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
This is Part 1 of 6 on Financial Modeling using ExcelIn 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.
35 Responses to “75 Excel Speeding up Tips Shared by YOU! [Speedy Spreadsheet Week]”
I see most are saying that array formulas are bad. But I thought that when you use array formulas it grabs all the data at once and performs the calculations in one fell swoop. At least that is how the UDFs that I created work. When I did the time test it was much faster that way. Maybe I'll go back and check to make sure my work is right, but that's what I did.
When I work with array formulas I get a full column of data then work on that column and return a full column of data all at once. Which has shown to be much faster than the alternative.
Anyone have special insights on this?
wow..! thats a pretty impressive list, some real gems in there. I read somewhere the other day that spreadsheet development should be 80% planning and 20% implementation - taking the time to think about layout, how you're going to calculate things and how to structure the data often results in a lot less headaches, and more time for deeper analysis...
Hi Chandoo...
Mixed feeling about this article, while I completely agree with you when you share everyone's points under their name giving credit to contributors, but at the same time I see alot of repeated tips and few those may not be applicable under all cases. (I may have sounded harsh). Some kind of sorting of tips were required than mere 3 categorization. (Tough ask, I know). Some really worthy and awesome tips get lost in occean.
I would have been happy to read only non repititive tips and more like standard chandoo articles.
Well, I have also got two tips (may get lost in the list above), which is not presented above:
1. When using too many pivots - Disable data drilling option. This reduces file size, cache memory and speeds up file.
2. If your macro has used too many files for gathering input, close the file and open. This is also release or kill unwanted space in memory and speeds up. Again this can be achieved by macro to close self file and reopen same file, using timer function.
Please do not count me negative.
Regards,
Prasad DN
Hey, one thing that really speeds up VBA processing of data is to extract ranges into arrays & then working on those arrays. Arrays are a lot faster than using cell offset or any other method for working with a database. After you are done you can also paste the value directly into the range with one single command. This will speed up the macros considerably.
Here is a msdn article with examples in it:
msdn.microsoft.com/en-us/library/aa139976(v=office.10).aspx
Hope this helps
oops, noticed a typo in the tip I posted:
Re directly assigning values in VBA rather than copying & pasting should have read:
Sheet2.Range( "B1:B200 ").Value= Sheet1.Range( "A1:A200 ").Value
not
Sheet2.Range( "B1:B200 ").Value= Sheet1.Range( "A1:A100 ").Value
Corrected with double quotes:
Sheet2.Range("B1:B200").Value= Sheet1.Range("A1:A200").Value
[...] posts on speeding up Excel worksheets, one of the posts focuses on formulas and another he let the general readers make their suggestions. I made the suggestion that people use array formulas. But most of the other suggestions said not [...]
OK, I tested it. My UDFs were faster as array functions (like a couple thousand times). But Excel's built in functions are faster when not doing arrays. Not sure this is the case for all situations.
I can't help but to speak up.
Deleting a PivotTable will not speed up your workbook. It will only reduce the file size. There is zero memory processing for a pivot table if it just sits there.
Instead of destroying the pivot table, why not remove the redundant raw data. That would equally reduce the file size of the workbook, while keeping the pivot table functionality.
http://datapigtechnologies.com/blog/index.php/cut-the-size-of-your-pivot-table-workbooks-in-half/
Thanks a lot guys for your valuable tips !!
It really worked for me
Application.ScreenUpdating = False
Application.Calculation = xlCalculationManual
...
...
...
Application.ScreenUpdating = True
Application.Calculation = xlCalculationAutomatic
I would add:
Application.StatusBar = "Wait a second..."
............
Application.StatusBar = False
Optimizing Speed using Pivot Tables:
If you find that Pivot Tables are becoming sluggish becomes of the sheer volume of tables there is a way to increase performance. By default (xls 2010) pivot tables are designed to autofit the data within the columns as well as preserving formatting. I discovered that unchecking these two options alone will exponentially increase performance.
Here's how to do it:
Right click on your pivot table(s) --->choose 'Pivot Table Options' -->Layout & Format' Tab --->uncheck two boxes at the bottom. Done!
here is my list:
1. Avoid Variants when possible
2. Use long instead of integer
3. Use double instead of single
4. Use booleans as much as possible
5. pull data into arrays, manipulate, then dump back to workbook
6. use .value2 instead of .value if you are looking at strings or numeric values
7. set object variables
dim Wks as Excel.Worksheet
set wks = thisworkbook.Sheets("Sheet1")
8. use with statements...
with wks.cells(x,y)
.value2 = "abcd"
.interior.colorindex=4
with .font
.bold=true
.size =20
.underline=xlunderlinestylesingle
end with
9. use string version of functions (Left$() instead of Left())
10. Test for empty string variables with len() or lenb()...if lenb(String1)=0 then
11. Use the Mid$() function if it is possible instead of split()
12. use the join$() function instead of concatenating strings
13. AscW() to evaluate first characters
14. combine if statements and booleans together
boolean = (lenb(String1) = 0)
16. InStr(), InStrB(), InStrRev() are very fast, InStr() can be used to quickly return a substring occurrence of a string
17. DICTIONARIES!!!!!!!!!!!
18. FileSystemObject
19. My machine runs slightly faster when i fill in all the inputs of a function (instead of InStrB(String1, "abcd"), i use (InStrB(1,String1,"abcd",vbBinaryCompare)
20. Short Circuit If statements: If x = 2 then if y >3 then if z = 5 then b=true or
if x=2 then
if y >3 then
if z=5 then
b=true
c=true
end if
end if
end if
21. use ElseIf
22. my testing indicates ElseIf is slightly faster than a Case Select
23. set strings to empty by: = vbnullstring
24. with application
.screenupdating = false
.displayalerts = false
.enableevents = false
end with
25. UserForms can be very beneficial
26. User-Defined Types are a very neat way to encapsulate data
27. User-Defined Functions are handy, but can increase run-time if called thousands of times
28. if using ElseIfs, nested And Ifs or Select Case statements, put the argument that will occur most frequently at the beginning
29. Looping is not the worst thing...just got to figure out how to do it the most efficiently
30. Use dynamic arrays instead of static arrays
31. if you can figure out Win32 APIs, then they are usually much faster than VBA functions
I worked on a massive spreadsheet and it had become very slow over time as I developed it. I tried stripping down more and more formulas by replacing with pasted values, removed all conditional formatting etc. In the end what finally did the trick was when I removed the last single SUMPRODUCT fomula. It changed the updating time after one change from 7-8 seconds to instantaneously. The SUMPRODUCT I had used the full columns, and if I put it to only look at rows 1-500 it was fine.
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TIPS FOR SPEEDING UP EXCEL
(1) Instead of writing a lot of formulas to organise data, you can VLOOKUP() the data in a Pivot table, thereby combining the advantages of Pivot table and VOOKUP().
(2) If you have a range named ‘TotalTaxForTheCurrentFinancialYear’, then it is not compulsory to use this name when making the worksheet. Naming the range as ‘Tax’ or simply ‘T’ will be sufficient. The formula =SUM(T) will be shorter and easier to use.
After completing typing all the formulas, simply edit the name of the range from ‘T’ to ‘TotalTaxForTheCurrentFinancialYear’, in the name box. The formula =SUM(T) will automatically change to =SUM(TotalTaxForTheCurrentFinancialYear).
Vijaykumar Shetye, India
VBA
I don't write many macros and like most of you when doing a recalculation it sometimes takes forever.
I have found that when I looked at my spreadsheet, I could determine which order of calcuations (by column) would produce the least number of iterations. So I wrote a macro to do my calculations on my terms. I picked the order of the columns I wanted to calcuate and it sped up my recalc 5-10X.
I did this so long ago, I believe I used "expression .Calculate".
TIPS TO SPEED UP EXCEL by Vijaykumar Shetye, India
You can view all the formulas in the entire worksheet quickly by pressing [ctrl] and [~] keys simultaneously.
To view results, press the key combination again.
i need help about excle lerning and reports making with dash bord i have no facility to join the on classes.
sajjad.hussain165@gmail.com
Is there any command to get time with seconds
Is there any way to create an excel file for specific time period, afterwards it will not open
[...] are looking for , but give it a try : Optimize Slow VBA Code. Speed Up Efficient VBA Code/Macros 75 Excel Speeding up Tips - How to speed-up & optimize slow Excel workbooks? | Chandoo.org - Lea... [...]
I've had to do a lot of mass calculations for reports etc. that involved repetitive identical, yet complex formulae, which took forever...
I hit on a great time-saver: sort the spreadsheet data; if, for example, the same result was due to a lookup of Hotel Name (A column), Date (B column), and Room Type (F column), the formula (Z column) would be: "=IF(A2&B2&F2=A1&B1&F1,Z1,VLOOKUP(A2&B2&F2,LookUps!A:G,7,FALSE))".
This meant that if the result is the same as the row above, just use the same answer, thus saving loads of time instead of VLOOKUPs. (This is a simplified example, the actual one had INDIRECT(ADDRESS...) in it, too!)
Check files for invalid range names, invalid links and names that aren't needed any longer.
Clearing out some 200 old references in a template made the file open go from 30 seconds to 2.
You can improve the speed by stopping calculation during changing cell value and after that you can enable it. please follow the link.
http://webtech-training.blogspot.in/2013/10/how-to-stop-heavy-formula-calculation.html
[…] 75 Excel Speeding Tips Its a long List, many repeated but worth a visit. […]
[…] 75 Speed-up tips by Chandoo (smartly done by crowd sourcing) […]
[…] Are you opening slow excel files? Use this reference to speed up your excel sheets […]
If you want to highlight the content or result within a cell with colour, use content colour not cell fill colour. This make a large data sheet fast as full colour takes up more resource.
There are already so many useful replies, so don't be mad at me if I repeat someone with the following hints.
While using pivot tables:
1. Link (raw) data from external files, rather then building pivots in the same workbook of the data. => Reduces file size.
2. don't flag "keep source data" in pivot settings. => reduces cache.
Downside is when you want to use slicers, you must allow refresh of the source data and thus people need access to that file.
One extra when using tables above ranges: replace the table header references by cell references in heavy duty formulas. I'm not sure but it seems to be faster and lighter (in #MBs).
hi
iam student and need xloptimizer( no demo) for solving the mathematical model
can you help me
thanks alot
@Reza
We cannot give away XLoptimizer
Why not post a question in the Chandoo.org Forums
http://forum.chandoo.org/
Dear Sir,
Thanks a lot for sharing tips & tricks of excel....
I read it , understand it and then use it in job and that has helped me a lot....
Thanks a lot...
Himanshu.
Mumbai, India.
In VBA, send out values to the worksheet all together as an array then excel will only re-calculate once rather than each time a cell that is output.
to the guy who said avoid looping in VBA - easier said than done, it's one of the most powerful uses for VBA out there. I'd therefore recomend the half way house and break the loop as soon as you've got what you want, don't let it run until the end. Use While etc.
What I would say on VBA in general is minimise sheet to code interations. Suck all your data into a VBA array THEN do the maths don't use cells themselves as stand alone visual variables.
And to the lady who said it's faster offline - that's because Microsoft are constantly contacting their own website be it security verification and/or update checks
Apply some logic to the order of criteria in sumifs / countifs formula
order the most exclusive criteria first. Once one criteria fails the others do not execute.
Bing AI, given the following query, confirms this: "excel countifs. if one criteria is likely to exclude most of the data range then should this criteria go first in the list to prevent frivilous executions".