Excel Tips (3)

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Financial Modeling in Excel

2011

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www.edupristine.com Neev Knowledge Management

Pristine

Agenda

Introduction and Context

Efficiently using excel preparation for modeling

Excel Summarization Using Pivot Tables

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Key Authorization

GARP (2007-11)

Authorized Training provider -FRM

Largest player in India in the area of riskmanagement training. Trained 1000+ studentsin risk management

PRMIA (2009-11)

Authorized Training provider PRM/ APRM

Sole authorized training for PRM Training inIndia. Largest player in India in the area of riskmanagement training. Trained 1000+ studentsin risk management

CFA Institute (2010-11)

Authorized Training provider CFA

Pristine is now the authorized training providerfor CFA Exam trainings . Pristine is largesttraining provider for CFA in India with presenceacross seven major cities.

FPSB India (2010-11)

Authorized Training provider -CFPAn authorized Education Provider forChartered Financial Planner Charter.

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Key Associations*

HSBC (2008)

Risk Management and Quant.

Analysis

New joinees in HSBC had a gap inknowledge of Risk Management

and quantitative skills. Conductedtrainings (On campus) to bridge the

gap

*Indicative List

Mizuho (2010)


Bankers were using excel modelsthat they could not

understand. Conductedfinancial modeling in Exceltrainings to bridge the gap

Bank Of America

Continuum Solutions(2010)

Finance for Finance

Associates were trained onvaluation and mergers

and acquisitions

J. P. Morgan (2010)

Financial Modeling inExcel

The Real Assets Groupwere trained in Excel forinfrastructure and real-

estate modeling

Franklin Templeton

CFA (2010)Students were facing a gap inthe overall understanding offinance topics like corporatefinance, FSA and valuation.

Provided training for over 100hours to bridge the gap

Credit-Suisse India (2009)

Risk Management and Quant.Analysis

IT Professionals of Credit-Suisse India were trained on

risk management.

Ernst & Young (2010)

Real Estate Modeling

Senior Associates weretrained on building

valuation models for realestate

ING Vyasa (2010)

Infrastructure & ProjectFinance

Bankers were trained onmaking integratedmodels for project

finance andinfrastructure.

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Key Associations

IIM Calcutta (2010-11)


Students about to go for internshipsand join jobs found a gap in theirgrasp of knowledge of excel forfinancial modeling. Conducted

training for 75+ students with anaverage rating of 4.5+

BITS Pilani (2009)

Workshops on Basics ofFinance

Most of the students desire acareer in finance. Conductedtraining for 350+ students with

an average rating of 4.5+

IIT Delhi (2009)

Corporate finance

Students get placed in financecompanies (UBS, GS, MS, etc)with no understanding of thesubject/ Job Profile. Conductedworkshop to bridge the gap

NUS Business School (2011)


Second year MBA studentswere given a full 2-day

workshop on creating financialmodels. They learnt how tocreate integrated models of

valuation.

NISM (2008-11)

Derivatives in Hedging (2008)

Financial Modeling (2011)

Corporate in Ludhiana incurred hugelosses because of derivative trades(for hedging). Conducted trainingsfor directors and CFOs for betterunderstanding of derivative products

FMS Delhi (2010-11)


Final Year MBA students of Facultyof Management Studies, Delhi

University were trained in financialmodeling so as to prepare them

better for a job in finance.

IEMR Delhi (2010-11)


Final Year MBA students of IEMRwent through extensive financial

modeling workshop to acquire skillsof financial modeling.

SIMSREE (2010)

Final Year MBA students ofSydenham MBA, Mumbai were

trained in financial modeling so asto prepare them better for a job in

finance.

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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 correctresults

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

ToolbarFormula 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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Basic Editing and Saving Excel

CTRL + S

CTRL + C

CTRL + V

CTRL + X

CTRL + ZCTRL + A

CTRL + B

ALT + TAB

ALT + F4CTRL + TAB

Save Workbook

Copy

Paste

Cut

UndoSelect 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/columns

Ungroup 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 format

Date 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 + ~

F9

SHIFT + CTRL + Enter

Start a formula

Insert AutoSum formula

Copy formula from above cell

Show formulas/values

Recalculate all workbooks

Enter array formulaAuditing Formulas

ALT + M + P

ALT + M + DALT + M + A + A

CTRL + [

CTRL + ]

F5 + Enter

SHIFT + CTRL + {

SHIFT + CTRL + }

Trace immediate precedents

Trace immediate dependentsRemove tracing arrowsGo 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 + HomeSHIFT + 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 A1Move 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 colorChange 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

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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

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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

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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

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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

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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

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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

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Agenda

Introduction and context



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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 filterlist, 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 PivotTablesdata 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, andve 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

Excel Tips (3)

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