7 Financial Models for Analysts, Investors and Finance Professionals : Theory and practical tools to help investors analyse businesses using Excel / Paul Lower.

Format:

Book

Author/Creator:

Lower, Paul, author.

Language:

English

Subjects (All):

Business enterprises--Finance.

Business enterprises.

Physical Description:

1 online resource (156 pages)

Edition:

First edition.

Place of Publication:

La Vergne : Harriman House, 2019.

Summary:

Financial models in Excel allow investment analysts and other finance professionals to take the laborious number crunching out of financial analysis and forecasting. Models help them to gain meaningful insights into the way that a business is working and focus attention on areas to improve bottom-line results. They can also be used as powerful tools to test the potential impact of various risks on business performance. In this brand new guide, financial modelling expert Paul Lower presents step-by-step instructions for seven spreadsheet models that will help the user to gain a better understanding of the financial data coming out of a business. These seven models can be used to:1. Assess how a business is performing on key financial indicators.2. Produce sales and cost forecasts.3. Create a cash flow forecast.4. Understand the impact of product price changes on profitability.5. Assess potential investment decisions.6. Check the sensitivity of key financial measures to risk events.7. Produce a business valuation.With this suite of seven tools, a financial analyst will be equipped to use Excel to achieve a deep understanding of a business and its financial data.

Contents:

Intro

Contents

About the Author

Acknowledgements

Preface

Chapter 1 - Financial Modelling and Excel Basics

The need for financial models

Financial models - what they are and how they are used most effectively

Using Excel spreadsheet software for financial modelling

Best practice in building financial models

Ten steps to create good financial models

Tips on how to get the best results using Excel for financial modelling

Chapter 2 - Understanding and Using Financial Statements

Understanding financial statements

The purpose of financial statements

Financial position

Financial performance

Some key accounting concepts

Accruals concept

Prudence concept

Going concern concept

Consistency concept

The structure of financial statements

1. Balance sheet - statement of financial position

2. The income statement or profit statement

3. Cash flow statement

Comparing financials for different companies

Chapter 3 - Model 1: Key Financial Indicators

The Financial Indicator Model

Topic refresher - the financial analysis toolkit

Five-year summary overview

Income statement analysis

Balance sheet analysis

Ratio analysis

Return on investment (ROI)

Profitability ratios

Return on net assets (RONA)

Profit margin

Net asset turnover

Efficiency and working capital ratios

Fixed asset turnover

Working capital turnover

Working capital efficiency

Days' sales in inventory (DSI)

Days' sales outstanding (DSO)

Days' purchases outstanding (DPO)

The working capital cycle

How financial indicators guide improvements in ROI

Liquidity ratios

Current ratio

Acid test ratio

Financing structure and risk ratios

Gearing ratio or debt ratio

Interest cover

Shareholder return ratios

Return on equity (ROE)

Three-Step DuPont analysis.

Using Three-Step DuPont analysis

Earnings per share (EPS)

Price/earnings ratio (P/E ratio)

Dividend yield

Cash flow ratios

Operating cash flow ratio

Price/cash flow ratio

Cash flow margin ratio

Cash flow to debt ratio

Comparing financial indicators for different companies

Chapter 4 - Model 2A: Sales Forecasting

Identifying trends and other variations in time series data

Using an Excel chart to identify a trend

The Sales Forecasting Model

Using Excel functions to isolate a trend from time series data

Calculating seasonal and random variations

Calculating a seasonal index

Extending the trend for the sales forecast

Adjusting the trend for seasonal variations

Chapter 5 - Model 2B: Cost Forecasting

Causal analysis

Adding a line of best fit through the data

Using correlation to test the strength of the relationship

Measuring correlation

Using the Excel CORREL function

The Cost Forecasting Model

Using Excel functions to identify variable and fixed costs

Correlation and causation

Making a maintenance cost forecast

Interpolation and extrapolation

Chapter 6 - Model 3: Cash Flow Forecasting

The Cash Flow Forecasting Model

Topic refresher - understanding business cash flow

Calculating cash flow for a period

Cash generated from operating activities (operating cash flow)

Direct method of calculating operating cash flow

Indirect method of calculating operating cash flow

Understanding working capital

Direct versus indirect method of calculating operating cash flow

Investing activities

Financing activities

Forecasting cash flow

Direct method of cash flow forecasting

Direct cash flow forecast example

Indirect method of cash flow forecasting

Input assumptions for the Cash Flow Forecasting Model.

The operating cash flow section of the forecast

EBITDA (earnings before interest, taxation, depreciation and amortisation)

The output from the operating cash flow section of the forecast

Forecasting with strong seasonal sales patterns

Investing activities and financing activities

The output from the investing and financing sections

Using the Cash Flow Forecasting Model to test the impact of risk on cash flow

The complete output section of the cash flow forecasting app

Chapter 7 - Model 4: Pricing and Profit

The Pricing and Profit Model

Topic refresher - understanding pricing and profit

Acme Widget Company

Interpreting the Cost-Volume-Profit (CVP) chart

Gross margin and break-even point

Gross margin and pricing

Pricing and sales volume decisions

The limitations of this approach

The Pricing and Profit Model workbook

Input worksheet for the Pricing and Profit Model

The Price Check Analysis Model

The Cost-Volume-Profit Analysis Model

CVP calculations

The CVP chart

Chapter 8 - Model 5: Investment Decision

The Investment Decision Model

Topic refresher - discounted cash flow and capital investment decisions

Net Present Value

Example

Internal rate of return (IRR)

The Excel NPV function

The Excel IRR function

Relevant costs and benefits for investment decisions

Which discount rate to use

DCF and inflation

DCF investment analysis - practical methodology

Calculating terminal value

The Investment Decision Model workbook

Input worksheet for the Investment Decision Model

The DCF analysis

Chapter 9 - Model 6: Financial Statement Forecasting

The Financial Statement Forecasting Model

Topic refresher - the impact of risk on financial performance

Expected values

Simulation modelling.

Monte Carlo simulation modelling

Scenario analysis

Sensitivity analysis

Forecasting financial statements for sensitivity analysis

Conventional approach to forecasting financial statements

Key business drivers

The Financial Statement Forecasting Model workbook

Input sheet for the Financial Statement Forecasting Model

Income statement forecast

The balance sheet forecast

The cash flow statement forecast

The executive summary

Chapter 10 - Model 7: Business Valuation

The Business Valuation Model

Topic refresher - business valuation

The Shareholder Value Added (SVA) method of business valuation

The key shareholder value drivers

Valuation of the operational assets

Calculating the residual value of the operational assets

DMT2Z product margin assumptions

Other input assumptions

EBITDA analysis

SVA model

Publishing details.

Notes:

Description based on print version record.

ISBN:

9780857195777

0857195778