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 4 and 5 of 6 on Financial Modeling using Excel
In this tutorial we are going to learn how to build assumptions & input sheets in our excel financial model. 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
If you remember my last tutorial, I had discussed that there are just two cardinal rules:
- Cash is the king
- Cash today is more important than cash tomorrow
We will focus on the first principle today and we will delve in the second principle in the next tutorial to value the project.
By far the most important exercise in any integrated (e)valuation model is to get your cash projections right. This would mean going from your accounting profit (which is usually on accrual basis) projection to the actual cash that the company would earn. One of the simplest examples would be:
Let’s say you buy a plant worth USD 1,000,000 in FY 10 in cash. Now this plant is going to give you benefit for the next 10 years. So it would be wise to allocate its cost to all the 10 years, when it’s going to give you the benefit! This allocation of cost to 10 years is called depreciation (which would be USD 100,000 per year for the next 10 years).
But please note – Although you are recognizing the costs in 10 years, but all your cash went out in the first year. Thus when you prepare the cash flow of the project you have to make these adjustments!
What all adjustments would be required?
- All non cash expenses are added back to the profit
- All increase in liability is like a source of fund (cash up) and increase in assets takes away cash from you
Updating the integrated model to incorporate investments
One of the huge cash flow that occurs in the project is due to the initial capital expenditure (capex). This would usually be an important part of cash flow in any manufacturing company. Apart from the initial capex, whenever you are investing in any competing business of your own, you also lose the opportunity to earn from that project.
Working capital investment also takes cash away from the company. This could comprise of investment in inventories, accounts receivables, etc. But please note that working capital by itself does not take away cash, it is the increase in working capital that sucks cash.
Updating the integrated model to incorporate P&L for the project
Profit and loss statement gives indication of the business of the company. In our current evaluation model, we have assumed a starting revenue, and then a year on year growth in the revenue (Typically most of the models that you see in investment banking would make similar assumptions).
Variable expenses are assumed to be a %age of the revenues.
The important part to note while linking this part of the model is:
- You should always link the numbers to the assumptions area (which is demarcated in blue font), so that if anybody wants to analyze any changes, they can easily do that
- You should take care of the referencing ($ protection for rows and columns)
Updating the integrated model to calculate the free cash flow to the project
The most important part of the model is to estimate the free cash flow to the project. As discussed earlier, adjustments have to be made to the PAT/ EBIT to get to the free cash flow.
I typically start here from Earning before Interest and Tax (EBIT) but if you want, you can start with PAT as well. Essentially the logic is that all the earnings before interest and tax go to the capital investors (Debt holders take interest and equity holders take the PAT). If I reduce from it the share of government, I am left with the portion of profit for the complete project – That is why you see the EBIT multiplied by (1- Tax Rate).
Again depreciation is added back as it is not a cash expense and Capex is reduced in the first year. Please note that this reduces the returns from the project as a huge cash is reduced in the first year itself, instead of equal small amounts being paid each year.
Templates to download
I have created a template for you, where the subheadings are given and you have to link the model to get the cash numbers! You can download the same from here:
Download Blank Cash-flow Projection Sheet
You can go through the case and fill in the yellow boxes. I also recommend that you try to create this structure on your own (so that you get a hang of what information is to be recorded).
Also you can download this filled template and check, if the information you recorded, matches mine or not! 🙂
Download Solution Cash-flow Projection Sheet
I am just doing that for the single sheet model and recommend that you do the same for multi-sheet model as a homework problem. If you face any issue, post your excel with the exact problem and we can discuss the way to move forward.
Next Steps
In the last installment, we would see the impact of timing of cash and how the project can be valued. We would be using functions like NPV, IRR and analyzing the assumptions behind the same. For maximum benefit from the series, please try to fill it on your own and fill in the other parts of the model as well.
Read next part of this series – Putting it all together – Final Project Evaluation Model
What best practices do you follow while making cash-flow projections?
We are very eager to learn from. Tell us how you go about modeling cash-flows? Please share using comments.
Join our Financial Modeling Classes:
Chandoo.org is partnering with Pristine to bring an online financial modeling training program for you. Click here to know more & join our class.
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.
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.
13 Responses to “Gantt Box Chart Tutorial & Template – Download and Try today”
Hi Chandoo
As one of your students I have followed your detailed example through with great success. However, Excel is acting in an unexpected way and I wonder if you could take a look?
http://cid-95d070c79aef808e.office.live.com/self.aspx/.Public/Gantt%20Box%20Chart.xlsm
On my version, I have to type 40239 (Which equates to 2 Mar 2010) to get the chart to display 31 May 2010 (which should be 40329)!!??
Have I done something wrong or is Excel acting up?
Thx
Oli
PS Your example file in 2007 displays correctly.
Hi,
I like this idea a lot, but I agree the name is a little drab.
As an American I may just be seeing things, but to me the combination of lines and bars on your chart looks like a bunch of cricket bats.
Maybe you could work that into a catchier name. 🙂
Cheers!
Here is some code I use to keep the axis synched.
It may be useful to some of your readers
It is based on a comment I saw on Daily Dose of Excel.
Function SynchGanttAxis(Cname, lower, upper)
'Sets the X min and X max for Category axis
Application.Volatile
On Error Resume Next
'
'Top Horizontal Axis
With ActiveSheet.Shapes(Cname).Chart.Axes(xlCategory, 1)
.MinimumScale = lower
.MaximumScale = upper
End With
'Bottom Horizontal Axis
With ActiveSheet.Shapes(Cname).Chart.Axes(xlValue, 2)
.MinimumScale = lower
.MaximumScale = upper
End With
End Function
Function SynchVerticalAxis(Cname, lower, upper)
Application.Volatile
On Error Resume Next
' Excel 2007 only
'Right hand vertical axis
With ActiveSheet.Shapes(Cname).Chart.Axes(xlValue, 1)
.MinimumScale = 0
.MaximumScale = upper
End With
End Function
@Oli.. Can you check your file again.. I see 40329...
@Dave: Even I saw things.. the bars actually looked like lollipops. How about calling this lollipop chart - now that would be yummy and goes along the tradition of naming charts after eatables (bar, pie, donut...)
@Bob: Superb stuff... thanks for sharing 🙂
Hi Chandoo
This looks really good and I think it can also be applied to show project phases / milestones.
Question: Thinking further could this be amended to display a project lifecycle (Idea through to Implementation say 7 phases) on one bar / row? Just imagine 20 projects within a programme all on one chart one bar each showing their respective lifecycle stages i.e. on one page.
Idea: As the Gantt Box Chart this is quite intensive to set up re formatting etc how about the added extra of once you have completed this to "Save as template" i.e. saves the formatting and layout of the chart as a template so you can apply to future charts. Simple to do and will save the time formatting etc again and again and again.
Therefore tip: Click on your chart demo and then click on Save As template icon (2007) - edit file name and click on save. Ready to use / apply via Templates in Change Chart Type window.
Thanks and be very interested if the lifecycle question can be resolved
Mike
How embarrassing.
I was obviously suffering from numerical dyslexia. I was one of those days.
@Mike H: You can easily make this chart to work like a generic project lifecycle plan chart. All you have to do is,
1. in a separate sheet define the steps of lifecycle and various dates in a table (with 5 columns for each of the projects you have).
2. now use a control cell to input the project name you want to show in the chart
3. based on the input, use OFFSET Formulas to get the correct data
4. Rest is same as the tutorial above
For more info on the dynamic charting visit http://chandoo.org/wp/tag/dynamic-charts/ and http://chandoo.org/wp?s=OFFSET
Your solution is really smart but in the en Excel isn't meant to do stuff like this. I, as a former PM, always thought is was frustrating that you had to do stuff like this for something simple like a Gantt chart. So I built Tom's Planner. And would like to plug it here. I think it really solves the problem you are trying to solve in the most efficient way. Check out http://www.tomsplanner.com for a free account or play around with the demo.
Hi there,
Chandoo - this is really a very nice and helpfull chart - I adopted it, so I can report a forecast or the delay of a certain task (coming from my role as an auditor for projects).
One topic I´m currently struggeling with: I do have a project lasting for lets say 12 month. For a management reporting, I want to have kind of snapshot, lets say one month back and 2 month in the future. I tried with the offset formula, but failed. Any idea?
Thx
Lopi
[...] Ein viel geliebter Klassiker ist die Erstellung von GANTT-Diagrammen mit Excel. Wir hatten das Thema wiederholt schon hier. Chandoo.org hat sich mal wieder mit einer neuen Variante hervorgetan: Das GANTT-Box-Chart. [...]
[...] [...]
Hi Chandoo - fantastic xls. One thing I can't figure out how to do is adjust the alignment of the vertical axis. I would like to left align so that I could indent to represent sub tasks. Can that be done? Or is there a better way?
I've been trying to work out if there's a way to show weekends on the graph. The closest thing I've got is to add them on a secondary axis, but then I haven't been able to keep both axis lined up together! Any ideas?
Following on from this - is it possible to show things like holidays?