CONTENTS
As I wrote the Financial Modelling Handbook, I published the draft of each chapter online. This helped me to get feedback and input before publishing. More than 2,500 people read the book online before it was published, and helped me to create a much better-finished product. I'm leaving all the drafts online. Please note that these may differ slightly from the finished chapters in the book.
You can buy the hard copy of the Financial Modelling Handbook here and receive all the accompanying worked example files.
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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