This is a guest post written by Paramdeep from Pristine. Chandoo.org is partnering with Pristine to bring an excel financial modeling online training program for you.
This is Part 1 of 6 on Financial Modeling using Excel
In this and next 5 posts, we are going to learn how to build a financial model to do project evaluation using Excel. The 6 parts of this tutorial are,
- Introduction to Financial Modeling
- Building a layout for Project Evaluation Model – Best practices
- Building Inputs and Assumptions Sheet
- Building Projections for Project Evaluation
- Modeling the Cash Flow Statement and Projections
- Putting it all together – Final Project Evaluation Model
- Join our Financial Modeling Classes
What is financial modeling?
Financial modeling is creating a complete program/ structure, which helps you in coming to a decision regarding investment in a project/ company. Now this could be on a simple piece of paper or in excel. The advantage with excel is that, even if you have calculation speed and accuracy like me (this is one place where I am like Einstien!), then also you would be able to come to the right conclusion!
Who does Financial Modeling?
Anybody dealing with any decision related to money (wish there was somebody who did not require that!). If you are involved in financial decision making/ planning related to large corporate, then you would definitely need financial modelling day in and day out. Financial modeling is a mandatory activity for investment bankers, bankers, project finance persons, equity research folks, PE & VCs.
What are the steps in building a financial model?
- Data collection – This is where the real front end banker works. She goes to the client, collects the data like revenue, growth, investments, need for money, etc.
- Back of the envelope calculations – Now most of the corporate guys are very hunky dory about their business. They usually think that their idea is one of a kind and is going to generate loads of mullah. Banker would sanitize their thoughts and try to figure out, if the business makes sense. Initially the thinking and analysis is very simple,
- Does the corporate guy look sober to me?
- How soon can I get my investment back?
- Is the revenue that he is projecting seem greater than the market size? 😉
You usually need no industry knowledge for this. Just keep your eyes and ears open and put your thinking cap on!
- Structured approach to thinking – Once the basic numbers seem reasonable (they make business sense and seem to be true as well), you have to dig deeper! This is where you need a complete financial model. And the first real step to doing that is to think of a structure of analysis. Thankfully finance has some basic theories in place and you can rely on them to proceed:
- Cash is the king – The more cash is generated (from the operations of the business) the better is the business
- Money today is better than money tomorrow – technically this can be called Time value of money. But it does not matter!
Practically these are the fundamental building blocks of analysis and you have to start thinking in these terms for the analysis
- Deciding on a Layout – Now when you start to put this plan in excel, the starting point is deciding on a layout for your financial model. Usually the following questions need to be answered:
- How much information/ data would your model have? If its going to be large, then it might make sense to break the model in multiple sheets
- What kind of assumptions would your model make? For better readability, we would try to keep assumptions in a different heading than the calculations and the final conclusion
- Different fonts/ formatting for assumptions and other parts might enhance readability as well
- Create logical modules for your model
- Keep your P&L, Balance Sheet, cash flow statement, etc. separate
- Even in P&L, keep the revenue generation separate from costs
One Advice for Aspiring Financial Modelers
Speed is the Key: Finally when you are dealing with tons of information, you can easily get bored. If you remember a bunch of keyboard shortcuts, then it would be very beneficial! Here are some resources to get you started:
- Comprehensive list of Excel Keyboard Shortcuts: Lists 97 shortcuts organized by functionality and usefulness.
- Favorite Shortcuts as voted by readers: Keyboard shortcuts shared by our readers.
- Using Mouse Effectively – Part 1 & Part 2: If you are going to use mouse, you better be productive at it.
An Example Financial Modeling Case
Now to make your life easy, we have done the first two parts for you! 🙂 There is a case (In the attached PDF file) that lists a situation and some of the data you might need to organize your thoughts. The decision is simple, would you advice Mr. Samar to invest in design Y?
Download the case pdf from here [pdf].
Once you have read the case and analyzed the numbers try creating a model for evaluation. Remember to make the layout of your model in such a way that navigation becomes easier.
What Next?
In the next installment of this tutorial, learn how to create a layout / template for our project evaluation model. We also discuss about some of the best practices to follow when building models in excel.
Join our Financial Modeling Classes
We are glad to inform that our new financial modeling & project finance modeling online class is ready for your consideration.
Please click here to learn more about the program & sign-up.
Share your Experience:
Do you build financial models? What is your experience like? What process do you follow and how do you plan the model? Do share your ideas and methods thru comments.
Added by Chandoo:
Thank you Paramdeep & Pristine:
Many thanks to Paramdeep and Pristine for making this happen. I am really enjoying this series and learning a lot of valuable tricks about financial modeling.
If you like this series, say thanks to Paramdeep. I am sure he can take any amount of appreciation without choking.
Join our Newsletter
if you are new here, consider joining my newsletter, because I can send you updates when new articles are posted (plus you get a cool e-book with 95 excel tips, free)
Pristine is an awesome training institute for CFA, PRIMA, GARP etc. They have trained folks at HSBC, BoA etc. Chandoo.org is partnering with Pristine to bring an excel financial modeling online training program for you.
30 Responses to “Rescue oddly shaped data – Battle between Formulas, VBA and Power Query”
Nice use of Power Query! Power Query is simply awesome! But somehow a lot of people are punishing themselves by not using it (not learning it).
An imperfect 4th approach for consideration... no codes at all...
Select myrange.
Go to Special --> Blank
Delete Cell --> Shift cell left
90% done... now we just need to move the data of 2nd column to the bottom of 1st column
Of course... Power Query is the best.
Cheers,
There is another way but it involves multiple steps:
Copy the values in column E, move the cursor to F5, Paste Special with Skip Blanks, OK
Copy the values in column D, move the cursor to F8, Paste Special with Skip Blanks, OK
And so on.
This works perfectly, albeit a little clumsily apart from the values in B17 and C16, which can be moved with simple copy and paste
Power Query Forever! I do not know how I survived for so long without knowing and using this tool, I can not recommend it to my colleagues, but by the way they prefer to suffer to learn.
My congratulations here from Brazil.
I rolled my eyes when I saw that data
Using decimal places is a nice trick to order data, thanks for that
And tweaking the first formula a bit, you can use OFFSET instead of INDIRECT
=OFFSET($A$1, MIN(IF(myrange, ROW(myrange)), ROWS(A$1:A1))-1, RIGHT(TEXT(MIN(IF(myrange, ROW(myrange) + COLUMN(myrange)*0.00001), ROWS(A$1:A1)), ".00000"), 5)-1)
Tried the above formula with the downloaded oddly shaped data file and I could not get it to work. I get #value without ctrl+shift+enter, and #ref with ctrl+shift+enter.
Sorry, it was SMALL, not MIN.
Add with CTRL+SHIFT+ENTER.
Thank you for your formula. Like the indirect formula I tested this one in older versions of EXCEL and it worked without ALTERATION in EXCEL 95. Very impressive.
Too complicated
Use =Sum to summarize all the sells to the left and Bobs Your Uncle
@Bertie... I am afraid that won't work when you have more than one value in a row.
I tested this formula in versions of Excel all the way back to Excel 95
=IF(ISERROR(INDIRECT("R"&SUBSTITUTE(TEXT(SMALL(IF(MyRange"",ROW(MyRange)+COLUMN(MyRange)*0.00001),ROWS(A$1:A9)),"00000.00000"),".","C"),FALSE)),"",(INDIRECT("R"&SUBSTITUTE(TEXT(SMALL(IF(MyRange"",ROW(MyRange)+COLUMN(MyRange)*0.00001),ROWS(A$1:A9)),"00000.00000"),".","C"),FALSE)))
So there are multiple ways of cleaning up messy data by formulas.
Wow.. Excel 95. Who knew people still use that. But as you have shown, Excel has all these beautiful and powerful functions for 23 years. It has data sciency stuff before DS was even a thing.
I had a problem with pasting the formula in the original post.
Formula should be: =IF(ISERROR(INDIRECT("R"&SUBSTITUTE(TEXT(SMALL(IF(myrange"",ROW(myrange)+COLUMN(myrange)*0.00001),ROWS(A$1:A1)),"00000.00000"),".","C"),FALSE)),"",(INDIRECT("R"&SUBSTITUTE(TEXT(SMALL(IF(myrange"",ROW(myrange)+COLUMN(myrange)*0.00001),ROWS(A$1:A1)),"00000.00000"),".","C"),FALSE)))
EXCEL even in a 16 bit version, is a very robust and capable program.
I don't like the VBA code. If you have a blank row in MyRange, the last entry in the range is doubled up in the paste.here range.
Not really. The macro is writing one cell at a time from paste.here. You have to clean the range before, which I was too lazy to write. But a line like Range(range("paste.here"), range("paste.here").end(xldown)).clearcontents should do the trick.
Adding Range(range("paste.here"), range("paste.here").end(xldown)).clearcontents fixed the problem.
for step split column by delimiter i am not getting option of split into rows or columns. Can you help me in this
Thanks Chandoo for promoting Power Query.
To simplify further, you can "Unpivot Columns" instead of right click on the newly created column and split it by comma in to rows in step 3 of Power Query.
i used
=LOOKUP(10000,B5:F5)
and got the answers. I just plagiarized this formula somewhere and use it, maybe you can explain why it works.
Regards
@Johan... I am not sure if the formula works correctly. When I tested it with the sample data in this post, it showed #N/As in two cells. Essentially, it will only give first value in each row. So if a row has multiple values, then subsequent values are missed. LOOKUP() function goes thru a list and finds the first value that is less than or equal to the input - in this case 10000 in B5:F5.
I have the need to convert pdf's to excel on occasion and they often come out a mess like this. I have used:
Cell G2 =COUNT(myrange)
Cell G3 =IFERROR(IF(G2-1<1,"",G2-1),"") copied down to G100
Cell H2 =IFERROR(LARGE(myrange,G2),"") copied down to H100
Waouw...
=IFERROR(INDIRECT("R" & SUBSTITUTE(TEXT(SMALL(IF(myrange "", ROW(myrange) + COLUMN(myrange)*0.00001),
ROWS(A$1:A1)), "00000.00000"), ".", "C"), FALSE), "")
but CTRL Shift Enter with {} before and after 🙂 😀
Here's a way with pivot table
https://www.bookkempt.com/2018/02/aligning-non-contiguous-data.html
This is brilliant. Bookmarked 🙂
Another possibility.
This assumes that you have a row index 'k' to use in the SMALL function and a column index 'h' to identify the columns of 'myRange'.
If you define 'coord' to refer to
=k+h/10 [assuming h<10]
then it will be possible to recover values later based upon location within 'myRange'. The formula 'nb' that identifies non-blanks by coordinates is given by
= SMALL( IF(myRange"", coord), k )
Finally, to unpick the pieces
= INDEX( myRange, INT(nb), 10*MOD(nb, 1) )
Whilst I am here and making trouble the PQ solution is also a tad over-complicated. All that is needed is to unpivot the entire table and remove the Attribute column.
The advanced editor would show
let
Source = Excel.CurrentWorkbook(){[Name="myRange"]}[Content],
#"Unpivoted Columns" = Table.UnpivotOtherColumns(Source, {}, "Attribute", "Value"),
#"Removed Columns" = Table.RemoveColumns(#"Unpivoted Columns",{"Attribute"})
in
#"Removed Columns"
1.fill the blank cells with 0
2.the requested column value=sum of those mess number column
but this can be used in only one column has value
Chandoo
And if we use the formula SEARCH (100000000, B5: F5)
JC
Another approach with Power Query, it will still work if the number of columns changed:
let
Source = Excel.CurrentWorkbook(){[Name="myrange"]}[Content],
#"Added Custom" = Table.AddColumn(Source, "List", each Record.ToList(_)),
#"Removed Other Columns" = Table.SelectColumns(#"Added Custom",{"List"}),
#"Expanded LIst" = Table.ExpandListColumn(#"Removed Other Columns", "List"),
#"Filtered Rows" = Table.SelectRows(#"Expanded LIst", each ([List] null))
in
#"Filtered Rows"
Cool idea to use Record.ToList as added column. Thanks for sharing this.
Nowadays, you can just use TOCOL on Excel 2024, MS 365, and Web Excel. It has a parameter to ignore blanks/errors/both.