Building Financial Models: A Guide to Creating and Interpreting Financial Statements (McGraw-Hill Library of Investment and Finance)

Financial modeling is essential for determining a company's current value and projecting its future performance, yet few books explain how to build models for accurately interpreting financial statements. Building Financial Models is the first book to correct this oversight, unveiling a step-by-step process for creating a core model and then customizing it for companies in virtually any industry. Covering every aspect of building a financial model, it provides a broad understanding of the actual mechanics of models, as well as their foundational accounting and finance concepts. The first all-inclusive guidebook for designing, building, and implementing a sturdy core valuation/projection modelIn today's no-room-for-error corporate finance market, precise and effective financial modeling is essential for both determining a company's current value and projecting its future performance. Yet few books have explained how to build models that accurately interpret a company's financial statement, while none have focused on projection models.Building Financial Models fills this gap. The first book to detail a step-by-step process for first creating a simple, standardized projection/valuation model, and then customizing it for specific situations, this hands-on book:Provides in-depth explanations of the mechanics as well as the underlying and accounting principles of projection modelsOutlines how to design and implement a projection model that allows the user to change inputs quickly for sensitivity testingComprises a concise yet comprehensive tutorial on the use of Excel, as well as other spreadsheet programs, to build a dynamic financial modelThe ability to create and understand projection models is fast becoming one of the most highly prized skills in finance. Let Building Financial Models lead you through the model development process, and provide you with the know-how you need to create and implement a flexible, user-friendly, and results-driven financial projection model."The ability to create and understand financial models is one of the most valued skills in investment banking and other finance fields today. This book will lead you through the development process for a projection model. By the end of the book, you will have the satisfaction of having built your own model, to which you can then add your personal changes and modifications." -From the IntroductionA well-designed financial projection model can be invaluable for providing estimates of an organization's future financial condition given certain performance assumptions. In addition, that same model can reveal what needs to happen in order for a particular performance goal to be reached within a stated time frame.Building Financial Models shows you how to create a functional, dynamic spreadsheet financial model that will allow you to create and refine projections for industrial and manufacturing organizations. Leading you step-by-step through the development and implementation process, this first-of-its-kind book provides:An overview of projection models--what they are, how they are used, and how they differ between industriesExploration of the accounting and finance concepts that underpin working financial modelsBasic model design principles, along with detailed directions for using spreadsheet software to put those principles into practiceDetailed directives for using this new knowledge to build and refine a working financial modelMore than 100 charts and screen shots to illustrate each step in the development and implementation processA flexible and robust financial projection model does more than just add numbers; it explains the complex relationships between those numbers as well as provides ways to examine, interpret, and use those relationships to add value to an enterprise. Building Financial Models is today's only easy-to-follow, self-contained course on the creation and implementation of a customizable, state-of-the-art financial projection model. Annotation The first all-inclusive guidebook for designing, building, and implementing a sturdy core valuation/projection model In today's no-room-for-error corporate finance market, precise and effective financial modeling is essential for both determining a company's current value and projecting its future performance. Yet few books have explained how to build models that accurately interpret a company's financial statement, while none have focused on projection models. Building Financial Models fills this gap. The first book to detail a step-by-step process for first creating a simple, standardized projection/valuation model, and then customizing it for specific situations, this hands-on book: Provides in-depth explanations of the mechanics as well as the underlying and accounting principles of projection models Outlines how to design and implement a projection model that allows the user to change inputs quickly for sensitivity testing Comprises a concise yet comprehensive tutorial on the use of Excel, as well, as other spreadsheet programs, to build a dynamic financial model The ability to create and understand projection models is fast becoming one of the most highly prized skills in finance. Let Building Financial Models lead you through the model development process, and provide you with the know-how you need to create and implement a flexible, user-friendly, and results-driven financial projection model. "The ability to create and understand financial models is one of the most valued skills in investment banking and other finance fields today. This book will lead you through the development process for a projection model. By the end of the book, you will have thesatisfaction of having built your own model, to which you can then add your personal changes and modifications."--The Introduction A well-designed financial projection model can be invaluable for providing estimates of an organiz Cover......Page 1 CONTENTS......Page 4 INTRODUCTION......Page 6 C H A P T E R 1 A Financial Projection Model......Page 12 C H A P T E R 2 Design Principles for Good Model Building......Page 24 C H A P T E R 3 Starting Out......Page 34 C H A P T E R 4 Your Model-Building Toolbox: F Keys and Ranges......Page 58 C H A P T E R 5 Your Model-Building Toolbox: Functions......Page 74 C H A P T E R 6 Guerilla Accounting for Modeling......Page 120 C H A P T E R 7 Balancing the Balance Sheet......Page 130 C H A P T E R 8 Income Statement and Balance Sheet Accounts......Page 156 C H A P T E R 9 Putting Everything Together......Page 166 C H A P T E R 10 The IS and BS Output Sheets......Page 204 C H A P T E R 11 The CF Sheet......Page 210 C H A P T E R 12 Ratios: Key Performance Indicators......Page 220 C H A P T E R 13 Forecasting Guidelines......Page 238 C H A P T E R 14 The Cash Sweep......Page 248 C H A P T E R 15 The Cash Flow Variation for Cash Sweep......Page 267 C H A P T E R 16 Recording Macros......Page 282 C H A P T E R 17 On-Screen Controls......Page 298 C H A P T E R 18 Bells and Whistles......Page 308 C H A P T E R 19 Writing a Macro in Visual Basic for Applications......Page 326 I N D E X......Page 339 A Projection Model -- Design Principles For Good Modeling -- Starting Out -- Your Model-building Toolbox: F Keys And Ranges -- Your Model-building Toolbox: Functions -- Guerilla Accounting For Modeling -- Balancing The Balance Sheet -- Income Statement And Balance Sheet Accounts -- Putting Everything Together -- The Is And Bs Output Sheets -- The Cf Sheet -- Ratios: Key Performance Indicators -- Forecasting Guidelines -- The Cash Sweep -- The Cash Flow Variation For Cash Sweep -- Recording Macros -- On-screen Controls -- Bells And Whistles -- Writing A Macro In Vba. John S. Tjia. Includes Index.