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Financial Modeling in Excel For Dummies

Book Description

Make informed business decisions with the beginner's guide to financial modeling using Microsoft Excel

Financial Modeling in Excel For Dummies is your comprehensive guide to learning how to create informative, enlightening financial models today. Not a math whiz or an Excel power-user? No problem! All you need is a basic understanding of Excel to start building simple models with practical hands-on exercises. Before you know it, you’ll be modeling your way to optimized profits for your business in no time. Excel is powerful, user-friendly, and is most likely already installed on your computer—which is why it has so readily become the most popular financial modeling software. This book shows you how to harness Excel's capabilities to determine profitability, develop budgetary projections, model depreciation, project costs, value assets, and more. You'll learn the fundamental best practices and know-how of financial modeling, and how to put them to work for your business and your clients. You'll learn the tools and techniques that bring insight out of the numbers and make better business decisions based on quantitative evidence. You'll discover that financial modeling is an invaluable resource for your business, and you'll wonder why you've waited this long to learn how!

Companies around the world use financial modeling for decision making, to steer strategy, and to develop solutions. This book walks you through the process with clear, expert guidance that assumes little prior knowledge.

  • Learn the six crucial rules to follow when building a successful financial model
  • Discover how to review and edit an inherited financial model and align it with your business and financial strategy
  • Solve client problems, identify market projections, and develop business strategies based on scenario analysis
  • Create valuable customized templates models that can become a source of competitive advantage

From multinational corporations to the mom-and-pop corner store, there isn't a business around that wouldn't benefit from financial modeling. No need to buy expensive specialized software—the tools you need are right there in Excel. Financial Modeling in Excel For Dummies gets you up to speed quickly so you can start reaping the benefits today!

Table of Contents

    1. Cover
    2. Introduction
      1. About This Book
      2. Foolish Assumptions
      3. Icons Used in This Book
      4. Beyond the Book
      5. Where to Go from Here
    3. Part 1: Getting Started with Financial Modeling
      1. Chapter 1: Introducing Financial Modeling
        1. Defining Financial Modeling
        2. Looking at Examples of Financial Models
      2. Chapter 2: Getting Acquainted with Excel
        1. Making Sense of the Different Versions of Excel
        2. Defining Modern Excel
        3. Recognizing the Dangers of Using Excel
        4. Looking at Alternatives and Supplements to Excel
      3. Chapter 3: Planning and Designing Your Financial Model
        1. Identifying the Problem That Your Financial Model Needs to Solve
        2. Designing How the Problem’s Answer Will Look
        3. Gathering Data to Put in Your Model
        4. Documenting the Limitations of Your Model
        5. Considering the Layout and Design of Your Model
      4. Chapter 4: Building a Financial Model by the Rulebook
        1. Document Your Assumptions
        2. Create Dynamic Formulas Using Links
        3. Only Enter Data Once
        4. Model with Consistent Formulas
        5. Build in Error Checks
        6. Format and Label for Clarity
      5. Chapter 5: Using Someone Else’s Financial Model
        1. Considering Templates for Building a Financial Model
        2. Inheriting a File: What to Check For
        3. Using Audit Tools to Find and Correct Errors
    4. Part 2: Diving Deep into Excel
      1. Chapter 6: Excel Tools and Techniques for Financial Modeling
        1. Referencing Cells
        2. Naming Ranges
        3. Linking in Excel
        4. Using Shortcuts
        5. Restricting and Validating Data
        6. Goal Seeking
      2. Chapter 7: Using Functions in Excel
        1. Identifying the Difference between a Formula and a Function
        2. Finding the Function You Need
        3. Getting Familiar with the Most Important Functions
        4. Being Aware of Advanced Functions and Functionality
      3. Chapter 8: Applying Scenarios to Your Financial Model
        1. Identifying the Differences between Types of Analysis
        2. Building Drop-Down Scenarios
        3. Applying Sensitivity Analysis with Data Tables
        4. Using Scenario Manager to Model Loan Calculations
      4. Chapter 9: Charting and Presenting Model Output
        1. Deciding Which Data to Display
        2. Conveying Your Message by Charting Scenarios
        3. Deciding Which Type of Chart to Use
        4. Dynamic Charting
        5. Preparing a Presentation
    5. Part 3: Building Your Financial Model
      1. Chapter 10: Building an Integrated Financial Statements Model
        1. Getting to Know the Case Study
        2. Entering Assumptions
        3. Calculating Revenue
        4. Calculating Expenses
        5. Building the Income Statement
        6. Building the Cash Flow Statement
        7. Building the Balance Sheet
        8. Building Scenarios
      2. Chapter 11: Building a Discounted Cash Flow Valuation
        1. Understanding How the Discounted Cash Flow Valuation Works
        2. Step 1: Calculating Free Cash Flow to Firm
        3. Step 2: Calculating Weighted Average Cost of Capital
        4. Step 3: Finding the Terminal Value
        5. Discounting Cash Flows and Valuation
      3. Chapter 12: Budgeting for Capital Expenditure and Depreciation
        1. Getting Started
        2. Output 1: Calculating Cash Required for Budgeted Asset Purchases
        3. Output 2: Calculating Budgeted Depreciation
        4. Output 3: Calculating the Written-Down Value of Assets for the Balance Sheet
    6. Part 4: The Part of Tens
      1. Chapter 13: Ten Strategies for Reducing Error
        1. Using the Enter Key
        2. Checking Your Work
        3. Checking It Again
        4. Getting Someone Else to Check Your Work
        5. Documenting Assumptions
        6. Documenting Methodology with a Flowchart
        7. Stress-Testing with Sensitivity Analysis
        8. Conducting a Scenario Analysis
        9. Taking Note of Excel Error Values
        10. Including Error Checks
      2. Chapter 14: Ten Common Pitfalls to Avoid
        1. The Numbers Don’t Add Up
        2. You’re Getting #REF! Errors
        3. You Have Circular References
        4. The Model Has Too Much Detail
        5. The File Size Is Out of Control
        6. Your Model Is Full of “Spaghetti” Links
        7. The Formulas Are Unnecessarily Long and Complicated
        8. No One Is Paying Attention to the Model
        9. You Don’t Want to Let Go
        10. Someone Messes Up Your Model
    7. About the Author
    8. Advertisement Page
    9. Connect with Dummies
    10. End User License Agreement