Basic Financial Modelling

Introduction

This introductory course is suitable for a two day live training course and an eight hour online webinar style programme. The essence of the course is to provide delegates with an introduction to the basic topics that everyone with an interest in financial model must be aware of.

The course content and practical exercises are centred around Microsoft Excel and a significant number of Excel functions and techniques will be reviewed during the course.

Training methodology

Whether the course is provided as live training or as an online experience, the training methodology is essentially the same:

The trainer will introduce each topic with a discussion and/or practical exercise and the delegates will then be provided with a follow up exercise to complete on their own. The final result will be shared with everyone either by confirmatory discussion during the session or by means of sharing the trainer’s completed Excel file.

All delegates will receive a full set of training notes and Excel files: both delegate and trainer versions. There will also be PowerPoint slides and other support materials that will form an integral part of the course.

Workshop prerequisites

Delegates should have a good working knowledge of Microsoft Excel: you don’t need to be an advance user, just aware of and be confident in the use of basic Excel

Delegates should also be in possession of their laptops loaded with Office365/Excel 2016

You will also need to ensure that Power Query and Power Pivot are fully operational: you will receive a delegates’ pack in advance of the course and full instructions will be given then

Required Outcomes

After completing this workshop the delegate should be able to:

• Construct financial statement based models together with other financial models using Excel
• Train, Test and demonstrate the models you are given or that you build.
• Produce output from a model for use at work and in presentations.

Course Content

PART I: Design and Efficiency

In this first Part we will take a specific look at the design of a financial model, providing insight into the usage of spreadsheet maps, formatting and calculations. This section will provide a hands on focal point for designing of your own financial model using Excel.

Section One

Producing and Publishing Model Output for effective communication and workability

• Style, formatting and layout
• - Fonts colours, backgrounds and borders
• - Pivot Tables
• - Using symbols and equations
• - Using graphs and figures
• Error capturing
• Technical issues to be considered
• Documentation
• File formats and compatibility
• Size and memory consideration
• Object embedding

Part II: Financial Analysis Models

In Part two we undertake a review of data that organisations provide for us: the data normally comes from the financial reporting process. We then undertake a systematic and interactive review of the data we have gathered. A comprehensive examination of the key components of financial statements and financial management will assist in developing effective models that will be vital as you create a world class financial model using Excel.

Section Two

Systematically analysing financial statements for improved model performance

• Financial Statements
• Appreciating the structure and content of Income Statements and Balance Sheets
• Improving displays by using Power Query and Power Pivot
• Financial Ratios
• Calculating and interpreting financial ratios
• DuPont analysis of Return on Equity
• Financial Forecasting
• An example of forecasting earnings from components of ROE
• Time Value of Money
• PV (Present Value) and FV (Future Value) Calculations
• from first principles and using PV and FV functions
• Rates of Return
• Arithmetic, Geometric and Continuous Compounding
• Yields on uneven returns
• Internal Rates of Return

Section Three

Highlighting key financial management principles underpinning effective model development

• Cost of Capital
• Cost of Equity
• Cost of Debt
• Tax impact on Cost of Capital
• Calculating the Weighted Average Cost of Capital (WACC) and Hurdle rates
• Marginal WACC curve and finding break points
• Reviewing Capital Budgeting
• Cash flow modelling
• Decision modelling, including:
• Payback Period
• NPV (Net Present Value): NPPV, XNPV
• IRR (Internal Rate of Return): IRR, MIRR, XIRR
• Sensitivity analysis
• Optimum Capital Budget