CONTENTS
FINANCIAL MODELLING HANDBOOK
INTRODUCTION
PART 1: IT'S ALL ABOUT THE SYSTEM
- Tools, structure & workflows - the three parts of your modelling system
- Benefits of a good financial modelling system
- What makes a good financial modelling system?
- Simple does not mean easy
- Systems don't impede creativity
- Financial Modelling Standards
- Changing working habits is difficult
- Self-discipline is just as important as intelligence
- Financial modelling is part of a bigger process
- All models are wrong. Some are useful.
- Your path to confidence
- The four stages of learning
PART 2: HOW TO STRUCTURE YOUR MODEL FOR EFFICIENT WORKFLOW
- Design thinking
- What makes financial models hard to read
- Model complexity compounds business complexity
- As simple as possible
- Cleverness is not wisdom
- What Irish monks from the 7th century can teach us about financial modelling
- Technical debt in financial models
- Good financial modelling is like good business writing
- Eliminating unnecessary thinking time
- Understand the building blocks and you understand the model
- Model structure 1: Workbook level
- Model structure 2: Worksheet level
- Hiding unused columns at the end of the timeline
- How to ensure all sheets have a consistent structure
- How to navigate around your model
- Calculation blocks: Part 1
- Calculation blocks: Part 2
- Using the pyramid structure in calculation blocks
- What makes a poor row label
- How to navigate using links
- Why we use placeholders
- Dealing with time - an introduction to flags
- The five types of flags
- How to model balances
- Stay Positive: Sign convention in modelling
- Managing inputs - Part 1: Cases, scenarios and sensitivities
- Managing inputs - Part 2: Using and comparing cases
- Managing inputs - Part 3: Running scenarios
- Managing inputs - Part 4: Input sheet mechanics
- Using a Standard Monetary Unit
- Output sheet structure
- Using a Start Model
- The power of checklists in financial modelling
PART 3: MODEL BUILD: THE COMPONENTS OF YOUR MODELLING WORKFLOW
- Three quick changes in your Excel environment that will make you a more productive modeller
- The benefits of working in manual calculation mode
- The importance of keyboard shortcuts
- How we write keyboard shortcuts
- Native Excel shortcuts
- Financial Modelling Productivity Pack
- Twelve core model build skills
- Core modelling skill 1: How to add an input
- Core modelling skill 2: How to create a link
- Core modelling skill 3: How to create a placeholder
- Core modelling skill 4: How to copy a link
- Core modelling skill 5: How to create a new calculation
- Core modelling skill 6: How to apply number formatting
- Core modelling skill 7: Copying a calculation block
- Core modelling skill 8: Adding a balance corkscrew
- Core modelling skill 9: Adding a new work sheet
- Core modelling skill 10: How to relocate inputs
- Core modelling skill 11: How to create a quick chart
- Core modelling skill 12: How to track financial model outputs
- When to copy a link vs when to create a new link
- Daisy chains: Why to avoid linking to links
- Why we mark imports and exports
- When not to mark imports and exports
- Managing import / export marking exceptions
- Advanced linking
- Making "paste value" and "paste format" easier
- Using grouping to see the big picture
- How to add a sparkline to any calculation with a single keystroke
PART 4: CASE STUDY: THE WORKFLOW IN PRACTICE
- We’re ready to start building a model
- Case study
- What is this model for?
- Always have a hypothesis
- Checking the timeline of our model
- Wiring up the financial statements
- Section completion checklist
- Modelling revenue - conceptual model & assignment
- Modelling revenue - solution
- Accounts receivable - concepts
- Modelling accounts receivable - assignment
- Modelling accounts receivable - solution
- Modelling accounts receivable - alternative solution 1
- Modelling accounts receivable - alternative solution 2
- Operating costs - assignment
- Operating costs - solution
- Modelling accounts payable - assignment
- Modelling accounts payable - solution
- Fixed asset & 100% equity financing - assignment
- Fixed assets & 100% equity financing - solution
- Modelling dividends - assignment
- Modelling dividends - solution
- What’s going on with retained earnings?
- Modelling IRR - assignment
- Modelling IRR - solution
- Modelling depreciation - assignment
- Modelling depreciation - solution
- Share capital redemption
- Debt modelling: Concepts and assignment
- Debt modelling 1: Balance and initial drawdown
- Debt modelling 2: Straight-line principal repayment
- How has leverage changed IRR?
- Debt modelling 3: Modelling interest
- How debt repayment profiles affect IRR
- Debt modelling 4: Modelling amortising principal repayment using the sum of discount factors
- Debt modelling 5: Debt service coverage ratio
- Debt modelling 6: Debt sizing and sculpting
- Dealing with our first-period cash shortfall
- Modelling company tax: Introduction
- Modelling tax - terminology
- A checklist of tax questions to ask
- Modelling the tax computation - taxable profit
- Modelling the tax computation - tax depreciation
- Modelling the tax computation- thin capitalisation
- Modelling tax loss carry forward
- Circularity in our tax calculation
- How to manage circularity in a financial model
- How to break circularity in our financial model
- How to add a VBA macro to a financial model
- A quick guide to Excel file types
- How to attach a macro to a button
- What is deferred tax and how do we model it?
- Tax review and tidy-up
- Equity premium on acquisition
- Direct vs indirect cashflow
- Modelling a refinancing - introduction
- Modelling a refinancing - model set up
- Modelling a refinancing - solution
- Modelling a refinancing - testing our hypotheses
- Early share capital redemption
- Modelling a refinancing - retesting our hypotheses
- Revolving credit facility
- Model release checklist
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