Written by Danielle Stein Fairhurst and Lance Rubin
This article first appeared as part of the Financial Modelling Knowledge Hub
It’s never been more important to have a well built, flexible and robust financial model to use to predict outcomes and it’s at times like these a financial model really proves its worth. With a global pandemic unfolding and the situation changing daily, having a model that can you can quickly and easily update as the situation requires, is going to make it so much easier to make the quick decisions that are going to be necessary in the coming weeks or months.
As 2020 is a leap year, this month we have an extra day in the calendar. Those who are on a fixed monthly salary are complaining that they are not getting paid for working the extra day, but I do hope you are enjoying your day anyway, as this is something that only happens once every four years!
If you work in financial modelling or analysis you’ll know that the uneven number of days in each month causes quite a headache for financial calculations and reporting, especially with calculating interest payments, salaries or anything time-based. Excel does handle date-based calculations very well with handy functions such as =TODAY() or =NOW() which will always give you the current date, or date and time.
If you’re planning to take the FMI Financial Modelling Certification exams coming up on 2nd May, you should start practicing now! It’s one of the most hands-on exams you’re ever likely to see; for Level 1 you need to build a full set of financial statements within the four hour time-frame and it’s certainly not for the faint-hearted. A lot of people fail (about 60% of them actually) and mostly because they simply run out of time. The best way to prepare for this gruelling exam is practice, practice and more practice! Timed practice session will help build stamina and give you the best possible chance of gaining this rigorous qualification.
Scenario analysis, sensitivity analysis and what-if analysis are very similar concepts and are really only slight variations of the same thing. All are very important components of financial modelling – in fact, being able to run sensitivities, scenarios and what-if analysis is often the whole reason the model was built in the first place.
Should people working in finance, such as financial modellers bother to learn Power BI? Whilst not a modelling tool, Power BI is incredibly useful for preparing, crunching and presenting data and there’s no doubt that Microsoft is truly committed to its place in the market with the speed and frequency of updates and feature improvements.
Watch the recording of this live webinar as we learn how to create a multi-dimensional model for your budget vs. actual performance data and how to create interactive reporting on it. Compare retail performance of Appraisal Owls (fictional company) over last 12 months and analyse results in Power BI. Chandoo (aka Purna Duggirala) is the founder of chandoo.org, an award-winning Excel and visualisation site which has over 50,000 members and 1.6 million visitors each month.
I wrote a blog article a while ago with links to some good Excel and Financial Modelling online resources. Due to its popularity at the time, and the fast moving pace of the online world, I thought it was time to update it!
Each time an updated version of Excel is launched, new features are introduced and subtle changes in the look and feel take place. The biggest change was way back when the big jump from Excel 2003 to 2007 occurred. The introduction of the Ribbon and change of file types caused all sort of difficulties for heavy-duty Excel users, financial modellers included. In the versions since then, the changes have been somewhat less traumatic for users and in recent years Microsoft has been moving towards a subscription-based model, making the changes incrementally rather than all at once.
Collaboration is an inevitable feature of today’s working environment, and financial modellers are no exception. In the interests of building good working relationships and reliable outcomes when building a financial model, it’s important to cultivate processes that take Excel version compatibility into account.
Danielle Stein Fairhurst graduated from Griffith University with a Bachelor of International Business Relations. Since then, she has completed a Diploma of Accounting and Finance from ACCA in London and an MBA at Macquarie University and now runs Plum Solutions, a consultancy specialising in financial modelling and analysis. She is the author of two books and travels regularly to deliver specialised training courses and consulting services. Griffith University visited Danielle at her home in Sydney to find out more about how her first degree contributed to her career path.
As 2020 is a leap year, this month we have an extra day in the calendar. Those who are on a fixed monthly salary are complaining that they are not getting paid for working the extra day, but I do hope you are enjoying your day anyway, as this is something that only happens once every four years!
Scenario analysis, sensitivity analysis and what-if analysis are very similar concepts and are really only slight variations of the same thing. All are very important components of financial modelling – in fact, being able to run sensitivities, scenarios and what-if analysis is often the whole reason the model was built in the first place.
Each time an updated version of Excel is launched, new features are introduced and subtle changes in the look and feel take place. The biggest change was way back when the big jump from Excel 2003 to 2007 occurred. The introduction of the Ribbon and change of file types caused all sort of difficulties for heavy-duty Excel users, financial modellers included. In the versions since then, the changes have been somewhat less traumatic for users and in recent years Microsoft has been moving towards a subscription-based model, making the changes incrementally rather than all at once.
Collaboration is an inevitable feature of today’s working environment, and financial modellers are no exception. In the interests of building good working relationships and reliable outcomes when building a financial model, it’s important to cultivate processes that take Excel version compatibility into account.
