and Excel
2. Steps for Building a Financial Model
3. Formulas and Functions - Completing Modeling Tasks with a Single Formula
4. The Referencing Framework in Excel
5. An Introduction to Power Query
6. Understanding Project and Building Assumptions
7. Asset and Debt Schedules
8. Preparing a Cash Flow Statement
9. Ratio Analysis
10. Valuation
11. Model Testing for Reasonableness and Accuracy
12. Case Study 1 – Building a Model to Extract a Balance Sheet and Profit and Loss from a Trial Balance
13. Case Study 2 – Creating a Model for Capital Budgeting

✦ Table of Contents

Cover
Title
Copyright and Credits
Table of Contents
Part 1 – Financial Modeling Overview
Chapter 1: Introduction to Financial Modeling and Excel
The main ingredients of a financial model
Investment
Financing
Dividends
Understanding mathematical models
Definitions of financial models
Types of financial models
The 3-Statement model
The discounted cash flow model
The comparative companies model
The merger and acquisition model
The leveraged buyout model
Loan repayment schedule
The budget model
Other types of models
Limitations of Excel as a tool for financial modeling
Excel – the ideal tool
Summary
Chapter 2: Steps for Building a Financial Model
Discussions with management
Gauging management expectations
Knowing your client's business
Department heads
Building assumptions
Building a template for your model
Multiple-worksheet approach
Single-worksheet approach
Uploading historical financial data
Projecting the balance sheet and profit and loss account
Additional schedules and projections
Cash flow statement
Preparing ratio analysis
Valuation
Summary
Part 2 – The Use of Excel Features and Functions for Financial Modeling
Chapter 3: Formulas and Functions – Completing Modeling Tasks with a Single Formula
Understanding functions and formulas
Working with lookup functions
The VLOOKUP function
The INDEX and MATCH functions
The CHOOSE function
Utility type functions
The IF function
The MAX and MIN functions
Pivot tables and charts
Pitfalls to avoid
Protect sheets
New functions in Excel 365
XLOOKUP
FILTER
SORT
SORT BY
UNIQUE
Summary
Chapter 4: Referencing Framework in Excel
An introduction to the framework
Relative referencing
Absolute referencing
Mixed referencing
Summary
Chapter 5: Introduction to Power Query
Highlighting common formatting mistakes
What is Power Query?
Different ways to use Power Query
Advantages of Power Query
Illustrative example
Summary
Part 3 – Building an Integrated 3-Statement Financial Model with Valuation by DCF
Chapter 6: Understanding Project and Building Assumptions
Understanding the nature and purpose of a project and discussions with management
Conducting interviews
Building assumptions
Historical data
General assumptions
Profit and loss and balance sheet assumptions
Selecting profit and loss account growth drivers
Year-on-year growth
Compound annual growth rate
Selecting balance sheet growth drivers
Days of inventory
Debtor days
Creditor days
Summary
Chapter 7: Asset and Debt Schedules
Understanding the BASE and corkscrew concepts
Asset schedule
The straight line method
The reducing balance method
Approaches to modeling assets
The detailed approach
Asset and depreciation schedule
The simple approach
Debt schedule
The complex approach
The simple approach
Creating a simple loan amortization schedule
Summary
Chapter 8: Preparing the Cash Flow Statement
Introduction to the cash flow statement
Cash flow from operations
Working capital movements
Cash flow from investing activities
Cash flow from financing activities
Balancing the balance sheet
Troubleshooting
Circular references
Summary
Chapter 9: Ratio Analysis
Understanding the meaning and benefits of ratio analysis
Learning the various classes of ratios
Profitability
Liquidity ratios
Efficiency ratios
Debt management ratios
Market value ratios
Interpreting ratios
Understanding the limitations of ratio analysis
Summary
Chapter 10: Valuation
Understanding absolute valuation
Understanding relative valuation – comparative company analysis
Trading comparatives
Precedent transaction comparative
Interpreting the results
Summary
Chapter 11: Model Testing for Reasonableness and Accuracy
Incorporating built-in tests and procedures
Troubleshooting
Show Formulas
Evaluate Formula
Understanding sensitivity analysis
Using direct and indirect methods
The direct method
The indirect method
Understanding scenario analysis
Creating a simple Monte Carlo simulation model
Summary
Part 4 – Case Study
Chapter 12: Case Study 1 – Build a Model to Extract a Balance Sheet and Profit and Loss from a Trial Balance
Scenario for the case study
Preparing a WTB
Extracting groupings from the WTB
Preparing a model template for BS and PNL, and relevant extracts from notes and schedules
Populating BS, PNL, notes, and schedules from groupings
Preparing journal adjustments and linking to the WTB
Updating financial statements and troubleshooting to correct errors
Summary
Chapter 13: Case Study 2 – Create a Model for Capital Budgeting
Introduction
Understanding NPV
Understanding IRR
Understanding PI
Understanding PBP
Case study
Solution
Summary
Index