1. Excel Financial Modeling Day 1 Nick Crain

2. Students in this class… Beginners – Want introduction of excel functionality – Really this is covered by the Training Team Intermediate – Want to do analysis, instead of just calculations – Want exposure to best practices Advanced – Want exposure to industry practices and prep for Investment bank internship/job.

3. Finance Theory Work Presentation Skills Excel Concepts and Functions

4. Rough Schedule Day 1 – Modeling Intro – Excel Shortcuts (this should be a review from the Training Team demos) – Excel Financial Functions – Characteristics of a good model Day 2 – Analysis – Lets use the Model to Answer Questions Solving Models Sensitivity / Scenario Analysis Day 3 – Advanced Topics (4 – 7 PM) – 4:00 – 5:30 Session Macros & VBA for non-programmers – 5:30 – 7:00 Session Macros & VBA for programmers (some experience)

5. A Word About Shortcuts Proficient Excel users don’t use the mouse. Learning the keyboard shortcuts can reduce modeling time by 25% or more.

6. Moving around the Page: – Ctrl + arrows:Move to end of “block” – Ctrl + PgUp/Down:Cycle though worksheets Filing In Values / Editing: – Ctrl + R:Fill in formulas to the Right – Ctrl + D:Fill in formulas downward – Shift + arrows:Select multiple cells – F2:Edit a cell (no mouse click) – F4:Anchor a value

7. First Example Bond Calculations: CBS CorpCBS Corp – Face Value: 100 – Coupon: 7.625%, Fixed – Non-callable – Maturity: 01/15/2016 – Yield 5.937% What is the clean price? What will you actually pay for the bond? How Sensitive is this bond to interest rates?

8. “Hard” Coding Making choices about a models inputs or assumptions which are coded directly into the spreadsheet. – Speed vs. Flexibility

9. Absolute and Relative Cell Referencing Referencing takes inputs for a formula from another cell. If we copy, or move that formula, the reference comes with it. Relative Reference: – The reference moves as we copy or move the formula. Absolute Reference: – Indicated by $ in the formula – Will remain anchored to a particular column or cell. – We can also do this by Naming Shortcut for this is F4

10. The IF() Statement IF (logical_test, value_if_true, value_if_false) Can also be nested: – IF(logical_test, IF (logical_test, value_if_true, value_if_false), value_if_false) – Any more than two nested use a lookup function instead. Useful for: – Avoiding Hard coding – Real Options Problems – Monte Carlo Simulation.

11. The Scooter Problem David-Harleyson Motorcycles is deciding whether to enter the Scooter market. If you where an executive in this company, what would you want to know before making a decision to pursue the project?

12. Year012345 Sales -Costs EBITDA - Depreciation EBIT x (1-t) Net Income + Depreciation Operating CF ΔNWC CapEx FCF

13. Things to keep in mind Format spreadsheets to “tell your story”. – Put the results up front. – Use highlighting and colors to indicate logical divisions in the spreadsheet, but avoid a “Skittles” spreadsheet. – Use conditional formatting to highlight salient results. Document your spreadsheet – Clearly separate out inputs and assumptions – Use Cell Comments – Use a model description worksheet (optional)

14. Things to keep in mind Error Avoidance / Debugging – Hard Code only when absolutely necessary. – Use Names, especially for input variables. – For calculations or data in a series (e.g. years), line up years from sheet to sheet. – When identity’s exist, use them to calculate a quantity twice as a check. – Check for errors using an example you know the answer for.

15. Lookup() Functions Lookup() Vlookup(), Hlookup()