An introductory Session on Content / Focus Areas for Design and Development of Financial Models in MS Excel and VBA for MS Excel

1. Integrated
Financial Modeling
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INTRODUCTION TO FINANCIAL MODELLING IN MS EXCEL AND VBA FOR
MS EXCEL

2. A perspective on Accounting
Profession going forward
 Accounting firms: The next generation
 Command of data will take precedence as advanced technologies push CPAs
to seek new skills, explore different services, and enter into new practice
structures.
 As technology performs more compliance-related tasks and CPAs shift their
focus to advisory services and value-addedstrategic input, the prospects for
profit and growth appear to be as bright as at any point in the profession's
history. However, with innovation and technological breakthroughs coming at a
furious pace, this may not be a gradual evolution — nor an easy one
 By Ken Tysiac and Jeff Drew
June 1, 2018
 https://www.journalofaccountancy.com/issues/2018/jun/next-generation-
accounting-
firms.html?utm_source=mnl:cpald&utm_medium=email&utm_campaign=04Jun2
018
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3.  1
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 0
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 X
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4. Agenda – Integrated Financial
Modeling (1/2)
Meaning & Examples
Application
Benefits & Need
Classification (Macro vs. Granular ; Term; Consensual vs
Guestimate etc.,)
Major Financial Concepts relating to Valuation Modeling
Requisites of an Integrated Financial Modeling Process
Financial Modeling Methodology – Construction of
Financial Model
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5. Agenda – Integrated Financial
Modeling (2/2)
Key MS Excel Concepts
Select Excel Functions
Excel Macros
VBA Macros (UDF)
VBA Architecture
 Excel Object Model
 Properties
 Methods (actions)
 VBA Syntax
Programming in MS Excel
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6. Meaning of Financial Models
Models
Are abstraction of real world objects, events or processes.
Financial Models
Are the models that present abstraction of real world financial objects,
financial events or financial processes. They may be either component
models or macro models. They are designed to provide effective decision
making and analytical tools and to support financial governance.
????
Historical + / -
Zero Base
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7. Integrated Financial Modeling -
Meaning
It refers to a scientific process of design and development of Financial
Models that builds in validations, maps internal scenarios with external
environments and uncertainties, integrates individual process
objectives with that of the entity’s objectives, recognizes respective
constraints, enhances automation and minimizes the probability of
bias.
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8. Examples of Financial Models
Micro Models
 Purchase Model
 Production Model
 Cost Model
 Revenue Model
 Income Model
 Cash Flow Model
Macro Models
 Group Statement of Financial Position
 Valuation - Assets & Liabilities / Securities / Firm
 National GDP Model
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9. Application Areas
 Strategic Financial Management / Corporate Finance
 Tactical Management
 Investment / Merchant Banking
 Equity Research
 Capital Markets
 Portfolio Management and Security Valuation
 Valuation of Assets and Liabilities
 Forecasts, Plans / Budgets
 Operations Management
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10. Benefits of Integrated Financial
Modeling
 Requirement as per Reporting Standards
 Maps Financial objectives with Organizational Objectives
 Inculcates an integrated approach towards financial / business
planning, valuation and preparation of models
 Incorporates Control Mechanism as per parameters, constraints, and
thresholds and creates alerts when deviations occur. Thus helps in
making corrective decisions
 Builds in Statistical Concepts for validation of the assumptions and
variables and thereby reduces the chances for biases and errors
 As the process follows (supposed to follow) a scientific approach,
reliability of projections and models increases, which in turn increases
the probability of acceptance by bankers, lenders, probable
candidates for takeover or take over giants, ultimately enabling
informed decisions
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11. Thematic Process Flow 11
INTEGRATED FINANCIAL MODELLING:
PROCESS FLOW AND BENEFITS
Strategies and
business plans
Integrated
financial
models
Business / Security /Asset / Liability
valuation, Investment / Expansion,
financing and asset management
decisions, budgets, performance review,
goal congruence, etc.
Maximisation
of
stakeholders’
wealth

12. Classification
 Function (Department)
 Term
 Component
 Objective (Financial Position, Market Value, etc.,)
 Tools (Statistical, Neural Network)
 Guestimate vs. Scientific, Consensual
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13. Financial Modeling – Key Concepts
and Terminology
 Explicit Period
 Continuing Value
 FCFF
 Hierarchy of reference values – Tiers
 Approaches (Market , Cost, Income)
 Prospective Approach (DCF)
 Relative Approach
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14. Requisites of an effective
Integrated Financial Model
 Follow a scientific process (as against guestimates, for example)
 Identifies and analyses External Environments (Economy vs. Industry Growth;
Industry vs. Entity Growth etc.,)
 Maps Internal Scenarios (Organizational Capabilities… ARR )
 Identifies External and Internal Uncertainties (Eg: Mr. Trump)
 Identifies the Major Constraints (Market Size, Resources etc.,)
 Presents different Scenarios (Possible outcomes..)
 Integrates Individual Process Objectives with Organizational Objectives
(Operational Processes vs. Governance Process – Mr. Satyam; NPO; J&K Govt.)
 Enhances Automation (take advantage of advancements in technology …
probably aim at AI & ML)
 Embeds Validation Mechanisms
 Minimizes probability for bias (Behavioural… eg: Hawthorne Experiments)
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15. Integrated Financial Modeling –
Methodology
The methodology consists of two segments:
I Conceptual:
 Define the scope of the Financial Models and Business /
Organizational Plans
 Understand the External Environment
 Analyse the Internal processes and scenarios
 Map the Internal scenarios with the External Environment
 Validation of Objectives
 Research and Collection of Data
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16. Integrated Financial Modeling –
Methodology
II Conceptual cum Technical:
 Identification of Model Components – Top Down
 Design Template Models in a Spreadsheet software
(such as MS Excel, Open Office)
 Add Programming Functionality
 Build up Assumptions and Scenarios
 Define Controls
 Supply the Data / Provide the Links
 Preparation of Models and Reports
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17. Key MS Excel and VBA for Excel
Concepts
 Absolute, Relative and Mixed referencing
 Naming Cells & Ranges and their use in Calculation
 Some Key Formulas and Functions
 Data Table
 Regression Line and Forecasting
 Excel Macros – Creating and Editing Macros
 Designing Excel Sheet with Controls
 VBA Macros / User Defined Functions
 Other MS Excel / VBA Concepts
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18. Referencing
 Fixed (Absolute) Referencing
 Relative Referencing
 Mixed Referencing
 Absolute + Relative Referencing
Highereducationbookpc484101114.xlsm (TERM-SCHK);(ITAX-SCHM)
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19. Naming a Cell / Range
 Formulas – > Name Manager
 Benefits
 Highereducationbookpc484101114.xlsm (Balance Sheet)
 StatAnal.xlsm (Scenario Analysis)
 Cell Name vs Range Name
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20. Some Important Formulae /
Functions
 Significance of “Round” in calculations
Highereducationbookpc484101114.xlsm (DEP-WDV-SCHL)
 IF, SUMIF, SUMIFS Trial Balance.xlsm
 Summing Top / Bottom ‘n’ values Trial Balance.xlsm (array formula)
 NPV; IRR StatAnal.xlsm (NPVnIRR)
 Construction of Frequency Table StatAnal.xlsm (Freq)
 Analysis ToolPak
 Simulation StatAnal.xlsm (Simulation)
 Goal Seek Financial Modeling Template1.xlsm (MicroModels)
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21. Some Important Formulae /
Functions
 Date (Net Work Days) StatAnal.xlsm (Freq)
 Scenario Analysis Financial Modeling Template1.xlsm (Micro Models;
Scenario Summary 2)
 StatAnal.xlsm(ScenarioAnalysis)
 Data Table Financial Modeling Template1.xlsm (Dtable)
 Standard Deviation StatAnal.xlsm (STDDEV)
 Array formula : Highereducationbookpc484101114.xlsm SALARIES-
SCHG&H)
 Regression, Forecast and Trend Line StatAnal.xlsm (Regrn)
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22. Excel Macros
Developer
 Creating an Excel Macro (Absolute and Relative)
Invoking Macro –
 Calling Shortcut Key
 View Menu
 Assigning Macro to Quick Access Tool Bar
 Creating a Button in the Work Sheet
 Editing a Macro
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23. VBA Macros
 Calling a UDF (VBA Macro) in Excel Sheet Financial Modeling
Template1.xlsm (COTBAS)
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24. VBA Architecture
 Excel Object Model
 Properties
 Methods
 Procedures, Sub Routines, Functions and their Scope
 Variables and their Scope
 Control Tools (Command Buttons, User Forms)
 Syntax Construction
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25. Excel Object Model
 Is the heart and soul of VBA for MS Excel
Excel Object Hierarchy
 Application
 Workbook Trial Balance.xls (Checksnbal)
 Worksheet
 Range
 Row Chap7XLnMac.xlsm (XLnMac – New Supplier Ln 118)
 Cell
 Buttons, User Forms etc.,
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26. Properties
 Dimensions and Characteristics of Objects
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27. Methods
 What we can do with the objects based on their properties
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28. Data Type 28
BYTE 1 byte Number from 0 to 255 for storing binary data
INTEGER 2 Integer from -32 768 to 32 767.
LONG 4 Integer from -2 147 483 648 to 2 147 483 647
SINGLE 4
Numeric data type with float precision to 6
decimal digits
DOUBLE 8
Numeric data type with float precision with
double precision in calculatons
CURRENCY 8 A number with fixed 4 decimal digits
DECIMAL 14
Numeric data type with fixed precision and
scale (accuracy upto 28).
STRING Text strings. Flexible length or 64 kilobytes
BOOLEAN 2 Logical value (true or false)
DATE 8
The date in the range from 1.1.100 to
31.12.9999
OBJECT 4 Reference to an object.
VARIANT 16
Basic type. May contain special value Null,
numeric value, text, reference to object or
variable array.

29. Control Tools
 Form Controls
 Active X Controls
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30. Procedures, Routines and Functions
plus Key words, Syntax,,,,,,
 Function Procedures
Insert – Module /VBA Editor
workingmaterials2.xlsm (Main)
 Sub Procedures
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31. Programming in VBA for Excel
 Storing Value in Variables
 -Calculate Tax and Enter the Tax workingmaterials2.xlsm
 -Passing Values and Enter Value in User Specified Location(calling other
Procedures / Functions) workingmaterials2.xlsm
 -Checking whether TB is tallied - Trial Balance.xlsm (Checksnbal)
 Do While .. Loop StatAnal.xlsm (Iterate100Times)
 Opening & Naming New Workbooks, Creating & Naming Sheets (While
… Wend) workingmaterials2.xlsm
 Keeping Ledger Accounts in XL Chap7XLnMac.xlsm
 If ..End If
 Check Each Row (For Each Row…. Next Row)
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32. nalayiram@hotmail.com +919790853099
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