The Financial Modelling Handbook is a collaborative guide focused on building better financial models, particularly for debt annuity repayments. It details how to calculate an annuity payment profile using various functions and assumptions, emphasizing accuracy and methodology. Key steps include gathering data, calculating principal repayments, and determining debt service consistently across periods.

1. Financial Modelling
HANDBOOK
How to model
DEBT ANNUITY
REPAYMENT
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2. If you can’t explain it to a six year old,
you don’t understand it yourself.
ALBERT EINSTEIN

3. 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.
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4. Financial Modelling
HANDBOOK
MALA
Mala Khetarpal is a Project Manager
at F1F9. She manages financial
modelling projects in various sectors
including infrastructure, oil & gas and
energy. She is also an experienced
FAST financial modelling instructor.
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5. Financial Modelling
HANDBOOK
How to model
DEBT ANNUITY
REPAYMENT
An annuity debt repayment profile involves
“level debt service” – with interest reducing
and principal increasing over the term of
the debt.
This modelling guide explains how to
calculate an annuity payment profile.
DOWNLOAD THE EXCEL FILE THAT
ACCOMPANIES THIS MODELLING GUIDE

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HANDBOOK
GATHER THE DATA
1
2
1
This example assumes quarterly
repayment and so we need to
calculate a quarterly rate. Don’t
assume that an annual rate is
always decompounded to give a
period rate.
2
The ‘Debt principal repayment
counter’ comes from the time
sheet. The repayment counter
calculates the number of
remaining debt repayment
periods.

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HANDBOOK
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REPAYMENT PROFILE
3
3
The PPMT function is used to calculate the annuity repayment profile. The PMT
function requires the period interest rate, the repayment counter and the repayment
period flag.
The PPMT function returns the periodic principal repayment profile of the debt.
Formula in J17:
= IF(J16 = 1, -1 * PPMT($F14, 1, J15, 1), 0)

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HANDBOOK
PRINCIPAL REPAYMENT
4
5
4
Multiply the principal repayment
profile by the debt balance to
calculate the debt principal
repayment.
Formula in J21:
= J19 * J20
5
Resulting debt principal repayment
line is then deducted from ‘Debt
balance BEG’ to arrive at debt end
balance.

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HANDBOOK
DEBT SERVICE
6
7
6 Debt interest is calculated using the
formula debt balance times interest
rate.
Formula in J27:
= $F25 * J26
7
With an annuity repayment profile, total
debt service is equal each period. This
is sometimes known as “mortgage
style” debt.