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Discussion topics
Overview of Financial Modeling Excel Best Practices Modeling Warm Up
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Understanding the purpose of the modeling in order to create the right design and functionality
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Clarity of presentation
You should be able to understand the model when you revisit after some time lapse! More Important Others should be able to understand!
Be efficient
Utilize excel to improve productivity Do Not hard code in formulae cells
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Separate line items are always useful
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Never Hide rows or columns its useful to group them instead (Data -> Group)
Set up the first sheet as a template for a complete worksheet using Page Set Up
Use Edit -> Move/ Copy Sheet to create as many sheets as required in the model Take care as named cells will be duplicated in the new sheet
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Working Capital
Income Statement
Shareholders Equity
Intangibles, Amortization
Balance Sheet
Other LT Items
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Things to Remember
Historical data as a guide for projections
Aim at projecting future performance Remember you are an Analyst and not an Auditor! Do not get worked up if historicals do not reconcile (its quite common!)
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Income Statement
Historical information
Balance Sheet
Historical data only
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Sources for appropriate line items financial statements, management guidance and research Incorporate detailed line items to suit the business under analysis Ensure the income statement represents the company/ industry
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Calculations in Black
Inputs are in Blue
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Forecasted figures
Drivers: forecasted annual sales growth Sources: management guidance, research, past trends Challenge assumptions for being reasonable Footnote all sources for assumptions
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Calculations
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Calculations in Black
Inputs are in Blue
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Income Statement
Balance Sheet
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Referenced from BS
Calculations
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Calculations
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Assumptions
References, if constant
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Drivers
Projections
Drivers
Use the future ratios and assumptions to project the forecasted working capital balances
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Calculations
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Arrive at Cash Flows based on individual line items Ensure signs are accurate!
Private and Confidential Not for Circulation
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Link up the forecasted Working Capital cash flows with the Cash Flow Statement
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Sales COGS
Income Statement
Working Capital
Balance Sheet
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