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2021 | Buch

The Handbook of Financial Modeling

A Practical Approach to Creating and Implementing Valuation Projection Models

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Über dieses Buch

Financial modeling is a crucial concept for business leaders to understand and execute effectively, but few have the tools necessary to do so. While many professionals are familiar with financial statements and accounting reports, not many are truly proficient at building an accurate and practical financial model from the ground up. The Handbook of Financial Modeling provides these skills and so much more.

Now in its second edition, The Handbook of Financial Modeling takes into account the new tech released since its successful initial release. Author Jack Avon uses his expertise to analyze the changes and improvements in industry-wide financial modeling through the past five years, in addition to instilling core concepts for readers of all experience levels. Approaching your company’s financial issues with a modeler’s perspective will transform and improve the rest of your business career’s trajectory.

Financial professionals, students, business leaders, aspiring CFOs, and more will come away with all the tools necessary to precisely and efficiently monitor an organization’s assets and project future performance. The engaging case studies and Avon’s expert analysis leave you prepared to monitor and predict your organization’s finances effectively. Financial modeling’s latest technology is at your fingertips, and this book’s deep understanding of the topic ensures that you stay ahead of the pack.

What You Will Learn Approach financial issues and solutions from a modeler's perspective

Discover the importance of thinking about end users when developing a financial model Plan, design, and build a fully functional financial modelWho This Book Is For

Analysts who would typically be middle management, VPs, and associates. It is also written for business graduates and MBA students.

Inhaltsverzeichnis

Frontmatter
Chapter 1. The Role of a Financial Modeler Today
Abstract
This chapter serves as background to financial modeling from the perspective of the individual person. There are possibilities now for individuals to enter a career as financial modeler. Many organizations will openly advertise job titles as “financial modelers” or “business modelers.”
Jack Avon
Chapter 2. Types of Financial Models
Abstract
Often when training financial modeling candidates, I am asked to describe the types of financial models. There will always be someone in the training group who will point out a model type that I have not heard about. This is hardly surprising because in actual fact, there are hundreds of types of models because a model can be whatever you want it to be.
Jack Avon
Chapter 3. Review of Best Practices for Financial Modelers
Abstract
Across most organizations, there is a use of spreadsheet (mainly using Microsoft Excel) to assist with decision-making. The estimates bandied around in the Web suggest that there are hundreds of millions of active users using spreadsheets daily. Now, that is a whole lot of spreadsheet being created and used every single day.
Jack Avon
Chapter 4. The Modeling Life Cycle Explained
Abstract
Often, a financial modeler will be engaged by a client to deliver a financial model by a given date. Typically, these are the kinds of assignments taken by freelance financial modelers. The modeler is responsible for not just delivering the model but managing the engagement with the client and also managing the project.
Jack Avon
Chapter 5. Planning and Designing Models
Abstract
Evidence from involvements of hundreds of financial modeling suggests the majority of models built have no planning involved. There are some cases where there really is no need. But as a financial modeler, at some point, you will need to have some coherent plan for your models, particularly when working on a project where the modeling is only one aspect, such as being on a bid or in a transformation program. It is critical to understand not just how to build models but also how to fulfill all the aspects of planning. This way, you will provide a final model that meets and exceeds user expectations. This chapter continues from Chapter 4 on modeling life cycle and will take you through how to plan a model and also how to design a model.
Jack Avon
Chapter 6. It’s All About the Outputs
Abstract
This chapter specifically looks at the model outputs as part of the design and building of a model. So far, we have looked more at the overall planning and design of models. This will be the first chapter that examines a specific feature of a financial model.
Jack Avon
Chapter 7. Model Build
Abstract
This chapter is concentrated on the development (physical building) aspect of a best practice financial model. We have looked at the planning and design of financial models in Chapter 5 and then went on to describe how and why we need to start the model build with the outputs in Chapter 6. Now, we will be putting together the model. There will be some overlap with the previous chapter purely because we are looking at the end-to-end build (inputs to outputs), but that’s all good.
Jack Avon
Chapter 8. Financial Modeling and Accountancy
Abstract
The products of a financial model are the outputs, which in the majority of model are financial. At the end of the day, modeling is really about putting together a clutch financial analysis and statements that have had an acute level of rigor applied to them. This way, they offer the best possible representation of the real world as you can get.
Jack Avon
Chapter 9. The Implications of Accounting Rules for Modelers
Abstract
In this chapter, I will discuss an aspect of financial modeling that should never be overlooked, and that is the implications to the financial modeler of presenting financial statements. I mentioned earlier in this book that financial statements are heavily relied upon by various audiences and can have a significant influence on decision-making. While there are rules and regulations anywhere that are specifically aimed at the financial modeler, there are some implied responsibilities that if breached can have serious implications for whoever builds the model.
Jack Avon
Chapter 10. Modeling Scenarios Explored
Abstract
In this chapter, I want to take you through some specific examples of financial modeling situations. The examples can be seen as scenarios based on what has really happened when engaging with clients and building a financial model.
Jack Avon
Chapter 11. Calculations for Financial Modelers
Abstract
So far in the previous chapters, we have looked into the structuring on financial models and working through best practice paradigms. In this chapter, we will focus primarily on the detail of creating and using formula. Excel contains a bewildering number of functions, and it’s nigh on impossible for anyone how to use each and every function. In fact, there is no point because what really matters is not how to use a function but when to use it.
Jack Avon
Chapter 12. The Importance of Documentation
Abstract
In this chapter, I will examine the process of providing user documentation for models. Without question, one of the most neglected stages of building models is documentation, because often it is performed toward the end of the modeling project and subject to time constraints. This is a short chapter but a very important one because documentation in financial modeling is far too neglected. I want to make sure that you have a firm understanding of why documentation should be considered just as important as any other stage in modeling.
Jack Avon
Chapter 13. Model Stress Testing
Abstract
There are no standard tests for financial models, but there are a series of test types that are used. Not all of these are appropriate for each model, and in order for the tester to understand which test types will be right for the model, the tester must first understand the model. The testing is never incidental; it doesn’t just happen because the model has been built. It is a carefully planned and organized activity that has a significant part to play in the delivery of the model. Therefore, it is a critical part of the model design.
Jack Avon
Chapter 14. Model Audit and Review
Abstract
This chapter examines some essentials to modeling that are actually not in the hands of the modeler, namely, the testing and model audits. Both model testing and model audits are broadly referred to as model reviews or peer reviews. Ironically, model reviews are not performed by the modeler who has created the model. They are instead the domain of an independent person or body. Although it may seem odd that I am including this chapter, I would urge anyone who is serious about modeling to give attention to it. As a modeler, you should have a basic knowledge and appreciation of how testing and auditing are conducted. Not only will it have a positive influence on how you model by allowing you to look from the external perspective of the model, it’s also quite conceivable that at some time, you may be asked to be a reviewer.
Jack Avon
Chapter 15. The Role of VBA in Financial Models
Abstract
Within financial modeling circles, there has been a battle concerning the role that Visual Basic for Applications (VBA as it’s commonly known) and the part it should play in the financial modeling life cycle. Every financial modeler will have an opinion about using VBA with two distinct camps: those who advocate the use of VBA and those who believe VBA does not have a place in financial models.
Jack Avon
Chapter 16. Operis
A case study
Abstract
In each of the previous chapters, we looked at the elements that make up the broader toolset of a financial modeler. You will notice as you get to this chapter that financial modelers don’t have a predefined background and they come from all walks of life; however, we are about to discover in spite of the varied background that there are some underlying common traits that ensure success as a financial modeler.
Jack Avon
Chapter 17. Financial Modeling, Where Next?
Abstract
When I wrote the first edition of this book, there were clear signals to how financial modeling will develop in the future, which was seven years ago. Most of those developments have now happened; however, the next decade is increasingly more difficult to foresee where financial modeling will go. What I can comfortably assure you is the need for financial modelers will not diminish. In fact, there will certainly be an increased reliance in commercial business for professional modelers. The question is: how will the financial modeler of tomorrow differ from now? Let’s explore that question.
Jack Avon
Backmatter
Metadaten
Titel
The Handbook of Financial Modeling
verfasst von
Jack Avon
Copyright-Jahr
2021
Verlag
Apress
Electronic ISBN
978-1-4842-6540-6
Print ISBN
978-1-4842-6539-0
DOI
https://doi.org/10.1007/978-1-4842-6540-6