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

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 An Introduction to Financial Modeling and Excel Steps for Building a Financial Model Formulas and Functions - Completing Modeling Tasks with a Single Formula The Referencing Framework in Excel An Introduction to Power Query Understanding Project and Building Assumptions Asset and Debt Schedules Preparing a Cash Flow Statement Ratio Analysis Valuation Model Testing for Reasonableness and Accuracy Case Study 1 – Building a Model to Extract a Balance Sheet and Profit and Loss from a Trial Balance Case Study 2 – Creating a Model for Capital Budgeting 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 Explore a variety of Excel features, functions, and productivity tips for various aspects of financial modeling * 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 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. 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. * 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 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. 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 This book provides a gateway to financial modeling through easy-to-follow examples in Excel 365. It explores the process of modeling, from giving you a thorough understanding of the project to gathering historical information and arriving at assumptions. Good modeling practices are emphasized and demonstrated throughout the book.