Financial Modeling Getting Started WORKING TOGETHER Professionalism . How do I get the line on this graph to go straight? Example Use an XY scatter instead of a line chart Lets both use 5% for 10 years and compare results Example Hold on, I get $12 per share instead of $120 Example Sure, take a look Let me see how you get that graph Financial Modeling Some notes before we begin Finance vs Modeling You cannot model what you do not understand The assumption is that you know the finance If you need to refresh your memory Financial Markets (Oltheten & Waspi) Corporate Finance Financial Modeling (Sengupta) Financial Modeling . MASTER OF SCIENCE IN LEADERSHIP ASSESSMENT RUBRIC – WRITING Program Objective: Students will demonstrate effective written communication. Criterion No/Limited Proficiency 0-69% of points Some Proficiency 70-80% of points Proficiency 81-92% of points High Proficiency 93-100% of points Clarity of thesis or focus of writing. Cannot determine thesis and purpose OR the thesis has no relation to the writing task Thesis and purpose are somewhat vague OR only loosely related to the writing task Thesis and purpose are fairly clear and match the writing task Thesis and purpose are clear to the reader: closely match the writing task. Organization Unclear organization OR organizational plan is inappropriate to thesis. No transitions. Some signs of logical organization. May have abrupt or illogical shifts and ineffective flow of ideas Organization supports thesis and purpose. Transitions are mostly appropriate. Sequence of ideas could be improved Fully and imaginatively supports thesis and purpose. Sequence of ideas is effective. Transitions are effective. Support of ideas Offers simplistic, underdeveloped or cryptic support of ideas Offers somewhat obvious support that may be too broad Offers solid but less original reasoning; assumptions are not always recognized or made explicit Substantial, logical and concrete development of ideas. Assumptions are made explicit. Reasoning Inappropriate or off-topic generalizations, faulty assumptions, errors of fact. Details are too general, not interpreted, irrelevant to thesis, or inappropriately repetitive Contains some appropriate details or examples Details are germane, original, and convincingly interpreted. Use of sources/ documentation Plagiarism at any level. Neglects important sources. Overuse of quotations or paraphrase to substitute writer’s own ideas. Uses relevant sources but lacks in variety of sources and/or the skillful combination of sources. Quotations and paraphrases may be too long and/or inconsistently or incorrectly referenced. Uses sources to support, extend, and inform, but not substitute writer’s own development of idea. Doesn’t overuse quotes, but may not always conform to required style manual. Uses sources to suppor ...

1. Financial Modeling
Getting Started
WORKING TOGETHER
Professionalism
.
How do I get the line on this graph to go straight?
Example
Use an XY scatter instead of a line chart
Lets both use 5% for 10 years and compare results
Example
Hold on, I get $12 per share instead of $120
Example
Sure,
take a look

2. Let me see how you get that graph
Financial Modeling
Some notes before we begin
Finance vs Modeling
You cannot model what you do not understand
The assumption is that you know the finance
If you need to refresh your memory
Financial Markets (Oltheten & Waspi)
Corporate Finance
Financial Modeling (Sengupta)
Financial Modeling
.
MASTER OF SCIENCE IN LEADERSHIP ASSESSMENT
RUBRIC – WRITING
Program Objective: Students will demonstrate effective written
communication.
Criterion

3. No/Limited Proficiency
0-69% of points
Some Proficiency
70-80% of points
Proficiency
81-92% of points
High Proficiency
93-100% of points
Clarity of thesis or focus of writing.
Cannot determine thesis and
purpose OR the thesis has no
relation to the writing task
Thesis and purpose are somewhat
vague OR only loosely related to the
writing task
Thesis and purpose are fairly clear
and match the writing task
Thesis and purpose are clear to the
reader: closely match the writing
task.
Organization
Unclear organization OR
organizational plan is inappropriate
to thesis. No transitions.
Some signs of logical organization.
May have abrupt or illogical shifts
and ineffective flow of ideas

4. Organization supports thesis and
purpose. Transitions are mostly
appropriate. Sequence of ideas
could be improved
Fully and imaginatively supports
thesis and purpose. Sequence of
ideas is effective. Transitions are
effective.
Support of ideas
Offers simplistic, underdeveloped or
cryptic support of ideas
Offers somewhat obvious support
that may be too broad
Offers solid but less original
reasoning; assumptions are not
always recognized or made explicit
Substantial, logical and concrete
development of ideas. Assumptions
are made explicit.
Reasoning
Inappropriate or off-topic
generalizations, faulty assumptions,
errors of fact.
Details are too general, not
interpreted, irrelevant to thesis, or
inappropriately repetitive
Contains some appropriate details

5. or examples
Details are germane, original, and
convincingly interpreted.
Use of sources/
documentation
Plagiarism at any level.
Neglects important sources.
Overuse of quotations or
paraphrase to substitute writer’s
own ideas.
Uses relevant sources but lacks in
variety of sources and/or the skillful
combination of sources. Quotations
and paraphrases may be too long
and/or inconsistently or incorrectly
referenced.
Uses sources to support, extend,
and inform, but not substitute
writer’s own development of idea.
Doesn’t overuse quotes, but may
not always conform to required
style manual.
Uses sources to support, extend,
and inform, but not substitute
writer’s own development of idea.
Combines material from a variety of
sources, including personal
observation, scientific data,
authoritative testimony. Doesn’t
overuse quotes.

6. Audience awareness
Little or no awareness of audience
or form’s requirements.
Stance is that of a novice attempting
to please an expert
Stance is somewhat tentative and
meets reader’s need with some skill
Stance is that of an expert who
consistently and skillfully anticipates
reader’s needs
Style
Superficial and stereotypical
language. Oral rather than written
language patterns predominate
Sentences show very little variety,
simplistic. Diction is somewhat
immature; relies on clichés. Tone
may have some inconsistencies in
tense and person
Sentences show some variety and
complexity. Uneven control.
Diction is accurate, generally
appropriate, less advanced. Tone is
usually appropriate
Sentences are varied, complex and
employed for effect. Diction is
precise, appropriate, using
advanced vocabulary. Tone is

7. mature, consistent, suitable for
topic and audience
Writing conventions:
Grammar/Spelling/
Usage/Punctuation
Mechanical and usage errors so
severe that writer’s ideas are hidden
Repeated weaknesses in mechanics
and usage. Pattern of flaws
Few mechanical and usage errors,
errors do not interfere with
meaning.
Essentially error free. Evidence of
superior control of diction
Presentation
Essay looks untidy and does not
follow basic formatting rules (e.g.
Margins, headers and subheaders)
Essay looks fairly neat but violates
some formatting rules
Essay looks fairly neat but violates
some formatting rules
Essay looks neat, crisp, and
professional, follows formatting
rules

8. This rubric has been designed to assist students and instr uctors
in clarifying the strengths and weaknesses in a piece of writing,
and to establish standards. Please be aware that writing
assignments
have requirements that are specific and that the grading of an
assignment will take into account not only the strengths and
weaknesses of the final written piece, but also whether or not
other
specified requirements have been met, and to what extent they
have been met.
An essay will not pass if it plagiarizes at any level, does not
meet minimum page requirement, does not address the
assignment, or does not meet Trine University academic writing
standards.
OverviewThis spreadsheet provides two sample financial
models. Entrepreneurs use financial models to project revenue
and expenses to ultimately determine the best paths to
profitability. More complex models factor in marketing
expenses to project rate-of-growth and scale.
WEEK 8 FINAL PROJECTSAMPLE FINANCIAL
MODELWebsite ConsultancyCORE BUSINESS
ASSUMPTIONSA website consultancy generates profits by
charging 2-3x what it costs to produce a website. For the sake
of this model, consider that websites take about three months to
produce (which is over-simplified for the sake of the model --
all websites and clients are different). Notice when you reduce
from four projects per quarter to three (cell B7), profits become
dangerously low, so this model tells you how many website
contracts per quarter you need to sell to create a healthy
consulting business. Businesses are never as clean as their
models - some months you'll close three new contracts at once
and then you'll go many months with none. This model

9. illustrates one possible scenario around expenses, cost, and cash
flow, reminding you to save funds on good months so you can
cover expenses in months when there are no checks coming
in.Average website sale price15,000Duration of each website
build (months)3New project contracts sold per quarter4Project
Cost AssumptionsProject manager internal bill rate
(contractor)$75Project manager average hours per
website24Designer internal bill rate (contractor)$50Design
hours per website20Programmer internal bill rate
(contractor)$75Programmer hours per website50Cost to produce
a
website$6,550REVENUEJanFebMarAprilMayJuneJulyAugSept
OctNovDecTOTAL YEAR 1New contracts
signed400400400400TOTAL
REVENUE20,00020,00020,00020,00020,00020,00020,00020,00
020,00020,00020,00020,000240,000EXPENSESProgrammer5,00
05,0005,0005,0005,0005,0005,0005,0005,0005,0005,0005,0006
0,000Designer1,3331,3331,3331,3331,3331,3331,3331,3331,333
1,3331,3331,33316,000Project
manager2,4002,4002,4002,4002,4002,4002,4002,4002,4002,400
2,4002,40028,800Bookkeeper3003003003003003003003003003
003003003,600Legal2,000000000000002,000Accountant1,0000
01,000000001,000003,000Insurance (workman's comp, renter's,
etc.)5005005005005005005005005005005005006,000Misc.1,00
01,0001,0001,0001,0001,0001,0001,0001,0001,0001,0001,0001
2,000Owner
income6,0006,0006,0006,0006,0006,0006,0006,0006,0006,0006,
0006,00072,000TOTAL
EXPENSES19,53316,53316,53317,53316,53316,53316,53316,5
3316,53317,53316,53316,533203,400OPERATING CASH
FLOW4673,4673,4672,4673,4673,4673,4673,4673,4672,4673,46
73,46736,600
WEEK 4 Neighborhood CafeSAMPLE FINANCIAL
MODELNeighborhood caféCORE BUSINESS
ASSUMPTIONS% Growth per month0.05%In some business
models, like restaurants, revenue determines expenses. For

10. example, a restaurant owner may find that labor and food costs
should each be 30% of total revenue for the business model to
work. As you run your business over time, you'll see certain
patterns and limitations (e.g. cafes only have a certain number
of seats) -- patterns in revenue to determine expenses.Average
check per person$16Customers served per day125Days per
month31Food costs as % of total revenue30%Labor as % of
total
revenue30%REVENUEJanFebMarAprilMayJuneJulyAugSeptOct
NovDecTOTAL YEAR 1Customers per
month3,8753,8773,8793,8813,8833,8853,8873,8893,8913,8923,
8943,89646,628TOTAL
REVENUE62,00062,03162,06262,09362,12462,15562,18662,21
762,24862,28062,31162,342746,049EXPENSESLabor
costs18,60018,60918,61918,62818,63718,64718,65618,66518,6
7518,68418,69318,703223,815Food
costs18,60018,60918,61918,62818,63718,64718,65618,66518,6
7518,68418,69318,703223,815Rent &
utilities5,0005,0005,0005,0005,0005,0005,0005,0005,0005,0005
,0005,00060,000Bookkeeper30030030030030030030030030030
03003003,600Legal2,0001,0001,0001,0005,000Accountant1,000
1,0001,0001,0004,000Insurance (workman's comp, renter's,
etc)5005005005005005005005005005005005006,000Marketing/
website
maintenance1,0001,0001,0001,0001,0001,0001,0001,0001,0001,
0001,0001,00012,000Misc.2,0002,0002,0002,0002,0002,0002,0
002,0002,0002,0002,0002,00024,000Owner
income8,0008,0008,0008,0008,0008,0008,0008,0008,0008,0008,
0008,00096,000TOTAL
EXPENSES57,00054,01954,03756,05654,07454,09356,11254,1
3054,14956,16854,18654,205658,230OPERATING CASH
FLOW5,0008,0128,0256,0378,0508,0626,0748,0878,0996,1128,
1248,13787,820
OverviewThis spreadsheet provides two sample financial
models. Entrepreneurs use financial models to project revenue

11. and expenses to ultimately determine the best paths to
profitability. More complex models factor in marketing
expenses to project rate-of-growth and scale.
WEEK 8 FINAL PROJECTSAMPLE FINANCIAL
MODELWebsite ConsultancyCORE BUSINESS
ASSUMPTIONSA website consultancy generates profits by
charging 2-3x what it costs to produce a website. For the sake
of this model, consider that websites take about three months to
produce (which is over-simplified for the sake of the model --
all websites and clients are different). Notice when you reduce
from four projects per quarter to three (cell B7), profits become
dangerously low, so this model tells you how many website
contracts per quarter you need to sell to create a healthy
consulting business. Businesses are never as clean as their
models - some months you'll close three new contracts at once
and then you'll go many months with none. This model
illustrates one possible scenario around expenses, cost, and cash
flow, reminding you to save funds on good months so you can
cover expenses in months when there are no checks coming
in.Average website sale price15,000Duration of each website
build (months)3New project contracts sold per quarter4Project
Cost AssumptionsProject manager internal bill rate
(contractor)$75Project manager average hours per
website24Designer internal bill rate (contractor)$50Desig n
hours per website20Programmer internal bill rate
(contractor)$75Programmer hours per website50Cost to produce
a
website$6,550REVENUEJanFebMarAprilMayJuneJulyAugSept
OctNovDecTOTAL YEAR 1New contracts
signed400400400400TOTAL
REVENUE20,00020,00020,00020,00020,00020,00020,00020,00
020,00020,00020,00020,000240,000EXPENSESProgrammer5,00
05,0005,0005,0005,0005,0005,0005,0005,0005,0005,0005,0006
0,000Designer1,3331,3331,3331,3331,3331,3331,3331,3331,333
1,3331,3331,33316,000Project
manager2,4002,4002,4002,4002,4002, 4002,4002,4002,4002,400

12. 2,4002,40028,800Bookkeeper3003003003003003003003003003
003003003,600Legal2,000000000000002,000Accountant1,0000
01,000000001,000003,000Insurance (workman's comp, renter's,
etc.)5005005005005005005005005005005005006,000Misc.1,00
01,0001,0001,0001,0001,0001,0001,0001,0001,0001,0001,0001
2,000Owner
income6,0006,0006,0006,0006,0006,0006,0006,0006,0006,0006,
0006,00072,000TOTAL
EXPENSES19,53316,53316,53317,53316,53316,53316,53316,5
3316,53317,53316,53316,533203,400OPERATING CASH
FLOW4673,4673,4672,4673,4673,4673,4673,4673,4672,4673,46
73,46736,600
WEEK 4 Neighborhood CafeSAMPLE FINANCIAL
MODELNeighborhood caféCORE BUSINESS
ASSUMPTIONS% Growth per month0.05%In some business
models, like restaurants, revenue determines expenses. For
example, a restaurant owner may find that labor and food costs
should each be 30% of total revenue for the business model to
work. As you run your business over time, you'll see certain
patterns and limitations (e.g. cafes only have a certain number
of seats) -- patterns in revenue to determine expenses.Average
check per person$16Customers served per day125Days per
month31Food costs as % of total revenue30%Labor as % of
total
revenue30%REVENUEJanFebMarAprilMayJuneJulyAugSeptOct
NovDecTOTAL YEAR 1Customers per
month3,8753,8773,8793,8813,8833,8853,8873,8893,8913,8923,
8943,89646,628TOTAL
REVENUE62,00062,03162,06262,09362,12462,15562,18662,21
762,24862,28062,31162,342746,049EXPENSESLabor
costs18,60018,60918,61918,62818,63718,64718,65618,66518,6
7518,68418,69318,703223,815Food
costs18,60018,60918,61918,62818,63718,64718,65618,66518,6
7518,68418,69318,703223,815Rent &
utilities5,0005,0005,0005,0005,0005,0005,0005,0005,0005,0005
,0005,00060,000Bookkeeper30030030030030030030030030030

13. 03003003,600Legal2,0001,0001,0001,0005,000Accountant1,000
1,0001,0001,0004,000Insurance (workman's comp, renter's,
etc)5005005005005005005005005005005005006,000Marketing/
website
maintenance1,0001,0001,0001,0001,0001,0001,0001,0001,0001,
0001,0001,00012,000Misc.2,0002,0002,0002,0002,0002,0002,0
002,0002,0002,0002,0002,00024,000Owner
income8,0008,0008,0008,0008,0008,0008,0008,0008,0008,0008,
0008,00096,000TOTAL
EXPENSES57,00054,01954,03756,05654,07454,09356,11254,1
3054,14956,16854,18654,205658,230OPERATING CASH
FLOW5,0008,0128,0256,0378,0508,0626,0748,0878,0996,1128,
1248,13787,820
Website Consultancy Financial Statement Analysis
A website consultancy generates profits by charging 2-3x what
it costs to produce a website. For the sake of this model,
consider that websites take about three months to produce
(which is over-simplified for the sake of the model -- all
websites and clients are different). Notice when you reduce
from four projects per quarter to three (cell B7), profits become
dangerously low, so this model tells you how many website
contracts per quarter you need to sell to create a healthy
consulting business. Businesses are never as clean as their
models - some months you'll close three new contracts at once
and then you'll go many months with none. This model
illustrates one possible scenario around expenses, cost, and cash
flow, reminding you to save funds on good months so you can
cover expenses in months when there are no checks coming in.
I recommend that you use the Rubric to complete Week 4 and
Week 8 Assignment.
Please review and analyze the Financial Statement Model and
explain each component in Dark Blue Such as % Growth per

14. month, Revenue, Expenses, Operating Cash Flow, etc. Please
review the Sample Financial Statement as a reference.