Unit Three:

Excel Fundamentals: Formulas for

Models in Finance
 Keyboard over the mouse
• Professionals use the keyboard over the
mouse to
– Save time
– Move around more easily
• Professional trainings unplug your mouse
(Challenge yourself to unplug or not use
key board)
• Slower in short run; much faster in long
run.
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 EXCEL BASICS
A. WHAT IT CONTAINS:
1. Title Bar: At the Top
2. Tool Bar: Second from the Top
3. Ribbon: Shows items under each Tool Bar
4. Address Bar: Shows Row and Column Numbers of Address
5. Formula Bar: Shows Typed Formula
6. Columns: From Left to Right (Shows A, B, C…Columns)
7. Total Number of Possible Columns: 16,384
8. Rows: From Top to Down (Shows1,2,3…Rows)
9. Total Number of Possible Rows: 1.48576 Millions
10. Sheets: It is work sheet where work can be done
11. Total number of Possible Sheets: 256
B. Working Tips:
1. For Creating a New Column:
Select/: Home->Insert->Insert Column
2. For Deleting a Column:
Select/: Home->Delete-> Delete Column
3. For Creating a New Row:
Select/: Home->Insert->Insert Row
4. For Deleting a Row
Select/: Home-> Delete->Delete Row
5. Creating a Worksheet with No Lines:
Select/:View->Untick Gridlines (To undo it Tick Gridlines)
6. Freezing or Locking Cells in Excel when Scrolling:
a. Select the Cell and Rows which is needed to keep visible when you scroll.
b. Select/: View->Freeze Panes->Freeze Panes ( To Unfreeze Click Unfreeze)
7. To Fill Color in the Cells:
Press: CTRL+SHIFT+F
 BASICS - FORMULAS
1. All formulas in excel starts with natation: = (Equal To)
2. To Copy: CTRL+C
3. To Cut: CTRL+X
4. To Paste: CTRL+V
5. To Find and Replace: CTRL+H
6. For Summation: =sum(starting cell:ending cell)
7. For Averaging: =average(starting cell:ending cell)
8. Use of %Command: Example: =42/50 and press return. Will get 0.84. On the
Home Tab click%. Will get 84%.
9. For Grouping of Row and Columns:
a. Select Row or Columns or Cells to be grouped.
b. Go to: Data>Outline>Group>Group (For un-grouping click ungroup)
c. SHORT CUT COMMANDS: ALT+SHIFT+-> (To Create Group);
ALT+SHIFT+-< (To Un-Group)
10. To Fill Color in Cells: CTRL+SHIFT+F
11. Present Value of Annuity:
=pv(rate,nper,pmt[fv],[type])
Here,
Rate = Interest Rate per Period.
Nper = Total number of payment periods in an annuity.
Pmt = The amount paid in each period.
FV = Future Value of Cash.
Type = “0” For payment made at the end of each period.
“1” For payment at the beginning of the period.
12. Future Value of Annuity:
=FV(rate,nper,pmt,[pv],[type])
here,
Rate = Interest Rate per Period.
Nper = Total number of payment periods in an annuity.
Pmt = The amount paid in each period.
PV = Present Value of Cash. (Either Pmt or PV is required)
Type = “0” For payment made at the end of each period.
“1” For payment at the beginning of the period.
13. Net Present Value( NPV):
=NPV(rate, value1,[value2]…….)
Here,
Rate = Rate of Discount.
Value1 = Value 1 is a must. Value2,3,…..254 are
optional.
14. Internal Rate of Return (IRR):
=IRR(values, [guess])
Here,
Values = A reference to cells that contain
numbers for which IRR is required.
Guess = It is not compulsory. But any guess
which is near to IRR may be put here.
 CASE-1: ON INCOME STATEMENT MODEL
A Corporation has provided summarized two years historical financial information from its Income
Statement (In $ Million):
ITEMS 2020 2021
Revenue 150000 165000
COGS 67500 74250
SG&A 16500 18150
Depreciation 6600 7260
Interest 1000 1000
Taxes 17520 19302
Required:
1. Prepare a Model to forecast five years Earning After Tax (EAT) and Cash Inflow.
2. Show possible ratios.
Assumptions:
1. Revenue will grow with same ratio as in 2021.
2. COGS has a history of bearing constant ratio to Revenue.
3. SG&A is expected to increase by $1850M in 2022 and will remain same for another four years.
4. Depreciation is expected to be 5% of Revenue.
5. Interest payment will not change.
6. Tax rate is 30%
Layout and structure is the most important part of financial modeling and analysis
(What separates great work from the rest?)

Clean formatting

Easy to follow and understand Easy to audit

Dynamic Detailed

Accurate Easy to make changes

…….End of Unit-3