We all know about the MAX formula. But do you know about 3D Max?
Sounds intriguing? Read on.
Lets say you are the sales analyst at ACME Inc. Your job involves drinking copious amounts of coffee, creating awesome reports & helping ACME Inc. beat competition.
For one of the reports, you need to find out the maximum transactions by any customer across months.
But there is a twist in the story.
Your data is not in one sheet. It is in multiple sheets, one per month.
Like this:
How to get the max value for all months?
Using 3D MAX formula
We can use 3D formulas in such cases. 3D formula?!?
Lets say our transaction data is in column C, in range C5:C44 in all sheets (same cells in all sheets)
To calculate the max of all the transactions, we simply write:
=MAX(Jan:Jun!C5:C44)
Notice the blue text? That is what makes our references 3D.
Aside: If row & columns make Excel 2D, sheets in a workbook act as 3rd dimension. Hence the name 3D reference.
This formula will go and fetch all the C5:C44 data from sheets Jan thru Jun and gives us the desired answer.
Related: Consolidating data from multiple sheets using 3D references.
What if you want to consider only specific months
The 3D formula approach is simple & powerful. But what if you want to consider data only in a specific list of sheets (or months in our case)?
For example, what formula would work if we want to calculate maximum transactions in months Jan, Mar, Apr & Jun alone?
Lets say the names of the sheets we want to consider is listed in a range called sheet.names
Also, keep in mind that the data is in range C5:C44 in all the sheets.
Then the below formula gives us maximum value from the selected sheets.
{=MAX(N(INDIRECT(ADDRESS(ROW(A5:A44),3,1,1, TRANSPOSE(sheet.names)))))}
It is an array formula. So you must press CTRL+Shift+Enter to get the correct result.
PS: Thanks to Pranay Shah, whose question inspired me to write this formula.
How does it work?
First lets figure out the logic we need to use.
- We have a list of sheet names in the range sheet.names
- For each sheet, get the data from cells C5:C44
- Calculate the max of all this data
Now, lets take a look at the formula, inside out.
ROW(A5:A44) portion: This generates an array for numbers from 5 to 44 – {5;6;7;…;42;43;44}
Transpose(sheet.names) portion: This transposes the vertical sheet names array to horizontal. So {“Jan”;”Mar”;”Apr”;”Jun”} becomes {“Jan”,”Mar”,”Apr”,”Jun”}
ADDRESS(ROW(),3,1,1,TRANSPOSE()): This generates an array of cell addresses from rows 5 to 44, column 3 and sheets in sheet.names range. The result looks like this:
{“Jan!$C$5″,”Mar!$C$5″,”Apr!$C$5″,”Jun!$C$5”; “Jan!$C$6″,”Mar!$C$6″,”Apr!$C$6″,”Jun!$C$6”;
“Jan!$C$7″,”Mar!$C$7″,”Apr!$C$7″,”Jun!$C$7”; “Jan!$C$8″,”Mar!$C$8″,”Apr!$C$8″,”Jun!$C$8”;
“Jan!$C$9″,”Mar!$C$9″,”Apr!$C$9″,”Jun!$C$9”; “Jan!$C$10″,”Mar!$C$10″,”Apr!$C$10″,”Jun!$C$10”;
…
“Jan!$C$41″,”Mar!$C$41″,”Apr!$C$41″,”Jun!$C$41”; “Jan!$C$42″,”Mar!$C$42″,”Apr!$C$42″,”Jun!$C$42”;
“Jan!$C$43″,”Mar!$C$43″,”Apr!$C$43″,”Jun!$C$43”; “Jan!$C$44″,”Mar!$C$44″,”Apr!$C$44″,”Jun!$C$44”}
Why TRANSPOSE()?
If we have not TRANSPOSE()ed either sheet.names or row numbers, we will not get full list of addresses. TRANSPOSE forces Excel to generate all combinations of addresses from given row numbers & sheet names.
For example, here is the result of the formula
ADDRESS(ROW(A5:A44),3,1,1, sheet.names)
Notice the missing TRANSPOSE()
{“Jan!$C$5″;”Mar!$C$6″;”Apr!$C$7″;”Jun!$C$8”;#N/A;#N/A;#N/A;#N/A;#N/A;#N/A; #N/A;#N/A;#N/A;#N/A;#N/A;#N/A;#N/A;#N/A; #N/A;#N/A;#N/A;#N/A;#N/A;#N/A;#N/A;#N/A;#N/A;#N/A;#N/A;#N/A; #N/A;#N/A;#N/A;#N/A;#N/A;#N/A;#N/A;#N/A;#N/A;#N/A}
INDIRECT(ADDRESS()) portion: We have the addresses and we need values. This is exactly the purpose of INDIRECT formula. So we pass the list of addresses to INDIRECT to get the cell values.
This results in an array of numbers like this:
{1400,900,1225,1440; 1035,1300,850,1850; 990,2000,1140,775; 1520,870,1225,650; 1300,1000,1800,875; 1305,980,1085,1215; 750,1350,1000,1330; 1050,600,1125,1755; 990,735,1350,1600; 1215,1750,770,625; 1600,735,1305,1300; 960,1950,1480,1800; 1215,1365,1110,1395; 1320,910,750,1560; 1700,975,1125,1480; 900,1400,780,1300; 1485,1440,960,1300; 825,2125,1110,1215; 1000,945,810,1120; 1650,500,1170,990; 1440,1080,1110,840; 1035,840,1300,800; 1225,1330,1020,1560; 1100,690,1170,780; 600,700,1280,990; 1000,1000,1400,700; 1260,1520,875,1305; 1360,1260,925,1320; 810,1100,2000,1800; 825,690,750,1215; 1575,1560,1000,1900; 1190,1080,960,1400; 1200,1200,1160,980; 900,1665,575,500; 880,1000,1200,1550; 1000,950,1440,550; 1400,900,1000,1190; 750,1190,1110,700; 1710,805,800,1755; 1950,1365,660,1150}
Now, notice the 2 dimensional nature of this array. It has 4 items per row.
N(INDIRECT()) portion:
We just pass the array of numbers to N() so that they are force converted to numbers. This step ensures that we get correct results with MAX.
Note: Even without N() your array formula shows a result, but often this will be incorrect. I assume it is one of the quirks of Excel and we just have to use N().
Related: See how N() plays a vital role in situations like – dynamic charts from non-contiguous data & String parsing.
MAX(N()) portion:
This will just tell us what the maximum number in that array. Make sure you press CTRL+Shift+Enter to get the correct result.
Download Example Workbook
If all these MAX formulas are confusing, check out the example workbook. It shows all these. Play with the formulas and examine the results to learn more.
Do you use 3D references?
I rarely use them. This is because, most of the times, my data is in one place. If is it scattered across multiple sheets, I usually spend time writing a macro (or using Power Query) to consolidate the data to one place before attacking the analysis problems.
But I find 3D references & formulas a powerful way to answer questions like this.
What about you? Do you use 3D references in your formulas? When do you use them? Please share your thoughts & experiences using comments.
Learn more
If this technique sounds interesting, check out below tutorials to learn more.
- MaxIF formula in Excel
- Using INDEX formula in Excel
- Calculate maximum change – problem & Solution
- Calculating all-time high & trailing 12 months high values
62 Responses to “Introduction to Financial Modeling using Excel [Part 1 of 6]”
Oooh! Chandoo - are you looking to outperform the Altman Z-Score?
I'm all ears 😉
Many thanks, Paramdeep. Looking forward to the remaining parts of the series
Thank you Paramdeep. I look forward to following the series.
Those interested in Financial Modelling may also find this site interesting:
http://www.fimodo.com/
Hi Chandoo,
Really looking forward for this awesome financial modeling journey 🙂
All the very best..
Regards
Rohit1409
Hi Chandoo,
it seems the future is not away when we will have a new software/spreadsheet as competitor to Microsoft Office/Linux etc.......Hats Off to you..
KEEP SMILING
GURU
@apex, clarity: Thanks...
@all: I do hope that you have started creating the model for the simple case given.. Lets see, what according to you all is the best way forward. So your views on the best practices for the template for valuation?
The planning process varies depending on the project and type of data I am looking at.
If I am doing a cost impact study based on actuals, verses a cost impact study to estimate future cost, verses reviewing historical data then creating a model, verse having to review historical data, apply it to a draft model, update the model based on the draft outputs and the presentation then sometimes repeat the process a few times.
Revisions are an absolutely necessary part of corporate financial modeling especially for the presentation sections. A good presentation will be revised multiple time. There are just to many elements which cannot be planned for, especially with ad hoc reports/models.
Revisions are leading cause of errors, and time spent tracking down errors. The more complex the model the more important revision control is. I would be interested in a section on revision control and good methodologies to determine the effect of changes on models. That is without having to due detail review of the whole model over again.
Hi Paramdeep,
I can't wait for the continuation of this series. You have done a great job in making technical terms appear simple and easy to understand. This article is also very useful in our line of business, in fact i will be featuring this article in our site. Of course the credits will go out to you.
Many thanks and keep it up!
Drew
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@Drew: Thanks! Hope that you found the tutorials useful. Feel free to get back with any queries.
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Great information, i also want to learn financial modeling, how to learn
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chando bhai i m tired for looking financial modeling detail but i cant find it anyway. so plz kindly send me full detail of financial modeling from beginning levelo to final. where i learn complete modeling procedure n order to become professional
You noob, you won`t become a professional like that, you need to do it on your own and learn as you go
@Nadeem Bhai,
The 6 links to the tutorial at the top of this post, build a small integrated financial model step by step. We are also running a complete 8 weeks course on financial modeling (similar to excel school). But that is almost 50% complete right now. If you want to join, you can join the next batch (probably starting in Jan/ Feb)
Feel free to get back, if you have any queries regarding the model/ steps in creating the same
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I want to learn how to build a financial model
Dear Lulama,
You can use this tutorial to learn to build a financial model. We also run a course on financial modeling and project finance modeling. The details can be obtained from:
http://chandoo.org/wp/financial-modeling/
You can consider joining that as well.
I would strongly encourage you to join the newsletter to get the updates about financial modeling and the next batch starting for the course.
I want to learn thorough excel and financial modelling thing !!! I am a chartered accountant..CAn you please suggest a detail syllabus that should be learn by me. Also suggest any classes that would cover everything in excel and financial modelling related things.. I stay in mumbai, so please suggest a class in mumbai or any books..byyee.. thanks ..
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Hi Vivek,
We do conduct the financial modeling course online as well as in Mumbai. We start with the basics of excel and build a completely integrated financial model in the class. For details you can look at:
http://chandoo.org/wp/financial-modeling/
or
http://www.edupristine.com/courses/financial-modeling/prisitne-fm-offering
Please describe to me various type of financial modela and demonstrate how a model can be build.
Regards,
Dear Immanuel,
This series of articles does exactly that. If you go step by step through the articles and create the excel sheets on your own, you will understand how to create an integrated financial model.
Alternatively, if you are looking for video sessions, you can consider joining our course:
http://chandoo.org/wp/financial-modeling/
It is expected to reopen somewhere in mid july.
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Thanks Paramdeep this is great!
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Paramdeep Hi! A bit ignorant here, but let's ask anyway. Can I access "recorded" video sessions apart from following the step by step articles?
Thanks!
@Marius: Yes, we do have a training program with recorded video sessions. If you are interested, you can enroll for the same. The details can be obtained from: http://chandoo.org/wp/financial-modeling/
i want to know about the scope of financial modeling.i also want to know after doing financial modeling course what are the job prospect, like where i can found job so plz send me full detail of financial modeling from beginning levelo to final.
I am interested to join your Financial modelling class cos am involved in a new business. But I have a Macbook Air with Excel for Mac installed. Would that work with your program?
Dear Charsiew,
The complete training program is built using Excel 2007 with MS windows. Though there is nothing specific to Microsoft in the training. I think a few people have joined the program and are using MAC. If you write an email to me on paramdeep @ gmail.com, I can send you the email ids of those participants and you can get to know their feedback and difficulties in using the program.
This is great, when does the next batch start?
Dear Karan,
The course is in recorded format and you can register for the same as soon as you want.
Paramdeep, thanks. I'm venturing into financial modelling for the first time and from the little I've read from your website already, I'm sure I'll find your resources very useful; thanks once again.
Dear Seun,
I am glad that you are finding the resources to be useful. Feel free to send in comments with your feedback and further questions.
hie ppl...I jst wantd a small favour cn smone help me out in calculating EBITDA, along with its working, from wipros annual report 2011-2012, link - http://www.wipro.com/investors/annual-reports.aspx
...PLZ plz... i am having a submission tommorow.
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Nice article.
In designing Excel Financial Models I design the user interface as friendly as possible and structuring the input variables in the workflow of the client's operations so that they can flow through the impact of the input variables in Excel using buttons and macros and giving the model transparency.
Cheers
Arthur
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Another step to build any financial model is to do a financial analysis beforehand. This normally helps to design and come up with good projections.
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