GURU GOBIND SINGH

INDRAPRASTHAUNIVERSITY,
NEW DELHI

Practical Lab File ON

Financial Modelling Using Spreadsheets Lab
Submitted in partial fulfilment of the requirement for the award of degree of
B.COM Hons
Session: 2021-2024

SUBMITTED AT:
DELHI SCHOOL OF PROFESSIONAL STUDIES & RESEARCH
ROHINI, NEW DELHI-85
[AFFILIATED TO GGSIPU-NEW DELHI]

Submitted to :- Submitted by :-
Ms. Ayushi Guglani Mr. DHRUV GUPTA
Assistant Professor 02212588821
 Declaration

I take this opportunity to express my profound gratitude and deep regards to my guide Ms. Ayushi
Guglani for her exemplary guidance, monitoring and constant encouragement throughout the course of
this project. The blessing, help and guidance given by her from time to time shall carry me a long way in
the journey of life on which I am about to embark.

Last but not least, my sincere thanks to my parents and friends for their wholehearted support and
encouragement.

I also hereby declare that the project work entitled “Practical lab file on Data Analysis with Spreadsheets
lab” under the guidance of “Ms. Ayushi Gugli”” is my original work and it has not been submitted earlier
in any other university or institution.

DHRUV GUPTA
BCOM Hons- 6B
 Certificate

This is to certify that the project titled “Financial Modelling Using Spreadsheets Lab” is an
academic work done by DHRUV GUPTA submitted in the partial fulfilment of the
requirements for the award of degree of Bachelor of Commerce (Hons.) at Delhi School of
Professional Studies and Research, New Delhi under my guidance and direction.

DHRUV GUPTA has given an undertaking that the information presented in the project has
not been submitted earlier.

(Signature of Faculty)

MS. AYUSHI GUGLANI

(Assistant Professor), DSPSR

 TABLE OF CONTENT

TOPICS PAGE
NO.
INTRODUCTION TO FINANCIAL MODELLING
UNIT 1 (INTRODUCTION)
 Combination of multiple functions in a problem as VLOOKUP match,
index match
 VLOOKUP and if
 Offset function
 Sensitivity analysis using different ways
 Scenario manager and how to use that in model
 Iterative calculation
 Correlation using spreadsheet
 Regression using spreadsheet
 Variance using spreadsheet
 Summarize data from different sheets into single sheet using
indirect function
UNIT 2 (CHARTING)
 Rules of creating a bar chart
 Pictures as linked objects in spreadsheet
 Creating dynamic charts at the same time in same location using
filters
 Now and then analysis chart
 Waterfall charts
 Thermometer charts
 Change in chart using sensitivity analysis
 Interactivity using from control
 Creation of dashboard
 Conditional formatting
UNIT 3 (FINANCIAL ANALYSIS)
 Calculate Net Present Value (NPV)
 Calculate Internal Rate of Return (IRR)
 Build dynamic models with multiple scenarios using XIRR, MIRR
UNIT 4 (OTHER MODELLING TECHNIQUES)
 Weighted average cost of capital (WACC)
 Capital asset pricing model (CAPM)
 Calculation of free cash flow to firm
 Calculation of free cash flow to equity
 Creation of data table
 Scenario manager and solver
UNIT 1 (INTRODUCTION)

INTRODUCTION TO FINACIAL
MODELLING

INTRODUCTION TO FINANCIAL MODELLING

Financial modeling is a crucial tool used by professionals in finance, investment banking,

corporate finance, and other related fields to make informed decisions about investments,
business operations, and strategic planning. Essentially, financial modeling involves building
mathematical representations of financial situations and scenarios to analyze and forecast
outcomes.

Here's an introductory overview of financial modeling:

1. Purpose: Financial modeling helps in understanding the potential financial performance of

a business, project, or investment opportunity. It aids in decision-making by providing
insights into the potential risks and returns associated with various courses of action.

2. Components: A financial model typically includes various components such as

historical financial data, assumptions about future performance, formulas and calculations,
and output metrics. These components are integrated into a coherent framework to simulate
different scenarios and outcomes.

3. Types of Models: Financial models can vary widely depending on their purpose and
complexity. Common types include:
- Valuation Models: Used to estimate the value of a business, asset, or investment. -
Forecasting Models: Predict future financial performance based on historical data and
assumptions about future conditions.
- Budgeting Models: Aid in planning and managing budgets for businesses or projects. -
Merger & Acquisition (M&A) Models: Assess the financial implications of mergers,
acquisitions, or divestitures.
- Risk Models: Evaluate the potential risks and their impact on financial outcomes.

4. Tools: Financial models are often created using spreadsheet software like Microsoft Excel,
although more advanced models may be built using specialized financial modeling software.
Excel is widely preferred due to its flexibility, familiarity, and accessibility.
5. Best Practices:
- Simplicity: Keep models as simple as possible while still capturing the essential
aspects of the situation.
-Transparency: Document assumptions, methodologies, and sources of data to ensure
transparency and reproducibility.
- Flexibility: Design models to accommodate changes in assumptions or inputs easily. -
Accuracy: Validate models using historical data or sensitivity analysis to ensure accuracy
and reliability.
- User-friendliness: Ensure that the model is user-friendly and understandable for
stakeholders who may not have expertise in financial modeling.

6. Applications: Financial modeling is used in various areas including:

- Corporate finance: Budgeting, strategic planning, and investment analysis.
- Investment banking: Valuation of companies, IPO analysis, and merger modeling.
- Real estate: Property valuation, feasibility analysis, and investment decision-making. -
Portfolio management: Risk assessment, asset allocation, and performance tracking.
In conclusion, financial modeling is a powerful tool for analyzing and predicting financial
outcomes, enabling informed decision-making across various domains in finance and
business. Mastering financial modeling requires a combination of technical skills, financial
knowledge, and critical thinking abilities.

Features of Financial Modeling:

1. Flexibility: Models can be adjusted easily to incorporate changes in assumptions or

scenarios.
2. Customization: Tailored to specific needs, whether it's valuation, forecasting,
budgeting, or risk analysis.
3. Integration: Combines data from various sources to provide a comprehensive view of
financial situations.
4. Accuracy: When appropriately constructed and validated, models can provide
accurate predictions and insights.
5. Scalability: Models can be scaled up or down in complexity depending on the
requirements and available resources.

Advantages of Financial Modeling:

1. Informed Decision Making: Helps decision-makers assess the potential outcomes of

various financial strategies, investments, or business decisions.
2. Risk Management: Enables the identification and quantification of financial risks,
allowing for the development of mitigation strategies.
3. Resource Allocation: Aids in the efficient allocation of resources by prioritizing
investments or projects based on their expected financial returns.
4. Communication Tool: Provides a structured framework for communicating financial
information and strategies to stakeholders, investors, and management.
5. Strategic Planning: Facilitates long-term strategic planning by forecasting financial
performance under different scenarios and assumptions.
Disadvantages of Financial Modeling:

1. Complexity: Developing and understanding complex financial models requires

specialized skills and knowledge, which may be challenging for some users.
2. Assumption Sensitivity: Results are highly dependent on the accuracy of
assumptions, and small changes in inputs can lead to significant variations in
outcomes.
3. Data Limitations: Relies heavily on historical data and assumptions about future
trends, which may not always accurately reflect real-world conditions.
4. Over-reliance: Users may become overly reliant on models, leading to a false sense of
certainty or neglect of qualitative factors that can impact financial outcomes.
5. Time and Resources: Constructing and maintaining sophisticated financial models
can be time- consuming and resource-intensive, especially for large or complex projects.

Uses of Financial Modeling:

1. Valuation: Estimating the value of companies, assets, or investment opportunities

using various valuation techniques such as discounted cash flow (DCF) analysis or
comparable company analysis (CCA).
2. Forecasting: Predicting future financial performance based on historical data, industry
trends, and economic factors.
3. Budgeting and Planning: Creating budgets, financial plans, and forecasts to guide
resource allocation and strategic decision-making.
4. Investment Analysis: Assessing the financial viability and potential returns of
investment opportunities, including stocks, bonds, real estate, and projects.
5. Risk Management: Identifying, quantifying, and managing financial risks through
techniques such as sensitivity analysis, scenario analysis, and Monte Carlo simulation.
6. Mergers and Acquisitions (M&A): Evaluating the financial implications of mergers,
acquisitions, or divestitures, including synergies, valuation, and financing options.

Financial modeling is a versatile tool with numerous applications across various domains in
finance and business. While it offers significant advantages in terms of informed
decisionmaking and risk management, it also comes with challenges such as complexity,
reliance on assumptions, and resource requirements. Understanding these features,
advantages, disadvantages, and uses is essential for effectively leveraging financial modeling
in practice.
VLOOKUP FUNCTION

The VLOOKUP function is a premade function in Excel, which allows searches across columns.

It is typed =VLOOKUP and has the following parts:

=VLOOKUP(lookup_value, table_array, col_index_num, [range_lookup])

Lookup_value: Select the cell where search values will be entered.

Table_array: The table range, including all cells in the table.

Col_index_num: The data which is being looked up. The input is the number of the column, counted from
the left:

How to Use the VLOOKUP Function in Excel

The VLOOKUP Function is very easy to use in Excel by following the below mentioned steps:

Step 1: Select a cell

Step 2: Apply Vlookup

Type ‘=VLOOKUP‘ without quotes

Step 3: Double-click the VLOOKUP command

Use the VLOOKUP Function to find the Student names based on their Roll no.

Step 4: Select the cell and Put a comma

Select the cell where the Search value will be entered. G4 is the cell where the result will be
displayed. In this case, the student names based on their roll nos. and G3 is selected as the
LOOKUP value. Enter a comma.

Step 5: Mark table Range and Put Comma

Now select the table range for the function. This means mark from where to where. The range of the table
is marked at table_array (in this the table is selected A1:D9). Put a comma again(,).

Step 6: Type the number of columns, counted from the left

The number 2 is entered as col_index_number. This is the Second column from the left and is the data that
is being looked up.

Step 7: Type 1 or 0 and Press Enter

Type True or 1 for Approximate Match and False or 0 for Exact match.

Step 11: Preview Result

Now, you can preview the result. The function returns the #N/A value. This is because there have not been
entered any value to the Roll_no
If we give roll no value of 1015 then the result will be: The VLOOKUP function has successfully
found the Student name which has roll number 1015.

OFFSET FUNCTION
The OFFSET Function[1] is categorized under Excel Lookup and Reference functions. OFFSET will return a
range of cells. That is, it will return a specified number of rows and columns from an initial range that was
specified.In financial premade analysis, we often use Pivot Tables and Charts. The OFFSET function can be
used to build a dynamic named range for pivot tables or charts to make sure that the source data is always up to
date.

HOW TO USE THE OFFSET FUNCTION IN EXCEL?

As a worksheet function, the OFFSET function can be entered as part of a formula in a cell of a worksheet. To
understand the uses of the function, let us consider a few examples:

Example 1

Let’s say we are given the weekly earnings for 5 weeks below:
Now, if we insert the formula =OFFSET(A3,3,1) in cell B1, it will give us the value 2,500, which is 3 rows
down on column right, as shown below:

In the above example, as the height and width of the returned range are same as the reference range, we omitted
the reference range.

Example 2

Continuing with the same example, suppose we want the earnings for Thursday for all the weeks. In this
scenario, we will use the formula {=OFFSET(B7,3,1,1,5)}.

We get the results below:

In the example above:

1. As the results of the OFFSET function are to occupy more than one cell, it is necessary to enter the
function as an array. It can be seen by the parentheses that surround the formula in the Formula bar.
2. In the given formula, as the width of the returned range is more than the width of the reference range,
we specified the height and width arguments.
Example 3

Continuing with the same example, suppose we want the sum total of the earnings for Week 3. We use the
formula =SUM(OFFSET(G6,1,-2,5)).

We get the results below:

In the example above:

1. The array of values returned by the OFFSET function is directly entered into the SUM function, which
returns a single value. Hence, we do not need it to enter as an array formula.
2. The height of the offset range is greater than the height of the reference range and so the [height]
argument is entered as the value 5.
3. The width of the offset range is the same as the width of the reference range and so the [width]
argument was omitted from the function
IF FUNCTION

The IF function is a function in Excel, which returns values based on a true or

false condition.

It is typed =IF and has 3 parts:

=IF(logical_test, [value_if_true], [value_if_false])

The condition is referred to as logical_test, which can check things like:

• If a number is greater than another number >

• If a number is smaller than another number <
• If a number or text is equal to something =

STEPS FOR “IF” FUNCTIONS

 Click where you want to add the function

 Click the Formula tab.

 Click the Logical button.

 Select IF.
  Enter the IF function arguments:

• Logical Test: Any value or expression that can be evaluated to TRUE or FALSE.
• Value If True: The value that is returned if Logical_test is TRUE. If omitted, TRUE is
returned.
Value If False: The value that is returned if Logical_test is FALSE. If omitted, FALSE is returned.

VLOOKUP AND MATCH FUNCTION

The VLOOKUP and MATCH functions are both used to search within Excel, and they can be used
together to create a dynamic function that can overcome certain challenges. The VLOOKUP function is
used to search for information in a specified table. After inserting the row and column into the function, the
formula returns the information in the overlapping cell. The MATCH function plays a similar role in
searching for information. However, its job is to return the number of the row or column where the input
information is found.

We will use same steps we use in Vlookup, but this time instead of writing col_num we will use match
Function and it will show us complete data we required in single time.
VLOOKUP AND INDEX FUNCTION

VLOOKUP must be utilized for looking into values from Left to Right. INDEX MATCH can look into the
qualities from Left to Right as well as Right to Left. VLOOKUP just can query through vertical lines, for
example, segments, and not through columns. INDEX MATCH can query values through lines as well as
segments.
Index match function is used when the column data of data-array and the data we have is different. We
will use same steps we use in Vlookup, but this time instead of writing col_num we will use Match
Index Function.
SENSTIVITY ANALYSIS
Sensitivity analysis determines how different values of an independent variable affect a particular
dependent variable under a given set of assumptions. In other words, sensitivity analyses study how
various sources of uncertainty in a mathematical model contribute to the model's overall uncertainty.
This technique is used within specific boundaries that depend on one or more input variables.

Step-1 Calculate Revenue

Step 2: After that Calculate Cost of Sales

Step 3: Calculate Gross Profit by subtracting Revenue from Cost of Sales

Step 4: Then calculate Selling, General and administrative Expenses (SG&A)

Step 5: Calculate Operating Profit by SG&A from Gross Profit

Now, To find out Operating Profit on different Volume and Price

There are few steps
Step 1: Select Data which you want to find out
Step 2: Click on Data Tab
Step 3: Then select What if analysis and then click on Data Table
Then this Dialog box will open, In this Table
Select Price in row input cell and Cost in column input cell and then Click Ok
 You will get Operating Profit on different level of price and volume

Then, Find out Maximum and minimum Value which will show on which Price and value it will has maximum and
minimum Operating Profit

SCENARIO MANAGER
Excel's scenario manager is a collection of digital tools that allow a user to create, analyze and
compare data results in different business situations. You can store multiple versions of data within
the same cell, then change them depending on a scenario's goal
.

STEP 1 From what if analysis select scenario manager in data tab

Then Create Scenario1 in which do changes in Expenses which you want to change and Then Click ok

Make some more different scenario also in the same way of scenario 1 Then select summary and
click on show tab.

This is your Scenario summary

Scenario summary will shown on different sheet.
COORELATION & REGRESSION
The most commonly used techniques for investigating the relationship between two quantitative
variables are correlation and linear regression. Correlation quantifies the strength of the linear
relationship between a pair of variables, whereas regression expresses the relationship in the form of
an equation. Now, lets understand about Correlation and Regression with the help of this Data.
Step 1: Select Data analysis from Data tab

Then a dialog box will appear in which Select correlation, then Click Ok.

Then you will select Data of which you want to find correlation.
Then this table is showing Correlation of Different subjects.

And this table is showing Correlation of subjects and total

For Regression Select Data analysis on Data Tab

Then, Select Regression and you will see this Dialog box
Now, Select Age column in Y Range and Subject in X Range
After Click on Ok, you will see this table.

Now open Data analysis and Select Age in Y range and Subjects with Total In X range.
And this table is showing regression of Age and Subject with Total
VARIANCE
In the example below, we will calculate the variance of 20 days of daily returns in the highly popular
exchange-traded fund (ETF) named SPY, which invests in the S&P 500.1 We will use the following
formula:

=VAR.S(select data)
In this instance, if we had all returns in the history of the SPY ETF in our table, we could use the
population measurement VAR.P. However, since we are only measuring the last 20 days to
illustrate the concept, we will use VAR.S.

As you can see, the calculated variance value of .000018674 tells us little about the data set, by itself.
If we went on to square root that value to get the standard deviation of returns, that would be more
useful.
UNIT 2 (CHARTING)
RULES OF CREATING A BAR CHART

Step 1. We need to select all the data which you need to include in the chart.

In our example we will select a range from A1:C6

Step 2. It’s very important to include the row headings if you want to use values as labels on the chart.
Step 3. Under the Insert menu, you will find the options for Bar Charts, choose from the multiple designs
mentioned in the image below:
In our case we are creating a Column chart and bar graph, so click the Column button first. The following
options will then be displayed. As you’ll be able to see, there are many options available. Select 3D
Clustered Column Chart. We can change it to at least one of the opposite chart types later if we decide that
this one doesn’t suit our requirements.

Once you select a chart type, Excel will automatically create the chart and insert it into your worksheet.

CREATING DYNAMIC CHARTS USING

NAME MANAGER
Here are the exact steps to create a dynamic line chart using the Excel table:

• Select the entire Excel table.

 • Go to the Insert tab.

• In the Charts Group, select ‘Line with Markers’ chart.

The above steps would insert a line chart which would automatically update when you add more data to the
Excel table

Using Excel Formulas

Suppose you have the data set as shown below:

To create a dynamic chart range from this data, we need to:

1. Create two dynamic named ranges using the OFFSET formula (one each for ‘Values’ and ‘Months’
column). Adding/deleting a data point would automatically update these named ranges.

2. Insert a chart that uses the named ranges as a data source.

Step 1 – Creating Dynamic Named Ranges Below

are the steps to create dynamic named ranges:

• Go to the ‘Formulas’ Tab.

• Click on ‘Name Manager’.

• In the Name Manager dialog box, specify the name as ChartValues and enter the following
formula in Refers to
part: =OFFSET(Formula!$B$2,,,COUNTIF(Formula!$B$2:$B$100,”<>”))

• Click OK.
 • In the Name Manager dialog box, click on New.

• In the Name Manager dialog box, specify the name as ChartMonths and enter the following
formula in Refers to
part: =OFFSET(Formula!$A$2,,,COUNTIF(Formula!$A$2:$A$100,”<>”))

•
• Click Ok.

• Click Close.

CREATING THEN VS. NOW CHART

1. ARRANGE DATA

As usual, the first step is to get the data in to Excel. Structure your data like this.

2. INSERT A COMBO BOX CONTROL TO SELECT A REGION

Since our chart will display values for one region at a time, we need a mechanism to let user control which
region is displayed. We will use a combo box control do this. Follow these steps.
1. Go to developer ribbon and insert combo box form control.
2. Right click on the combo box and go to format control.
3. Set up input range to list of regions in your data.
4. Set up cell link to a blank cell in your workbook.
3. FETCH SELECTED REGION’S DATA
Now that we have a combo box to select which region to show in the chart, next step
is to fetch data for selected region. You can use either VLOOKUP or INDEX formulas to
do it.
Using VLOOKUP formula:
Assuming region name is in D17, and data is in values table, write: =VLOOKUP(D17,
values, 2, false)
to get 2nd column (then sales) value
Using INDEX formula:
Assuming region number is in D16, and data is in values table, write:

=INDEX(values[then],D16)

4. CREATE A CHART SHOWING THEN TO NOW MOVEMENT

Next step is to create a chart that would show a line going from then value to now value. Lets take a closer
look the line to understand how to make it in Excel.
In your workbook, set up a table like this:

Then, select the above and create a scatter plot. Select the scatter plot with connecting lines.

5. Formatting the chart

Since we want to show a thick circle at the beginning of then value and arrow at the end of now value, lets
go ahead and do the formatting song and dance.

Formatting the first point:

1. Select the first point of then values (you need to click once on it, take 3 deep breaths, click again and
sacrifice a goat).
2. Press CTRL+1 to format the data point.
3. Go to Marker options and select built in marker and use the circle symbol.

Formatting the last point:

1. Select the last point (same as above, but this time sacrifice a chicken)
2. Format the data point.
3. Go to line style, select End type and choose arrow
WATERFALL CHARTS

A waterfall chart is actually a special type of Excel column chart. It is normally used to demonstrate how the
starting position either increases or decreases through a series of changes

STEPS TO CREATE WATERFALL CHARTS

Step 1: Rearrange the data table

You start with inserting three additional columns in your Excel table. Let's call them Base, Fall and
Rise. The Base column will be a calculated amount that is used as a starting point for the Fall and Rise
series in the chart. All the negative numbers from the Sales Flow column will be placed in the Fall
column and all the positive numbers will be in the Rise column.

Step 2. Insert formulas

The best way to complete the table is entering special formulas in the first cells in the corresponding
columns and then copy them down to the adjacent cells using the fill handle.

1. Select cell C4 in the Fall column and enter the following formula there: =IF(E4<=0, -E4,0)

The formula says that if the value in cell E4 is less or equal to zero, the negative number will be shown
as positive and the positive number will be displayed as zero.

Note. If you want all the values in a waterfall chart lie above zero, you need to enter the minus sign ( - )
before the second cell reference (E4) in the formula. And two minuses will make a plus.

2. Copy the formula down to the end of the table.

3. Click on cell D4 and type in =IF(E4>0, E4,0).

It means if the value in cell E4 is greater than zero, all the positive numbers will be displayed as
positive and the negative ones as zero.

4. Use the fill handle to copy this formula down the column.

5. insert the last formula =B4+D4-C5 in cell B5 and copy it down; include the End row.
Step 3. Create a standard Stacked Column chart

Now your data are well-organized and you are ready to build the chart itself.

1. Select your data including the column and row headers, exclude the Sales Flow column.
2. Go to the Charts group on the INSERT tab.
3. Click on the Insert Column Chart icon and choose Stacked Column from the drop-down list.

1. The graph appears in the worksheet, but it hardly looks like a waterfall chart. Take the next
step and turn the stacked column graph into Excel bridge chart.

Step 4. Transform the column graph into a waterfall chart

The time has come to know the secret. You just need to make the Base series invisible to get a waterfall
chart from a stacked column.
1. Click on the Base series to select them, right-click and choose the Format Data Series… option from
the context menu.

The Format Data Series pane immediately appears to the right of your worksheet in Excel 2013 / 2016.

2. Click on the Fill & Line icon.

3. Select No fill in the Fill section and No line in the Border section.
 When the blue columns become invisible, just delete Base from the chart legend to completely

hide all the traces of the Base series.

Step 5. Format Excel bridge chart

Let's finish up with a little formatting. First I will make the flying bricks brighter and highlight the Start
and End values in the chart:

1. Select the Fall series in the chart and go to the FORMAT tab under CHART TOOLS.
2. Click on Shape Fill in the Shape Styles group.
3. Pick the color you want in the drop-down menu.

Here you can also experiment with the column outline or add special effects to them. Just use the
Shape Outline and Shape Effects options on the FORMAT tab to make changes.

Then you should do the same trick with the Rise series. As for the Start and End columns, you need to
color-code them individually, but they should be of the same color.

When you are done, the chart should look like the one below:

Note. Alternatively, you can change the color and outline of the columns in the chart by opening the
Format Data Series pane or choosing the Fill or Outline options in the right-click menu.

Then you can remove excess white spaces between the columns to make them stand closer to one
another:

4. Double-click on one of the chart columns to bring up the Format Data Series pane.
5. Change the Gap Width to something smaller, like 15%. Close the pane.
 Now the holes in the bridge chart are patched.

When you look at the waterfall chart above, some of the flying bricks seem to be of the same size.
However, when you refer to the data table, you'll see that the represented values are different. For
more accurate analysis I'd recommend to add data labels to the columns.

6. Select the series that you want to label.

7. Right-click and choose the Add Data Labels option from the context menu.

Repeat the process for the other series. You can also adjust the label position, the text font and color to
make the numbers more readable.
 Note. If there is an apparent difference in column size and the specifics aren't important, you can omit
the data labels, but then you should add a Y-axis for better data interpretation.

When you are done with labeling the columns, just get rid of unnecessary elements such as zero
values and the legend. You can also change the default chart title to something more descriptive.
Please take a look at one of my previous blog posts how to add titles to Excel charts.

My waterfall chart is ready! It looks completely different from the commonly used types of charts and it is
very readable, isn't it?

THERMOMETER CHARTS
To create a thermometer chart, execute the following steps.

1. Select cell B16.

Note: adjacent cells should be empty.

2. On the Insert tab, in the Charts group, click the Column symbol.

3. Click Clustered Column.

Result:

Further customize the chart.

4. Remove the chart tile and the horizontal axis.

5. Right click the blue bar, click Format Data Series and change the Gap Width to 0%.

6. Change the width of the chart.

7. Right click the percentages on the chart, click Format Axis, fix the minimum bound to 0, the maximum
bound to 1 and set the Major tick mark type to Outside.

Result:

CHANGE IN CHART USING SENSITIVITY ANALYSIS

Sensitivity analysis is a financial model that determines how target variables are
affected based on changes in other variables known as input variables.
This model is also referred to as what-if or simulation analysis. It is a way to predict the
outcome of a decision given a certain range of variables.

APPLICATION WITH EXMPLE STEPS TO SENSENTIVITY ANALYSIS

1. Select cell D3 and type =B17 (refer to the operating profit cell).
2. Select the range E4:I9.
3. On the Data tab, in the Forecast group, click What-If Analysis
4. Click Data Table.
5. Click in the 'Column input cell' box and select cell B6. 'Row input cell' box and select
cell B5.
6.. Click OK.

CONLUSION

A sensitivity analysis determines how different values of an independent variable affect

a particular dependent variable under a given set of assumptions. This model is also
referred to as a what-if or simulation analysis. Sensitivity analysis can be used to help
make predictions in the share prices of publicly-traded companies or how interest
rates affect bond prices. Sensitivity analysis allows for forecasting using historical, true
data.

INTERACTIVITY USING FROM CONTROL

Use Form Control and Go to the Developer menu tab (If activated from the File menu option). We
can find Form Control under the Control section, as shown in the screenshot below.
In this example, we will see all the objects in Form Control one by one. For this, you just simply need to select the
Form Control boxes from the menu option and drag and draw to get the button shape object.

1. Buttons – Once we select and draw this button, we will immediately get a dialog box of Assign Macro.
Now there, edit and give a name to Macro Name. Here we have kept it as Button.

We will then get a button in the area where it is drawn.

We can edit the button’s name as well, just by putting the cursor on it.
To assign a macro to this button, right-click and select Assign Macro.

2. Combo box – To use Combo Box, select the option and draw anywhere on the sheet.

To assign value to the Combo Box drop-down, click right on it and select Format Control.

Select the range of input cells. Here it is from A1:A5 with drop down lines as 5.
Once done, click on the drop-down arrow, and we will be able to see all the selected values. And we can
select any value as well.

3. CheckBox – This is used when we just need to mark an option for status. Please select this option from
Form Control and draw it.

We will see a Tick inside the box just by a single click on it.

Right-click on the box and select Format Controls. Select the type and cell link as shown below.

When we check the CheckBox with a tick mark, we get TRUE at the selected cell. And FALSE when
unchecked.
4. Spin Button – As the name says, we can spin around the selected values by this. Select and draw this on
the worksheet.

Right-click and select Format Control.

Now under the Control tab, give the limit as per requirement and select the cell link.

CREATION OF DASHBOARD

o An Excel dashboard is a high-level summary of key metrics used for monitoring and
decision-making.

o It provides an overview without diving into specific details.

o Think of it like a car dashboard that displays speed, temperature, and fuel level.

2. Outline Your Dashboard Structure:

o Before diving in, outline your dashboard’s purpose and structure:

 Goal: What do you want to achieve with your dashboard? Is it for business
performance evaluation, customer trends, or workload tracking?

 Data Sources: Identify available data sets (e.g., sales data, project management
data).

 Audience: Consider who will use the dashboard and which metrics are important to
them.
 3. Example Outline:

o Let’s use an example:

 Goal: Create a sales dashboard for an online store selling personalized gifts.

 Data Source: Raw sales data from various E-commerce platforms.

 Audience: Managers and team members.

4. For a simple example, I used a dashboard to transform this spreadsheet of first-

quarter expenses:

into this quick pie chart that shares a breakdown of where money was spent during January:

This example is relatively straightforward. But Excel has tons of capabilities to create as complex
of a dashboard as you require.
CONDITIONAL FORMATTING

Conditional formatting is a feature in many spreadsheet applications that allows you to apply specific
formatting to cells that meet certain criteria. It is most often used as color-based formatting to highlight,
emphasize, or differentiate among data and information stored in a spreadsheet.

Now let us perform some conditional formatting in our data : 1. Let us apply Highlight Rules to our
Highlight rules apply color formatting to cells that meet specific criteria that you define. They are the most
basic type of conditional formatting rule, and Excel provides a variety of preset highlight functions.

Open an existing spreadsheet in Excel, or start from scratch and manually enter new data. To apply
highlight rules, select the range of values you want to apply a rule From the Home tab, click Conditional
Formatting on the right side of the toolbar, and click Highlight Cells Rules from the dropdown menu.

Click Less than.

 A box will
appear. Type
the range that
you want to
highlight , you
can also select
the color as per
your choice
then . Click OK

Type Personal Care in the text box. To differentiate from our previous highlight rule, select green fill with
dark green text from the Format with: dropdown menu. Click OK.

Your sheet will now highlight the bottom five values in the Daily Expenditure column, and update as you
add to your data set.

Apply Data BarsData bars apply a visual bar within each cell. The length of the bar relates the value of the
cell to other cell values in the selected range.
We’ll apply data bars to the Daily Expenditure column so we can easily assess the ratios of Expenditure.
Click the top of the Daily Expenditure column to select this range of cells. Click Conditional Formatting >
Data Bars. You’ll see two options - one for Gradient Fill and one for Solid Fill. They function identically; just
select the option and color you prefer.

your sheet will now reflect the added rule

Similarly we can apply color scales , icon sets also to our data set in Excel. We can also clear and delete
rules by clicking on conditional formatting option and then click on clear rules
UNIT 3 (FINANCIAL ANALYSIS)
CALCULATE NET PRESENT VALUE (NPV)

What Is Net Present Value (NPV)?

Net present value (NPV) is the difference between the present value of cash inflows and the

present value of cash outflows over a period of time. NPV is used in capital budgeting and

investment planning to analyse the profitability of a projected investment or project.

Positive vs. Negative NPV

A positive NPV indicates that the projected earnings generated by a project or investment. An

investment with a negative NPV will result in a net loss.

How to calculate Net Present Value (NPV)

STEP 1:

Assume the yearly cash flows are earned at the end of the year, with the first payment arriving

exactly one year after the equipment has been purchased. This is a future payment, so it needs to

be adjusted for the time value of money. An investor can perform this calculation easily with a

spreadsheet.
STEP 2:

Formula to calculate npv:

=NPV (rate,value1,value2…..)

STEP 3: put the value in the formula

By calculating npv@ 12% , we get positive value i.e earning an

STEP 3: put the value in the formula

By calculating npv@ 12% , we get positive value i.e earning and,

By calculating npv@ 15% , we get negative value i.e net loss

CALCULATE INTERNAL RATE OF RETURN (IRR)

What is the Internal Rate of Return (IRR)?

The Internal Rate of Return (IRR) is the discount rate that makes the net present value (NPV) of

a project zero. In other words, it is the expected compound annual rate of return that will be

earned on a project or investment. In the example below, an initial investment of $50 has a 22%

IRR. That is equal to earning a 22% compound annual growth rate.

PURPOSE OF IRR :

When calculating IRR, expected cash flows for a project or investment are given and the NPV

equals zero. Put another way, the initial cash investment for the beginning period will be equal to

the present value of the future cash flows of that investment. (Cost paid = present value of future

cash flows, and hence, the net present value = 0).

Once the internal rate of return is determined, it is typically compared to a company’s hurdle

rate or cost of capital. If the IRR is greater than or equal to the cost of capital, the company

would accept the project as a good investment. (That is, of course, assuming this is the sole basis

for the decision.

Lets take an Example:-

The initial investment here is a negative value as it is an outgoing payment. The cash inflows are

represented by positive values.

STEP 2: Now, we would simply select the data from B1:B11 to get IRR , =IRR(B1:B11

The internal rate of return we get is 14%.

CONCLUSION

-The Internal Rate of Return is primarily an indicator of the profitability of prospective

investments or projects.

However, since it is based on speculative figures, it might differ from the actual profitability.

▪ Higher IRR is better

As perhaps substantiated in the example above, a higher IRR indicates better profitability of an

outlay. Therefore, analysts use this metric to compare varying projects to determine which one

would be worth the while and money.

BUILD DYNAMIC MODELS WITH MULTIPLE

SCENARIOS USING XIRR, MIRR
MIRR

The Modified Internal Rate of Return (MIRR) is a function in Excel that takes into account the

financing cost (cost of capital) and a reinvestment rate for cash flows from a project or company over

the investment’s time horizon

XIRR

The XIRR function is categorized under Excel financial functions. It will calculate the Internal Rate of
Return (IRR) for a series of cash flows that may not be periodic. It does this by assigning specific dates
to each individual cash flow. The main benefit of using the XIRR Excel function is that such unevenly
timed cash flows can be accurately modelled. To learn more, read why to always use XIRR over IRR in
Excel modelling
UNIT 4 (OTHER MODELLING TECHNIQUES)
• WEIGHTED AVERAGE COST OF CAPITAL (WACC)

The weighted average cost of capital (WACC) is a financial metric that shows what the total cost of

capital (the interest rate paid on funds used for financing operations) is for a firm. Rather than being

dictated by a company's management, WACC is determined by external market participants and

signals the minimum return that a corporation would take in on an existing asset base, in its effort to

capture the interest of investors, creditors, and other capital providers. Companies that don't

demonstrate an inviting WACC number may lose their funding sources, who are likely to deploy

their capital elsewhere.

KEY TAKEAWAYS

The weighted average cost of capital (WACC) is a financial metric that reveals what the total

cost of capital is for a firm.

The cost of capital is the interest rate paid on funds used for financing operations.

Companies fund operations either through debt or equity, where each source has its own

associated cost.

Companies without an inviting WACC number risk losing their funding sources, who are

likely to bring their dollars elsewhere.

WACC=wD × rD×(1−t)+wP × rP + wE × rE

W = the respective weight of debt,

preferred stock/equity, and equityin the total capital structure.

t=tax rate

D=cost of debt

P=cost of preferred stock/equity

E=cost of equity
All companies must finance their operations, and this funding either comes from debt, equity, or a

combination of the two. Each source has a certain cost associated with it. And when analysing

different financing options, calculating the WACC provides the company with its financing cost,

which is then used to discount the project or business in a valuation model.


 Calculation of free cash flow to firm
 Calculation of free cash flow to equity
 Creation of data table
 Scenario manager and solver
CAPITAL ASSET PRICING MODEL (CAPM)

CAPM takes into account the riskiness of an investment relative to the market. The model is less

exact due to the estimates made in the calculation (because it uses historical information).

CAPM Formula:

E(Ri) = Rf + βi * [E(Rm) – Rf]

Where:

E(Ri) = Expected return on asset

Rf = Risk-free rate of return

βi = Beta of asset

E(Rm) = Expected market return

The risk-free rate in the CAPM formula accounts for the time value of money. The other components

of the CAPM formula account for the investor taking on additional risk.

The beta of a potential investment is a measure of how much risk the investment will add to a

portfolio that looks like the market. If a stock is riskier than the market, it will have a beta greater

than one. If a stock has a beta of less than one, the formula assumes it will reduce the risk of a

portfolio.
CALCULATION OF FREE CASH FLOW TO FIRM
FCFF, or Free Cash Flow to Firm, is the cash flow available to all funding providers (debt holders,
preferred stockholders, common stockholders, convertible bond investors, etc.). This can also be
referred to as unlevered free cash flow, and it represents the surplus cash flow available to a business
if it was debt-free. A common starting point for calculating it is Net Operating Profit After Tax
(NOPAT), which can be obtained by multiplying Earnings Before Interest and Taxes (EBIT) by (1-Tax
Rate). From that, we remove all non-cash expenses and remove the effect of CapEx and changes in
Net Working Capital, as the core operations are the focus.

Example of How to Calculate FCFF

Below, we have a quick snippet from our Business Valuation Modeling Course, which has a step-by-
step guide on building a DCF Model. Part of the two-step DCF Model is to calculate the FCFF for
projected years.

How to calculate the FCFF for projected years as part of the two-step DCF model

FCFF Formula:

FCFF = NOPAT + D&A – CAPEX – Δ Net WC

NOPAT = Net Operating Profit

D&A = Depreciation and Amortization expense

CAPEX = Capital Expenditure

Δ Net WC = Changes in Net Working Capital

CALCULATION OF FREE CASH FLOW TO EQUITY

Free cash flow to equity (FCFE) is the amount of cash a business generates that is available to be
potentially distributed to shareholders. It is calculated as Cash from Operations less Capital
Expenditures plus net debt issued. This guide will provide a detailed explanation of why it’s important
and how to calculate it, along with several examples.

Formula:

FCFE = Cash from Operating Activities – Capital Expenditures +

Net Debt Issued (Repaid)
FCFE EXAMPLE

Below is a screenshot of Amazon’s 2016 annual report and statement of cash flows, which can be used
to calculate free cash flow to equity for years 2014 – 2016.

As you can see in the image above, the calculation for each year is as follows:

 2014: 6,842 – 4,893 + 6,359 – 513 = 7,795

 2015: 11,920 – 4,589 + 353 – 1,652 = 6,032
 2016: 16,443 – 6,737 + 621 – 354 = 9,973
CREATION OF DATA TABLE
You will be able to find a data table with the scenario summaries, where there will be many
different scenarios with their cells and values. So, this is where you need to use the Data tables
because these can easily be based on the different variables in the first place. If there is just one
variable, then you need to use a 2-column data table.
The first column will have the variable, and the second will be left all blank so that Excel can
populate it in the best way. All you have to do is select the table and then navigate it to the What if analysis section
and then choose the option of Data table, and you are definitely all set.

SCENARIO MANAGER AND SOLVER

The help of the scenarios tool in the excel format, the user will be able to perform the what if analysis in the best
way. The first thing that they need to do is to create some certain scenarios
which are pretty random, and then we will move on from there.
If you are not able to find out the Scenario Manager tool, then it is located right near the Data
ribbon, and you will find it under the What-if analysis section.
Scenario Manager is one of the What-if Analysis tools in Excel.

To create an analysis report with Scenario Manager, you have to follow these steps −

Step 1 − Define the set of initial values and identify the input cells that you want to vary,

called the changing cells.

Step 2 − Create each scenario, name the scenario and enter the value for each changing input

cell for that scenario.

Step 3 − Select the output cells, called the result cells that you want to track. These cells

contain formulas in the initial set of values. The formulas use the changing input cells.

The Scenario Manager creates a report containing the input and the output values for each

scenario.
Scenario Summary :

To easily compare the results of these scenarios, execute the following steps.

1. Click the Summary button in the Scenario Manager.

2. Next, select cell D10 (total profit) for the result cell and click on OK.

SOLVER –
Use Solver to find an optimal (maximum or minimum) value for a formula in one cell — called the

objective cell — subject to constraints, or limits, on the values of other formula cells on a worksheet.

Put simply, you can use Solver to determine the maximum or minimum value of one cell by

changing other cells. For example, you can change the amount of your projected advertising budget

and see the effect on your projected profit amount.

First I have to go to solver and then a dialogue box opens , in this I have to first set my objective ,

then I have to select the variable cell, as shown below

Now I have to click on add , and I have to add various constraints given the question , like this