MODELS, SPREADSHEETS AND NUMBERS
EVOLUTION OF SPREADSHEETS
INTRODUCTION
Understand the context in which spreadsheets and personal computers first emerged
as tools for individuals
Review the differences between ledgers & spreadsheets
SPREADSHEET THE ORIGINAL KILLER APP
FROM MUNDANE LEDGERS TO TOOL TO MODEL FUTURE
SPREADSHEET BASICS
Gain familiarity and comfort in navigating a spreadsheet,
Identity the different types of data used in a spreadsheet and options for displaying
them
Use spreadsheet notation for mathematical operations on cells and arrays
Understand and control the order of processing in formulas
Use shortcuts for copying data and formulas
POSSIBILITY OF TAKING UP WORK AT HYDERABAD
USING FUNCTIONS
Learn to use built in functions, including those included in the Business & Financial
Modeling specialization
Understand the different uses of the sum and sumproduct functions
Use basic statistical functions of average, min, max and standard deviation
A NEW BUSINESS OPPORTUNITY
USING CONDITIONAL EXPRESSIONS IN FORMULAS
Use conditional expressions within the logic of your formulas
Understand some applications of conditional logic
COMMON ERRORS IN SPREADSHEETS
Understand relative and absolute references in formulas
Recognize errors in formulas
Identify and correct circular references
Audit formulas
FROM SPREADSHEET TO MODEL
FINANCIAL MODELING DEFINITION
Financial modeling is the task of building an abstract representation of a real world
financial situation
This abstract representation is called a financial model
A financial model is designed to represent a simplified version of the performance of
a financial asset, a project, or any other investment
A financial model is generally build around financial statements such as the income
statement, the balance sheet and the cash flow statement
The most commonly tool used to build a financial model is Excel
MODELS
STRUCTURE FOR AN EFFECTIVE FINANCIAL MODEL
1. Project Description 2. Work sheet 3. Worksheet 4. Input 5. Calculation 6. Output
Sheet Description flow sheet(s) sheets(s) sheets(s)
PROJECT DESCRIPTION
The project name
The name of the scenario
A brief description of the project
The model version
The file name
The name of the persons who prepared and
reviewed the model
The names of project sponsor and the project
leader
THE WORKSHEET DESCRIPTION
The Financial model purpose
A worksheet overview with the name, the
type and the description of each sheet
If required, some guidance on how works
each sheet
The color codes and formatting
conventions used in the financial model
THE WORKSHEET FLOW
A visual representation of the inputs
sheet, calculations sheet(s) and outputs
sheet(s)
The relationship between each sheet of
the document
Links towards each sheet of the
document in order to facilitate the
navigation
THE INPUTS SHEET
Your company standard assumptions: Assumptions
that are used to assess all the projects of the
company
Your static assumptions: Assumptions specific to
your project and constant over the whole modeling
period (e.g. tax rate)
Your dynamic assumptions: Assumptions specific to
your project and changing over the whole modeling
period (e.g. growth rate)
The source and updated date of all assumptions
The possibility to select your scenario
CASE 1: TRUE THREAD LTD.
Step 1: Assess the past performance of TTL
Step 2: Forecast income statement and balance sheets for the next two years, taking
into account the warehouse expansion
Step 3: Determine the borrowing needs created by the warehouse expansion
Step 4: Evaluate the future financial health of the company once the warehouse
expansion is complete
USING ASSUMPTIONS AND DECISION VARIABLES
IN SPREADSHEET MODELS
Recognize assumptions and decision variables in business models, and the best ways
to reference them in spreadsheet formulas
Identify different types of metrics for evaluating outcomes of business processes
being modeled
Incorporate spreadsheet functions within models to identify and highlight outcome
variables
STRUCTURING A SPREADSHEET TO MODEL VARIABLES,
OBJECTIVES AND OBJECTIVE FUNCTIONS
Design a spreadsheet with distinct locations for assumptions, decision variables,
objectives and objective functions implemented through formulas
Express logic in formulas using range names
WHAT-IF ANALYSIS & SENSITIVITY ANALYSIS
Conduct what-if analysis using spreadsheet tools
Identify key variables using sensitivity analysis
