The Financial Modelling Handbook emphasizes the importance of collaboration in building better financial models and provides guidance on Excel's calculation modes. It details automatic and manual recalculation methods, along with shortcuts, and discusses the benefits and drawbacks of each mode. The handbook aims to enhance efficiency and accuracy in financial modelling processes.

1. Financial Modelling
HANDBOOK
CALCULATION
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MODESIn Excel

2. ABOUT THE FINANCIAL
MODELLING HANDBOOK
Financial modelling should be collaborative. Collaboration reduces
error, speeds up development time and lowers cost. The Financial
Modelling Handbook is a collaborative, crowd-sourced guide to
building better financial models using the FAST Standard.
www.financialmodellinghandbook.com/contribute

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HITANSH
Hitansh Doda is a financial
modeller with F1F9. He is part of
the project finance team and has
worked on infrastructure and
energy models.
Financial Modelling
HANDBOOK

4. Excel, by default, recalculates all open workbooks whenever there is a change in
an input or a formula in any of the open workbooks.
Excel has a number of options that allow you to control when open workbooks
are recalculated.
There are two types of calculation mode in Excel: automatic and manual
This modelling guide will explore the different Excel calculation modes and how to
use them.
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ACCOMPANYING EXCEL EXAMPLE
HANDBOOK
CALCULATION
MODESIn Excel

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Excel automatically recalculates all open workbooks with each change (input / formula)
when it is set to automatic calculation mode.
Set the mode to “automatic calculation without data tables” and Excel will stop recalculating
data tables that frequently slow the model down.
It will still calculate all dependent formulae – except for data tables.
AUTOMATIC CALCULATION MODE

6. SELECTING THE CALCULATION MODE
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You can select the calculation mode in
excel with the keystrokes Alt + M + X to
select your preferable mode.
“CALCULATE” BADGE IN EXCEL
When working with a manual calculation mode, the “Calculate” badge on the
status bar indicates that changes to calculations have not yet been
recalculated.
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Recalculate all open workbooks (key stroke: F9)
Recalculates all the open workbooks with a change in any input or formula in any
open workbook.
WARNING: only the calculations that have been affected by a change made to an input or
formula (after the last recalculation) will be recalculated.
Recalculate all open worksheets (key stroke: Ctrl + Alt + F9)
Calculates all worksheets in all open workbooks, regardless of whether or not they have
changed since the last calculation.
Ctrl + Shift + Alt + F9
This method forces a full calculation of the data and rebuilds the dependencies for all open
workbooks. Dependencies are the formulae that depend on other cells.
It is as if you are building
all formulae from scratch.
MANUAL CALCULATION MODE

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If a single input is updated on a sheet (for example a revolving facility interest rate is
changed to 10%) then Shift + F9 will recalculate the worksheet only. Values in the
current worksheet only will be updated.
The total revolving facility interest accrued and paid in cell H64 is increased to 37
GBPk (from 29 GBPk) in the Revolving credit facility sheet. Note that the “Calculate”
badge is still active because the model is not yet recalculated in full.
CALCULATE A SINGLE SHEET IN
MANUAL CALCULATION MODE
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Note that the model is not fully calculated since the revolving facility interest
accrued and paid in the Finstat sheet is still 29 GBPk.
CALCULATE A SINGLE SHEET IN
MANUAL CALCULATION MODE
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10. CALCULATE THE WHOLE MODEL
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To calculate the whole model use Ctrl + Alt + F9. The values for the revolving facility
interest accrued and paid will be updated in the financial statements as well.
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After recalculating the whole model, the “Calculate” badge on the status bar will
disappear and only “Ready” status will show. This indicates that the model is now
fully recalculated.
STATUS BAR - FULL CALCULATION
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Automatic recalculation
BENEFIT: Immediate feedback on whether model checks and alerts are triggered or not.
DRAWBACK: Recalculation in automatic calculation mode can be time consuming and so
might reduce modelling efficiency.
The modeller is more likely to accept changes to numbers without question (see below).
COMPARISON:
AUTOMATIC VS MANUAL MODE
Manual recalculation
BENEFIT: The modeller is in control of when numbers change and so is more likely to think
through what the results of recalculation are likely to be. Consequently, such modellers are
more likely to investigate when recalculated numbers do not match their expectation – and
acquire model insights as a result.
DRAWBACK: Moving to manual recalculation feels awkward for modellers used to working
with automatic recalculation. Inexperienced modellers may waste time investigating errors
which are resolved when a recalculation is undertaken.