A Excel Tips

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Financial Modeling in Excel2013

© EduPristine – www.edupristine.com


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© EduPristine | (Confidential)

Agenda

• Introduction and Context

• Efficiently using excel – preparation for modeling

• Excel – Summarization Using Pivot Tables• Creating a template for integrated model

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Excel as the most important tool for modeling

• Excel is one of the most widely used tools in financial industry

– Easy to use

– High reach & access to software across geographies

– Flexibility

– Robustness

– Inbuilt features (Most people would not even be using 95% of the features) & Extendibility

– Modular and Object Oriented Architecture

• Excel as a data-store

– Easy to store and retrieve information – Flexibility to put many data-types in the same sheet

• Functions and a range of features

– Excel is easily extendible to be used as a Modeling tool

• Modeling Context

– Understand the industry models being used

– Create your own models Rather than just using them – Improve & enhance productivity in work

– Extend these models for your use

– Debug Problems

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Agenda

• Introduction and context



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Key aspects of Modeling & Excel Usage

• Building a ROBUST model is a must for other people to use your model

– It should generate the correct results

– It should have proper area for Inputs/ Outputs

– It should be able to handle errors properly

– Naming/ Labeling of data items should be done properly

– Accidental changing of model parameters should be avoided

– The model should be easy to understand on computer and in printout

– Reusable components can be made in the excel sheet, which can be made later

• SPEED is the key in modeling

– A large model might have multiple excel sheets and a lot of formulas and calculations. It is necessary tonavigate through the excel sheet in a speedy manner and understand it

– It is a fact that mouse is 5 times slower than using the keyboard to use excel. Due to heavy involvementof the users, having a strong command over the keyboard shortcuts is a must!

– A well designed excel sheet is easy to understand as well

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Lets take a moment to understand components of Excel

Toolbar Formula Bar

Cells

Name

Worksheet

Excel 2007 Interface

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Excel 2003 and 2007 are being widely used in the industry. Most of features of 2007 are backward compatible


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… Lets take a moment to understand components of excel

Excel 2007 Interface

Excel 2003 and 2007 are being widely used in the industry. Most of features of 2007 are backward compatible

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8/32© EduPristine | (Confidential)

Basic Editing and Saving Excel

CTRL + S

CTRL + C

CTRL + V

CTRL + X

CTRL + Z

CTRL + A

CTRL + B

ALT + TAB

ALT + F4CTRL + TAB

Save Workbook

Copy

Paste

Cut

Undo

Select All

Bold

Switch Program

Close ProgramSwitch workbooks

Some Special Shortcuts

CTRL + ALT + V

CTRL + 9

SHIFT + CTRL + 9

CTRL + 0

SHIFT + CTRL + 0

ALT + H + O + I

SHIFT + F11SHIFT + Spacebar

CTRL + Spacebar

SHIFT + ALT +

SHIFT + ALT –

CTRL + Minus sign

F2

Paste Special

Hide Row

Unhide Row

Hide Column

Unhide Column

Fit column width

New worksheet

Highlight row

Highlight column

Group rows/columnsUngroup rows/columns

Delete selected cells

Edit cells

Formatting

CTRL + 1

ALT + H + 0

ALT + H + 9

SHIFT + CTRL + ~

SHIFT + CTRL + !SHIFT + CTRL + #

SHIFT + CTRL + $

SHIFT + CTRL + %

CTRL + ;

Format Box

Increase decimal

Decrease decimal

General format

Number formatDate format

Currency format

Percentage format

Enter the date

Inside the cell Editing

ALT + ENTER

SHIFT + Arrow

SHIFT + CTRL + ArrowF4

ESC

Start new line in same cell

Highlight within cells

Highlight contiguous itemsToggle “$”

Cancel a cell entry

Formulas

= (equals sign) ALT + “=“

CTRL + „

CTRL + ~

F9SHIFT + CTRL + Enter

Start a formulaInsert AutoSum formula

Copy formula from above cell

Show formulas/values

Recalculate all workbooksEnter array formula

Auditing Formulas

ALT + M + P

ALT + M + D ALT + M + A + A

CTRL + [

CTRL + ]

F5 + Enter

SHIFT + CTRL + {

SHIFT + CTRL + }

Trace immediate precedents

Trace immediate dependentsRemove tracing arrows

Go to precedent cells

Go to dependent cells

Go back to original cell

Trace all precedents (indirect)

Trace all dependents (indirect)

Navigating / Editing

Arrow keys

CTRL + Pg Up/Down

CTRL + Arrow keysSHIFT + Arrow keys

SHIFT + CTRL + Arrow

Home

CTRL + Home

SHIFT + ENTER

TAB

SHIFT + TAB

ALT +

Move to new cells

Switch worksheets

Go to end of continuous range Select a cellSelect range

Select continuous range

Move to beginning of line

Move to cell “ A1”

Move to cell above

Move to cell to the right

Move to cell to the left

Display a drop-down list

Change all Inputs to Blue:Press F5 then Select "Special" then "Constants", "OK” then Manually changeselection to blue font color Change all Formulas to Black: Select "Formulas" instead of "Constants“ thenchange selection to black color

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Moving across toolbars in Excel 2003 and 2007

• Press Alt Key to activate Main toolbar

– For Example, Alt F for file

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• Use CTRL + TAB to Go to

next toolbar

• Use Arrow key to navigate

further

In 2007, Pressing the “ALT” key automatically shows the options



Cell Referencing - $

• Use $ for Absolute Reference

– A1 vs $A1 vs A$1 vs $A$1

• What happens when you copy paste cells

• Change the referencing of a cell by F2 + F4

Source Destination

$A$1 $A$1

A$1 C$1

$A1 $A3

A1 C3

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Refer Worksheet A



Simple Exercises in Excel

• The financials of a start-up company are given to you. The company would be eligible for funding iftheir operating profit margin is greater than 35% and CAGR in revenue growth is greater than 50%.

Create a model to check if the company is eligible for funding. Also visually indicate the eligibility. – Use worksheet B

– Hint

• Use (P(t)/ P(t-k))^(1/k) -1 to calculate CAGR

• Use AND function to calculate eligibility

• Use IF function to print it

• Use conditional formatting to output the results

• Email ids of 100 people are given to you. They all need to be migrated to a new domain ofedupristine.com. Write a function to migrate all email ids to new domain

– Use worksheet C

– Hint

• Use FIND to find the common character

• Use LEFT function• Use CONCATENATE function

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Arrays in Excel

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• Array (Can be loosely thought of as a list) is agroup of cells or values that Excel treats as a

unit – No longer treats the cells individually, but list of

cells as an individual entity

– Since individual cells are not independententities, so they cannot be changed individually

– Enables apply a formula to every cell in the rangeusing just a single operation

• For any matrix Operation

– Calculate the exact size of the transposed Matrix

• Select the appropriate range

– Use the function

– Press SHIFT + CTRL + ENTER

• Use Worksheet D

To Run Array Functions – Remember to use CTRL + SHIFT + ENTER



Frequently Used Array functions

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Function Name Function

SUMPRODUCT() To Sumproduct 2 matrices

TRANSPOSE() To transpose a matrix

MATCH() Match and Index are used in conjunction as a lookup function

INDEX() Match and Index are used in conjunction as a lookup function

VLOOKUP() To lookup for a particular value in array, with the starting column acting as a

lookup reference

COLUMN() Returns the column number of the cell referenced

ROW() Returns the row number of the cell referenced

HLOOKUP() To lookup for a particular value in array, with the top row acting as lookupreference



Using the VLookUp Function

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• VLOOKUP() function

– The V in VLOOKUP() stands for vertical

– Works by looking in the first column of a table for thevalue you specify

– It then looks across the appropriate number of columns(which you specify) and returns whatever value it findsthere

– The final option (range_lookup) is a Boolean value thatdetermines how Excel finds the value. Always useFALSE- for exact match

– Whenever looking for data picked from the net, trim the stringsbefore comparison

• Question (Use WorkSheet E)

• The ID of defaulters and their amount and phone numberhas been provided by the Credit Bureau in Columns A to D.

• Column F contains the IDs of your clients. Use Vlookupfunction to find out the default amount of your clients.

One of the most widely used functions in Excel



Using the HLookup Function

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• HLOOKUP() function is

– H in HLOOKUP() stands for horizontal

– Similar to VLOOKUP()

– It searches for the lookup value in thefirst row of a table

• Question: Use Worksheet F

• Various expenses of Pristine aregiven in a table. Write a function tocalculate the total expenses for anydesired month (user should be able tochange this value, and automaticallythe expenses should be updated)

Both Vlookup and Hlookup have a limitation of using the first Column/ Row as reference



Index & Match Functions

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• INDEX() returns the reference or the value of a cell at theintersection of a row and column inside a reference

• MATCH() function

– looks through a row or column of cells for a value

– If it finds a match, it returns the relative position of the match

in the row or column – Use the usual wildcard characters within the lookup_value

argument (provided that match_type is 0 and lookup_value istext)

– Use the question mark (?) for single characters and theasterisk (*) for multiple characters

– See Worksheet G



Use Index and Match – Any Column & row Lookup

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• Index and Match can be used in conjunction to perform complex lookup functions

– Use Match to generate the row number that you are interested in

– Use Index to generate the value that you are looking for

– Similar to implementation of a new kind of directory service

• Use Worksheet H

• Various expenses of Pristine are given in a table. Write a function to calculate thedesired expense head for any desired month (user should be able to change both thevalues, and automatically the expenses should be updated)

Easily Extendible approach to get any generalized kind of search(where both row and column can be variable)

Always Use FALSE inthe boolean required

for comparison



Agenda




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Pivot Tables – An introduction

Easy Summarization & Analysis Tool

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Pivot Tables

• Summarize data in one field

– called a data field

• and break it down according to the data inanother field.

– The unique values in the second field (calledthe row field) become the row headings

• Further break down your data by specifying athird field

– called the column field

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Terms used in Excel

• Data source: The original data

– Range, a table, imported data, or an external data

source.

• Field: A category of data, such as Region, Quarter, orSales

– Most PivotTables are derived from tables or databases,a PivotTable field is directly analogous to a table ordatabase field

• Row field: A field with a limited set of distinct text,

numeric, or date values to use as row labels in thePivotTable

• Column field: A field with a limited set of distinct text,numeric, or date values to use as column labels for thePivotTable

• Report filter: A field with a limited set of distinct text,numeric, or date values that you use to filter thePivotTable view

• PivotTable items: The items from the source list usedas row, column, and page labels

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Summarize Large Data

• To start the pivot wizard:

– ALT D + P

– To complete the process, press finish

• Use Example I

– Calculate Region Wise, Year wise sales

– Give Product wise Data for 2008 Only

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Summarize Large Data

• To start the pivot wizard:

– ALT D + P

– To complete the process, press finish• Use Example I



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Filtering for Particular Rows/ Columns

• Use Example I



– Get Data only for Delhi

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Other Customization Options …

• Selecting the entire PivotTable: Choose Options, Select, Entire PivotTable

• Selecting PivotTable items: Select the entire PivotTable, then choose Options, Select. In the list,

click the PivotTable element you want to select: Labels and Values, Values, or Labels

• Formatting the PivotTable: Choose the Design tab and then click a style in the PivotTable Stylesgallery

• Sorting the PivotTable: Click any label in either the row field or the column field, choose the Optionstab, and then click either Sort A to Z or Sort Z to A. (If the field contains dates, click Sort Oldest toNewest or Sort Newest to Oldest, instead.)

• Refreshing PivotTable data: Choose Options and then click the top half of the Refresh button• Filtering the PivotTable: Click-and-drag a field to the Report Filter area, drop down the report filter

list, and then click an item in the list

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Give the average sales in regions

• Use Example I

– Calculate Region Wise, Year

wise sales – Give Product wise Data for

2008 Only


– Instead of Total, give theaverage sales

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Changing the Pivot Table

• Click any cell in the PivotTable‟sdata area

• Choose Formulas, Calculated Field – Excel displays the Insert

Calculated Field dialog box

– Use the Name text box to enter aname for the calculated item

– Use the Formula text box to enterthe formula you want to use for thecalculated item

• Use Example I – Calculate Region Wise, Year

wise sales

– Give Product wise Data for 2008Only


– Instead of Total, give the

average sales – Calculate the forecast for sales

in 2009

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Errors in Functions

Error Meaning

# DIV/ 0! Divide by Zero Error

Generally seen when trying to divide by empty cell

# NAME? Function name not found error

Generally seen in misspelling of function

# N/A Data Not available

Quite often seen Vlookup cannot find data

# REF! Invalid Cell referenceTypically when a cell is referenced, which has been deleted

# VALUE! Argument/ Operand of the wrong type

# NUM! Problem in value

Typically when a +ve number is expected, and –ve number is given as argument

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Important to understand what kind of error can occur and handle it properly


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Use ISERROR() to Handle Errors

• Excel 2003 has ISERROR() to determine, if there are any exceptions in the formulas

– Handle exception and exit the error gracefully

• Excel 2007 also has an IFERROR() function to handle errors

• Use Worksheet E to handle the errors and display “Not Defaulted”

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Agenda


• Understanding an integrated financial Model

• Efficiently using excel – preparation for modeling• Creating a template for integrated model

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Creating the template for financial modeling –Matrix Integrity across sheets and tower model for within the sheet

• Tower Model within sheet

– Reduce the size of the first 1-2 columns to createthe headings

• Ctrl + arrow keys to move faster from 1 section toanother

– Larger column width to put in the names and text

information

• Matrix integrity to be maintained across multiplesheets

– Eases copy paste and faster dragging of formulas

– Reduces chances of errors in writing the formulaslinked across sheets

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Freeze panes at the right spots to ease navigation in the model

• The years (indicating Actual and Projected) are put in one of the top row

• Rows and columns are frozen at the intersection of the left hand information column and the years

row at the top – Hint: Shortcut – Alt + w + f

A Excel Tips

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