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Financial modeling sameh aljabli - lecture 1
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- 2. Subject Name:Financial Modeling Pre-requisites: Introduction to Accounting Assessment and scoring details: ◦ Attendace 10% ◦ Quizes 10% ◦ Assignments 30% ◦ Midterm (Throy, Lab) 20% ◦ Project 30% Key Reference Sources: Books: ◦ Financial Modeling Using Excel and VBA, CHANDAN SENGUPTA ◦ Simon Benninga, (2014). Financial Modeling, 4rd Edition ◦ Lectures
- 3. Financial Modelingis a valuation tool which teaches you to work with historical information of companies and analyze the company performance on relevant financial parameters. This analysis is then used to give you an estimate of the valuation of companies/projects.
- 4. For anyonepursuing or advancing a career in corporate development, investment banking, financial planning and analysis (FP&A), equity research, commercial banking, or other areas of corporate finance, building financial models is part of the daily routine. Financial models are useful for: Decisions Making Company Performanc e, strategic planning Project Finance Whether to invest in a project Corporate Transaction Merger or acquisition, capital raise Other corporate Finance Transaction
- 5. What need tobuild model Feature of Best Model Financial Data Assumptions Financial instruction (in/out company) Modeling tool Speed Accuracy Simplicity Vairate of display information
- 7. In business decision-making,there are three classes of decision problems, namely: Decisions under conditions of certainty Decisions under conditions of risk Decisions under conditions of uncertainty.
- 8. Models involve alarge number of assumptions Uncontrollable variables because they are outside the decision-maker’s control, e.g., interest rates, consumer trends, currency fluctuations, etc. Controllable variables are those inputs that influence a model’s outcome and are within the decision-maker’s control. E.g. , product price, the level of output, or acceptable profit levels.
- 9. Every Investmentaim for: Earning Return Risk Level
- 10. 1. Financial Statements 1.The balance sheet. 2. The income statement. 3. The statement of cash flows. 2. Finance Regulations(in/out company) 3. Political Regulations 4. Investment environment
- 12. Financial TransactionFormsJournalT Accounts TrialBalance Financial Statements Balance Sheet Income StatementCash Flow Statement Accounting Cycle
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- 15. The best toolfor financial modeling is spread sheet MS EXCEL. The advantages of a model: it is easy for the decision-maker to understand it can be modified quickly and cheaply there is less risk when experimenting with a model than with the real system
- 16. Types of models Graphical models, which use lines, curves, and other symbols to produce flow charts, pie charts, bar charts, scatter diagrams, etc Mathematical models which use formulae and algorithms to represent real-world situations.
- 18. Excel providesseveral built-in functions to do various types of calculations. You therefore need to learn the underlying theory and concepts well and be able to write your own formulas to do calculations that cannot be done using the built-in functions. You also need to learn the theory and concepts well to clearly understand how the built-in functions work and what their limitations are so that you can take full advantage of them and not use them incorrectly.
- 19. EXCEL FUNCTION Financial Date & Timing Math & Trig. Statistical Lookup& Reference Logical Text
- 20. Data Table Pivot Table Charts Validation VBA