The following video is borrowed from our BusinessTraining.com platform and was originally recorded for our investment banking training program. Financial modeling is fundamental to a career in investment banking so we’ve enlisted the help of investment banking veterans to help us create high-quality free content on this important topic. Here is the second of a two part series on financial modeling best practices. To watch part one of this series, click here.
Video Transcript/Summary: The strategies and tips provided within this video module include:
Coming soon.
I hope that this video has shown you some important financial modeling best practices. To watch part one of this series, click here.
The following video is borrowed from our BusinessTraining.com platform and was originally recorded for our financial modeling training program. In the following video, you will see some common financial model errors and learn how to avoid them.
Video Transcript/Summary: The strategies and tips provided within this video module include:
One of the most common types of error is related to data entry, even for those who are being very careful. Therefore, embedding formulas within the excel model is important, rather than relying on manual calculations.
Ensure to watch out for errors in parenthesis and always check to see the value calculated appears reasonable. If you can, check your formula against simple math. Some of excels financial formulas are also a little tricky so if you don’t know exactly what you are doing, use the excel help function.
Break long formulas into simple steps and add or multiply those formula segments. in these formulas, double-check that your formula refers to the right cells. Finally, know which formula to use and what parameters to specify (i.e. NPV or XNPV, SUM or SUMPRODUCT or SUMIF etc.)
By selecting a cell and clicking F2, it highlights the cell references in your formula in different, easy to see colours. This is particularly useful when working on a new version of a model where changes have been made (i.e. adding or deleting rows and columns). be very patient with these changes.
Excel allows you to name and define ranges, which can really help make formulas easy to develop. The main gains from adopting this is the efficiency, transparency and simplicity of the resulting excel model. To name a cell, simply click on it and type the name you want above.
When in doubt, use the excel help feature. Type your query in the top right of your excel window. If you cant find the answer you are looking for, simply type the query into Google where an answer should be provided.
Be sure to avoid these financial model errors in order to construct better, more accurate financial models.
The following video is borrowed from our BusinessTraining.com platform and was originally recorded for our financial modeling training program. In the following video, you will learn how to set up a financial model.
Video Transcript/Summary: The strategies and tips provided within this video module include:
To become a good modeller, you need to understand finance and excel in particular, in addition to being a good listener and good communicator. Math is also an important element and each modeller must bring this together in an elegant, comprehensive, robust and east to use manner. In addition, transparency and flexibility are critical characteristics of the model.
Model stakeholders expect the model to take their thoughts and translate them into a functioning model, whilst they may also expect you to add way too many bells and whistles, graphs etc.
Model users will do unexpected things with your model so ensure you can track any changes and there is a backup saved somewhere.
Things to keep in mind with the model; what is the problem that the model seeks to assist with?; ask questions in order to understand the scope and set expectations correctly; asses the level of detail expected of your model; thoroughly understand the business and all variables and parameters that impact it.
It is important to know the users of the model. If it is a startup firm, you might have free reign to create a new model but if there is an existing structure in place, you will need to perhaps compromise on certain aspects in order to satisfy all tastes and requirements. Make the model more detailed/simplistic depending on the audience. Typically sticking to the industry norm is advisable. Excels “protect” feature disallows changes in certain cells and should be used.
Before building the model, spend some time on Global Settings, such as font, font size, number format, decimal places etc. Use a similar scheme for your text and your number values. Consistency in appearance is important in the model.
There should only be one cell for one input variable and avoid hardcoding numbers in your formulas. Finally, do not overly use hidden or grouped columns or rows and let users see the formulas you’ve used.
Learning how to effectively set up a model is important, I hope that this video has helped you master this skill.
The following video is borrowed from our BusinessTraining.com platform and was originally recorded for our financial modeling training program. In the following video, you will watch a useful tutorial of financial modeling.
Video Transcript/Summary: The strategies and tips provided within this video module include:
Coming soon.
I hope that this video has provided you with a useful financial modeling tutorial.
Below is a free-to-watch video module on basic financial modeling. A financial model is a tool used to forecast a business’s results and is designed to be able to evaluate multiple scenarios. Investment bankers are expected to be experts in financial modeling. This video is three of three video modules in our series: Basic Financial Modeling. Click here for part one of this series. Click here for part two.
This video was taken from our Certified Investment Banking Associate (CIBA) program which is the investment banking certification and training program hosted on our BusinessTraining.com platform.
Video Transcript Summary of Basic Financial Modeling:
The following are the final steps in the process for creating a basic financial model:
Setup debt and interest schedule including: interest rates, beginning balances, new borrowing, amortization of new or existing borrowing, and ending balances and interest amounts.
Link interest to IS. Continue IS forecast through bottom line.
Link debt balances to balance sheet.
Input line of credit borrowing repayment calculation on cash flow statement and link its activity to debt schedule.
Finally, link ending cash from cash flow statement to top of balance sheet, calculate interest earned on cash on income statement.
This is part three of our series on basic financial modeling. Click here for part one of this series. Click here for part two.
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