Financial Modeling
Guidelines
CORPORATE FINANCE INSTITUTE®
Financial Modeling Guidelines
Table of Contents
Introduction
03
Consistent Labeling
53
Design: Common Approach
08
Capitalization
54
Design: Preferred Approach
09
Transparency
58
Building Blocks
10
Positioning Precedents
59
Level of Detail
11
Corkscrews
62
Model Drivers
11
Waterfalls
65
Model Inputs
14
Debt & Equity Schedules
67
Layout & Printing
16
Financial Statements
68
Stacking Schedules
30
Circularity
70
Aligning Columns
31
Formatting
73
Freezing Panes
33
Font Types
75
Column & Row Consistency
34
Custom Number Formats
76
Periodicity
37
Font Colors
81
Modularity & Schedules
41
Marking Units
84
Navigational Columns
43
Naming
85
Row Grouping
46
Macros
88
Custom Views
48
Protection
88
Adding Indents
50
Resources
94
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02
Financial Modeling Guidelines
Introduction
One of the first subjects we will cover in this
document is the importance of thoughtful model
Modeling guidelines help to establish
standardization and consistency
design. Time invested upfront in the model design
process will save considerable amounts of effort
on the model build and will lead to a better finan-
Financial modeling is a wonderful opportunity
cial model. An example of a well-designed cover
to learn as much as possible about a business.
page and dashboard is shown on the next page
Creating an electronic replica of a business forces
in Fig 01 – 02. Model design will also consider how
us to understand all the nuances of that particular
the model will be presented so that print layout
project or company. While it is an amazing learn-
can be established early in the planning process.
ing opportunity, the person building the model
needs to remember that it must also serve a larger group of stakeholders. These stakeholders will
vary depending on the model to help guide and
inform their decision-making processes.
Many of the models that we encounter today are
poorly designed, difficult to maintain, and hard
to follow. Given their central role in the financial
decision-making process, it is critical that these
models be built to the highest possible standards.
Implementing some detailed Financial Modeling
Guidelines is a logical step towards improving
these financial tools we are using.
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03
Financial Modeling Guidelines
Operational Modeling
Table of Contents
Dashboard
Inputs
Model
Strictly Confidential
Model Checks
Sales Volume Within Capacity?
Yes
Revolver Within Limit?
No
Balance Sheet Balanced?
Yes
Notes
This Excel model is for educational purposes only and should not be used for any other reason.
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© 2022 CFI Education Inc.
All rights reserved. The contents of this publication, including but not limited to all written material, content layout, images, formulas, and code, are protected
under international copyright and trademark laws. No part of this publication may be modified, manipulated, reproduced, distributed, or transmitted in any
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except in the case of certain noncommercial uses permitted by copyright law.
Fig 01: Well Designed Model Page
corporatefinanceinstitute.com
04
Financial Modeling Guidelines
Dashboard: Perpetuity Growth Method
Model Drivers
Base Case
Model Drivers Set To
2
All figures in USD thousands unless stated
Main Outputs
Best Case
Base Case
Worst Case
Selected Inputs
1
2
3
Enterprise
Value
101,288
136,880
101,288
81,405
Equity
Value
Equity
Per Share
118,238
82,646
62,763
3.46
2.42
1.84
Terminal Growth Rate
WACC
Net Debt
Shares Outstanding
Current Stock Price
WACC
101,288
11.5%
12.5%
13.5%
14.5%
15.5%
1.0%
113,075
104,358
97,019
90,751
85,335
Terminal Growth Rate
1.5%
2.0%
116,241
119,740
106,882
109,647
99,064
101,288
92,432
94,247
86,732
88,233
2.5%
123,628
112,688
103,714
96,214
89,850
3.0%
127,973
116,049
106,370
98,352
91,595
11.5%
12.5%
13.5%
14.5%
15.5%
1.0%
2.76
2.51
2.29
2.11
1.95
11.5%
12.5%
13.5%
14.5%
15.5%
Terminal Growth Rate
1.5%
2.0%
97,599
101,098
88,240
91,005
80,422
82,646
73,790
75,605
68,090
69,591
(US$/sh)
$2.05
Terminal Growth Rate
1.5%
2.0%
2.85
2.96
2.58
2.66
2.35
2.42
2.16
2.21
1.99
2.03
2.5%
3.07
2.75
2.49
2.27
2.08
3.0%
3.20
2.85
2.57
2.33
2.13
Premium (Discount) to Stock Price
2.5%
104,986
94,046
85,072
77,572
71,208
3.0%
109,331
97,407
87,728
79,710
72,953
WACC
WACC
Equity Value
1.0%
94,433
85,716
78,377
72,109
66,693
(FD 000)
Equity Value per Share
WACC
Enterprise Value
(End of 2022)
2.0%
13.5%
18,642
34,200
11.5%
12.5%
13.5%
14.5%
15.5%
1.0%
34.7%
22.3%
11.8%
2.9%
(4.9%)
Terminal Growth Rate
1.5%
2.0%
39.2%
44.2%
25.9%
29.8%
14.7%
17.9%
5.2%
7.8%
(2.9%)
(0.7%)
2.5%
49.7%
34.1%
21.3%
10.6%
1.6%
3.0%
55.9%
38.9%
25.1%
13.7%
4.1%
Fig 02: Well Designed Model Page
CF Valuation Modeling
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Page 1 of 2
05
Financial Modeling Guidelines
We think about models in a modular
fashion as a series of building blocks
appropriate level of detail. In fact, it is common
that financial models are either too simplistic or
overly complex.
We will also discuss the use of building blocks like
dashboards, schedules, and financial statements
to design and assemble the model in a modular
Modeling guidelines help to promote
consistency and standardization
fashion. Using a modular process will enable us
to create a library of these building blocks for
These guidelines may resonate with individuals
future use in other financial models. Also, divid-
building their own models but also with corpo-
ing the model into these small modules or blocks
rations and institutions. Larger institutions may
will make the model easier to interpret, print, and
welcome more consistency and standardiza-
present once completed.
tion with the models they are using across their
teams, mitigating the risk of human error. While
Our design process also helps us achieve the
we don’t expect all of our suggestions will be ad-
right level of detail throughout the model. We
opted, this document may serve as a catalyst to
begin with the model dashboard or outputs and
stimulate discussions around this subject. Given
then solve back through the supporting sched-
that financial models continue to be a central part
ules to the required inputs as illustrated below
of the decision-making process, it is critically im-
in Fig 03. By only including the components that
portant that they are built to the highest possible
support the dashboard, we ensure that the level
standards. With this document, we are pleased to
of detail throughout the model is appropriate
assist by communicating the Financial Modeling
to its end objective. This is incredibly important
Guidelines that we’ve adopted over the years.
as many models miss the mark in terms of the
Fig 03: Preferred Model Design Process
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Financial Modeling Guidelines
About CFI
About Macabacus
Corporate Finance Institute (CFI) is a leading, accred-
Macabacus is a leading Microsoft Office produc-
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tivity and brand compliance add-in for finance
sionals. It offers specialized certification programs
professionals and consultants. It enables enter-
featuring hundreds of on-demand courses, lessons,
prises to streamline the preparation of finan-
assessments, and interactive exercises created and
cial models and presentations like pitch books
led by industry experts. The curriculum combines
with powerful tools used by tens of thousands
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learn anywhere, anytime.
funds, corporate finance teams, and others.
Macabacus is a wholly owned subsidiary of the
Corporate Finance Institute (CFI).
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07
Financial Modeling Guidelines
Design: Common Approach
Upfront model design is a critical part of
the modeling process
A common error is to start the model
design with the inputs
Another mistake that is often made is beginning
the design from the wrong starting point. It is
Model design is one of the most critical steps in
quite common to start with the model inputs,
the model building process. In many ways, it is
as shown below in Fig 04. Once the inputs have
the most important step between the initiation
been selected, calculations are thought through
of the modeling process and final completion.
sequentially until the designer progresses all the
Many model builders will rush through this step
way through to the outputs. Although progress-
or skip it completely and begin the build before
ing from inputs to outputs is quite common and
they have a clear vision of what they are creating.
makes intuitive sense, we prefer to design our
A proper design process will help set the
level of detail for the model
models in the reverse order.
We begin by defining exactly what we
need the model to do for us
The model design process sets the landscape for
the entire model and will clearly identify to the
We begin the process by asking ourselves a
model builder how each piece fits into the larger
number of questions. What is the model needed
picture. Also, this upfront process helps the team
for? What decision are we trying to make that it
understand which elements are critical and which
may help us with? What questions do we have
may be less important. If done properly, the pro-
that it could answer? These types of questions
cess will provide the team with insights needed to
define what we need the model to do and what
set the right level of detail for the model. This is
it will ultimately provide for us. This helps to set
critically important since it is common for models
the main goal and objective of the model.
to either be too simple or overly complex.
Fig 04: Common Model Design Process
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Financial Modeling Guidelines
We then progress to the dashboard and
decide what needs to be presented
Once clarity has been formed around what the
Design: Preferred Approach
We work backward through all the
components to arrive at the inputs
model needs to do, we turn our thoughts to
imagining how it will be presented. Would we
So we essentially start the process with the
like to see a graph comparing our cash flow
dashboard, as shown below in Fig 05. Designing
forecast with our budget? Or are we interested
the dashboard can be as simple as sketching on
in the intrinsic valuation for an acquisition target
paper or jotting down ideas on a whiteboard.
we are considering? Asking these questions
Once the dashboard is clearly defined, we move
helps us envision the types of tables, charts,
backward to solve for the outputs needed for the
graphs, and performance indicators that will
exhibits in the dashboard. The process continues
be needed. Essentially, we start the process by
backward through the model. Eventually, this
designing what we refer to as the dashboard of
process leads us all the way back to the inputs
the model. The dashboard is a page or set of
completing this initial stage of the design pro-
pages that shows the audience important model
cess. This method allows us to start with a clear
variables. This includes important outputs but
objective for the model. It also ensures that we
sometimes also critical inputs. Understanding
only include the components that are absolutely
the final dashboard helps us back solve for what
necessary for the completion of that objective.
is needed to get to that dashboard.
Fig 05: Preferred Model Design Process
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Financial Modeling Guidelines
Building Blocks
We’ve shown a more detailed diagram of a simple cash flow model
In the previous example in Fig 05, we shared a simplified schematic for a design
process. This was just meant to illustrate the importance of starting from the end
and solving backward. In Fig 06 to the right, we’ve shown a more detailed design
process that may be used for a simple cash flow model. The model is needed to
show a forecast of free cash flow for a business with annual proforma estimates.
Similar to the previous example in Fig 05, we begin with the model outputs and
solve back to the inputs. To be specific, we have started with the dashboard and
progressed back to the inputs and the drivers.
We often refer to the various components of a model as building blocks
As indicated by the title of Fig 06 on the right, we often refer to the various parts of
a model as building blocks. A building block could include many types of modules
like model schedules, financial statements, or dashboards. It is useful to think about
models in a modular fashion made up of a series of these building blocks. As we will
see in our discussions later, each one of these building blocks will have a defined
purpose within the model.
Using a modular system allows us to save building blocks to use again
There are a couple of advantages to designing and constructing using these building blocks. The first is that this modular type of building breaks the model up into
blocks of a reasonable size. This helps to focus on one block at a time and also
assists with model printing which we will discuss later. Another important advantage to this modular system is that the blocks will likely be used in many types
of models. For instance, many models require a working capital schedule so this
building block can be reused again in those models.
Fig 06: Building Blocks
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Financial Modeling Guidelines
Level of Detail
us to achieve the optimal level of detail for each
part of the model. We end up with a model that
Many models are either too simplistic
or overly complex
has adequate complexity for the crucial elements
but clean simplicity for the less important ones.
This backward design process also helps us
calibrate the right level of detail for the model.
Getting the right level of detail is one of the places where many model builders miss the mark.
Essentially, they either design a model which is
Model Drivers
We need to evaluate the relative
importance of the model inputs
too simplistic or overly complex. Models which
are too complex are becoming more common
The initial design process takes us from the
since data is so easily available today. The default
dashboard and outputs all the way back to the
for many model builders is to include all available
inputs. Through this initial step, we’ve been able
data in the model they are designing. This leads to
to see which calculations are important or critical
models with too much detail making them hard to
to the model output. This gives us insight into the
read and difficult to maintain.
relative importance of the various inputs. This is
where we need to focus our attention next.
We add complexity only where needed to
get to the model outputs
Model drivers are volatile and have a
significant impact on model outputs
By beginning with a clear vision of the dashboard
or end goal, we include only the details that
While a model may have hundreds of inputs,
are needed to get to meet that objective. As we
there may only be a few which are truly material
move back through the model, we focus on the
to the model output. We often refer to these as
elements which will have a meaningful impact on
drivers since their values really drive and influ-
the critical model outputs. There may be ele-
ence the model output. There are a couple of
ments of the model which do not have a signif-
common characteristics of a driver that makes
icant impact on the key model outputs. These
them stand out from other inputs. First, they are
elements can often be replaced with rough
inputs that have a significant impact on the mod-
estimates or simplifications. This helps keep the
el output. And second, they are relatively volatile
model lean and maintains the focus on the most
and have a wide range between their minimum
critical elements. In the end, this process helps
and maximum values.
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Financial Modeling Guidelines
Tax rate may only be considered as
a driver in unstable jurisdictions
Identifying the drivers requires
detailed knowledge of the business
Let’s consider a couple of examples. Should a
As illustrated by these examples, it may not be ob-
company’s tax rate be considered as a driver? It
vious which inputs to consider as drivers. In many
may be obvious that the tax rate has a significant
cases, sound knowledge of the business may be
impact on the model output. However, we would
needed to determine the drivers for a project or
need to consider the likelihood of a significant
company. This is an important part of the mod-
change in the tax rate. This may depend on the
el design process. We need to remember that
jurisdiction where the company is operating. If
modeling is not just an exercise in trying to get the
it is relatively stable, we may not consider this
right numbers. It’s an opportunity to learn about
to be a driver since it is unlikely to change much.
a business. By asking these questions early in the
However, we may consider the tax rate to be a
design process, we enable ourselves to learn so
driver for a company in an area with a high de-
much about the underlying business.
gree of political and fiscal uncertainty.
Only the main commodity prices
may be considered as drivers
We isolate the drivers so that we can
test how the model reacts to them
The reason that we are identifying these driv-
Another interesting example may be the com-
ers is so that we can test how the model reacts
modity price for a natural resource company.
to changes in them. We know that their move-
Commodity prices are often volatile, so they may
ments are material to the model outputs and
meet our second criterion. But, then we need
that there is a reasonably good chance that
to consider whether it has a significant impact
they may change. Thus, it makes sense to test
on the model’s outputs. The gold price may be a
how the model will react to movements in these
driver for a mining company with revenue gener-
drivers. After all, these drivers could make the
ated primarily from gold sales. But, if only a small
difference between the success or failure of the
amount of its revenue was from silver sales, we
project or company.
may not consider the silver price to be a driver.
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12
56,428
58,134
59,537
Financial52,185
Modeling
Guidelines
Revenue
8
Fig 8:
2022A
Inflation
Start by considering the minimum and
Revenue
52,185
maximum
levels for drivers
COGS
29,236
Gross Profit
22,949
There are a few ways to test drivers in a financial
model. One of the most common ways is to create
Revenue
a range of values for them. This may start with
COGS about the base case (most likely) as well
thinking
2023F
2024F
2025F
2026F
2027F
3.0%
2.5%
2.0%
1.5%
1.5%
Having the ability to move these critical drivers
56,428
58,134
59,537
60,854
62,077
between30,898
the best and
worst-case
allows 32,177
us to see
30,337
31,356
31,783
26,091
27,235
28,181
29,071
29,900
the range of possible outputs for the model. While
we could test the range of all model inputs in this
manner, it is only critically important for these driv-
13,046
13,046
13,046
13,046
ers. Testing only the drivers in this manner allows
7,842
7,842
7,842
us to focus
our attention
on the7,842
most important
as the best case and worst case. We’ve shown this
Quarterly & Annual Calculations inputs that truly have a significant impact on the
Fig 9:
below in Fig 07 using the examples of the gold
All figures in USD thousands unless stated
price and the tax rate. This will allow us to evaluate the range of model outputs given a best-case
or
Revenue
worst-case
COGS
Gross Profit
scenario for these drivers.
Only the model drivers need to be tested
in this
way with switches
DRIVERS
17
62,077
Income Statement
All figures in USD thousands unless stated
9
60,854
Fig 17:
model
outputs.
We always
need to
pay close
attenQ1
Q2
Q3
Q4
2022
tion to the right level of detail for a model. This will
help those using the model focus on the elements
13,046
13,046
13,046
13,046
52,185
7,842
7,842that are
7,842
31,368
of the model
the most 7,842
important.
Other
5,204
5,204
5,204
5,204
20,817
inputs may fluctuate, but over smaller ranges and
with less overall impact on the model outputs.
Model Drivers
2023F
2024F
2025F
2026F
2027F
(US$/oz)
1,800
1,700
1,600
1,500
1,500
Best Case
Base Case
(US$/oz)
(US$/oz)
2,000
1,800
1,900
1,700
1,800
1,600
1,700
1,500
1,700
1,500
Worst Case
(US$/oz)
1,400
1,300
1,300
1,200
1,200
25.0%
25.0%
25.0%
25.0%
25.0%
20.0%
25.0%
30.0%
20.0%
25.0%
30.0%
20.0%
25.0%
30.0%
20.0%
25.0%
30.0%
20.0%
25.0%
30.0%
All figures in USD thousands unless stated
Driver Switch
Gold Price
2
Base Case
Tax Rate
Best Case
Base Case
Worst Case
45 Fig Fig
45: Drivers
Driver Status Indicator
07: Model
Model Drivers Set To: Base Case
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13
Financial Modeling Guidelines
A driver status indicator is recommended
when all drivers are connected
Model Inputs
Inputs should be grouped together so
they are easy to find and update
In the previous image in Fig 07, we showed a
schedule that had all drivers connected to one
driver switch. This is quite common in financial
We can certainly appreciate the importance of
modeling
as it allows all the drivers
to be quickWorst Case
(US$/oz)
discerning
between
the drivers
and the other
1,400
1,300
1,300
1,200
inputs to a model. Drivers will need to be separat-
cases where the driver switches are connected, it
ed and selected with switches so that we can test
Tax Rate
often
makes sense to include an indicator show-
25.0% react25.0%
25.0%
how25.0%
the model outputs
as they move.
The
25.0
Case
ingBest
‘Driver
Status’ as shown below in Fig 08. This
20.0%
20.0%
other
inputs are 20.0%
less critical to
the model 20.0%
out-
20.0
25.0
30.0
Base Case
Worst Case
45
1,20
ly moved in lock-step throughout the model. In
Driver Status Indicator can be shown throughout
puts,25.0%
so they do 25.0%
not generally25.0%
need to be 25.0%
moved
the model, so it is always clear to the audience
with switches. However, they should be grouped
which set of drivers is active.
together into a consolidated section of the model
Fig 45:
30.0%
30.0%
30.0%
30.0%
so it is easy to locate and update them.
Driver Status Indicator
Each input should only ever be
entered into a model once
Model Drivers Set To: Base Case
It may be obvious to note that inputs should only
Fig 08: Driver Status Indicator
ever be entered once into a model. If we needed
to enter the tax rate into a model, we should only
have to do this in one place. All other locations
where the tax rate occurs should be connected
back to the original input. One topic that gets
Revenue
56,428relatively
58,134
debated
frequently59,537
in financial 60,854
modeling
circles
is how to 30,898
connect the31,356
occurrences31,783
of tax
30,337
COGS
SG&A
18
rate together
in the
model.
7,939
8,138
62,07
8,300
8,425
32,17
8,55
Other
Depreciation
Interest
Current Tax
2,087
4,168
2,520
–
2,139
4,382
2,520
132
2,182
4,600
2,520
2,353
2,214
4,823
2,520
2,586
2,24
5,04
2,52
2,79
Deferred Tax
2,344
2,382
291
186
9
2023F
2024F
2025F
Fig 18:
Income Statement
All figures in USD thousands unless stated
corporatefinanceinstitute.com
2022A
2026F 14
202
Financial Modeling Guidelines
There are two ways to connect multiple
instances of the same variable
to audit, most of the instances of tax rate have
There are two schools of thought on this. One is
We avoid linking multiple instances
in series to avoid dependencies
to connect the occurrences in series as shown
dependencies that will make deletions difficult.
below on the left in Fig 09. In this example, each
occurrence of tax rate is connected to the next
For this reason, our preference would be to link
closest one. The other approach is to connect all
all instances of tax rate directly to the original
occurrences back to the original source as shown
entry at the top of the tab, as shown below on
below on the right in Fig 10. Connecting all the
the right in Fig 10. In this example, the instance
instances of the tax rate in series, as shown
of tax rate at the top is the input. However, this
below on the left in Fig 09 means that any one
top entry could be linked over to another tab. In
connection is closer than it would have been if
this case, we would link directly to the top entry
# # back
9.57to the original
11.57 source. While
7.57
we had linked
connecting
in series may be marginally easier
2022
CORKSCREWS
XX
Fig XX:
and then#9.57
link
top entry
over to another
tab. 9.57
9.57
# that
9.57
9.5711.57
9.57 7.57
9.57
This structure
minimizes dependencies and the
2022
CORKSCREWS
amount of linking between tabs.
Connecting in Series XX
Connecting in Series
Tax Rate
25.0%
Tax Rate
25.0%
Tax Rate
25.0%
Tax Rate
25.0%
Tax Rate
25.0%
Tax Rate
25.0%
Tax Rate
25.0%
Tax Rate
25.0%
Tax Rate
25.0%
Tax Rate
25.0%
Fig 09: Connecting in Series
XX
Fig XX:
Fig XX:
Connecting to Source XX
corporatefinanceinstitute.com
Tax Rate
25.0%
Fig 10: Connecting to Source
Fig XX:
Tax Rate
Connecting to Source
25.0%
15
Financial Modeling Guidelines
Layout & Printing
senior leaders within organizations. These executives may not be spending as much time in Excel
Models should be properly set up
to print or to be saved in PDF format
and may prefer to see a printed copy of the model
We’ve now discussed the model dashboard,
All schedules within the model
should be included in the print
the drivers, and the inputs. Before we continue
or view it in a locked in format like PDF.
the dialogue into the other building blocks of a
model, we need to transition over to a discus-
When configuring the print settings for a model,
sion around model printing. We believe that all
it is important to think about the model in its
models should be set up properly for printing.
entirety. It is very common to encounter models
Even if you or your team is striving to reduce the
that are only configured to print a few key output
use of paper, the file should be configured to be
pages. While this allows the reader to focus on
saved as a formatted file type such as a PDF. This
the crucial model outputs, it does not provide
allows users to quickly open the file and save it
full transparency into the calculations within the
with a locked in presentation format very quickly.
entire model. In order to be comfortable using
In Fig 11 on next page we have shown an exam-
the model to help with important decisions,
ple of a Print Preview for a formatted model.
executives need to see and understand all of the
calculations in the model. While the most import-
Model printability is something
that often gets overlooked
Model printability often gets overlooked. It is be-
ant components of the model may be prioritized
to the first pages of the print, all schedules and
modules should be included in the printout.
coming more and more common to utilize models
mostly in Excel instead of on paper. However,
what is getting lost with the trend away from
printing is the model’s ability to present results to
its audience. We need to remember that models
are decision making tools that are often used by
corporatefinanceinstitute.com
16
Financial Modeling Guidelines
DCF Valuation Modeling
Table of Contents
Strictly Confidential
Model Checks
Outputs
Inputs
Incorrect Date Set for Valuation?
Incorrect Date Set for First Cash Flow?
No
No
Model
Terminal Growth Rate Greater Than or Equal To WACC?
No
Model exceeding operational capacity?
Unused Tax Losses Remaining? (Levered Schedule)
Yes
No
Unused Tax Losses Remaining? (Unlevered Schedule)
Two UFCF Methods Different?
No
No
© 2015 to 2022 CFI Education Inc.
This Excel model is for educational purposes only and should not be used for any other reason. All content is Copyright material of CFI Education Inc.
All rights reserved. The contents of this publication, including but not limited to all written material, content layout, images, formulas, and code, are protected
under international copyright and trademark laws. No part of this publication may be modified, manipulated, reproduced, distributed, or transmitted in any
form by any means, including photocopying, recording, or other electronic or mechanical methods, without prior written permission of the publisher,
except in the case of certain noncommercial uses permitted by copyright law.
https://corporatefinanceinstitute.com/
Fig 11: Print Preview of a Formatted Model
corporatefinanceinstitute.com
17
Financial Modeling Guidelines
We don’t recommend printing
in order from inputs to outputs
We make sure decision-makers
see all outputs and inputs first
In Fig 12 to the next page, you may recognize the
As shown in Fig 12, we’ve given these elements
building blocks or elements from Fig 06 that were
a very high priority in the print order. As indicat-
presented earlier. When presented previously, we
ed, the first two tabs after the cover are outputs
had shown these building blocks organized into
and inputs. Essentially, the audience first needs
a tall stack. Remember that our model design
to know what is coming out of the model, then
process began with an understanding of the flow
all the inputs that generated those outputs. To
of the model. This is where we solved from the
be specific, we are presenting the cover page,
dashboard backward through the model to the
dashboard, drivers, and inputs on the first few
inputs. This gave us an understanding of the linear
pages of the model. This begins the print with the
flow through the model. Although this was a critical
elements that are critical for most readers. The
step in the model design process, this does not
cover page provides basic information about the
mean that we recommend printing the model in
project or company. Then, the outputs are pre-
this order. Although it is relatively common to print
sented on the dashboard. Next, the reader is able
financial models in an order that matches this flow,
to see the main drivers and the remaining inputs.
we prefer to reorganize the model to prioritize the
Within these first few pages, they have been able
elements from a presentation perspective.
to see the outputs and all the inputs that led to
those outputs.
We prefer to prioritize the model
dashboard, drivers, and inputs
Our preference is to place a focus on the most
important elements necessary for the audience
to quickly understand the model. These are the
outputs and inputs. More specifically, the critical elements would be the model dashboard,
the drivers, and the inputs. While these building blocks only represent a small portion of the
model, they are the most important elements for
decision-makers to understand.
corporatefinanceinstitute.com
18
Financial Modeling Guidelines
COVER
OUTPUTS
INPUTS
MODEL
Cover
Dashboard
Drivers
Revenue
Inputs
Costs
Income Stmt
Working Capital
Depreciation
Assets
Income Tax
Free Cash Flow
DCF Valuation
Fig 12: Prioritizing a Model from a Presentation Perspective
corporatefinanceinstitute.com
19
Financial Modeling Guidelines
It is important to include a cover page
at the beginning of every model
about the model, like the name of the underlying
project or company. As indicated below, it also includes a table of contents as well as legal disclaim-
Let’s look at some examples of the first few pages
ers. Other common elements that can be included
of a model. The first page of a model should always
are version numbers, dates, and times.
be a cover page, as shown in the example below in
Fig 13. The cover page conveys basic information
Operational Modeling
Table of Contents
Dashboard
Inputs
Model
Strictly Confidential
Model Checks
Sales Volume Within Capacity?
Yes
Revolver Within Limit?
No
Balance Sheet Balanced?
Yes
Notes
This Excel model is for educational purposes only and should not be used for any other reason.
All content is Copyright material of CFI Education Inc.
https://corporatefinanceinstitute.com/
© 2022 CFI Education Inc.
All rights reserved. The contents of this publication, including but not limited to all written material, content layout, images, formulas, and code, are protected
under international copyright and trademark laws. No part of this publication may be modified, manipulated, reproduced, distributed, or transmitted in any
form by any means, including photocopying, recording, or other electronic or mechanical methods, without prior written permission of the publisher,
except in the case of certain noncommercial uses permitted by copyright law.
Fig 13: Well Designed Model Page
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20
Financial Modeling Guidelines
We recommend including checks which
can be summarized on the cover
We recommend printing the drivers
immediately after the dashboard
As shown on the previous page in Fig 13, the
The next most important item to print would be
cover page is also a great place to include a sum-
the model drivers. Remember that these are the
mary of model checks. Since the cover is highly
critical model inputs that have a large impact
visible, placing a summary of the checks here will
on the outputs. On page 23 in Fig 15, we have
ensure that they are noticed. Later, we will dis-
shown an example of a page showing the main
cuss how to add a summary of the alerts to each
model drivers. As indicated, the drivers would be
model tab to ensure they are noticed immediate-
presented on the third page in the model print.
ly if tripped. We have shown one of the checks
So, immediately after seeing the dashboard or
previously just to illustrate how a bold format in
outputs, the audience is able to see the main
a different color can bring attention to the read-
drivers that contributed to those outputs. Below
er. Printing a model that has checks in place but
the model drivers, we have also included some
none tripped will help to instill confidence in the
other inputs, as shown below.
audience. They will be able to see that the model
designer has diligently included checks that are
all inside of their allowable limits.
Printing: Model outputs should be
presented near the front of the model
Although it is common to print an output page
or conclusion at the end of a presentation, we
believe this should be the first item presented
after the cover page. Executives are usually most
interested in the model outputs, which is why we
recommend positioning them right at the beginning of the print. As shown on the next page in
Fig 14, we recommend printing the model dashboard immediately after the cover page. This
starts the presentation with the conclusion and
aligns everyone to the model outputs.
corporatefinanceinstitute.com
21
Financial Modeling Guidelines
Dashboard: Perpetuity Growth Method
Model Drivers
Base Case
Model Drivers Set To
2
All figures in USD thousands unless stated
Main Outputs
Best Case
Base Case
Worst Case
Selected Inputs
1
2
3
Enterprise
Value
101,288
136,880
101,288
81,405
Equity
Value
Equity
Per Share
118,238
82,646
62,763
3.46
2.42
1.84
Terminal Growth Rate
WACC
Net Debt
Shares Outstanding
Current Stock Price
WACC
101,288
11.5%
12.5%
13.5%
14.5%
15.5%
1.0%
113,075
104,358
97,019
90,751
85,335
2.5%
123,628
112,688
103,714
96,214
89,850
3.0%
127,973
116,049
106,370
98,352
91,595
11.5%
12.5%
13.5%
14.5%
15.5%
1.0%
2.76
2.51
2.29
2.11
1.95
11.5%
12.5%
13.5%
14.5%
15.5%
Terminal Growth Rate
1.5%
2.0%
97,599
101,098
88,240
91,005
80,422
82,646
73,790
75,605
68,090
69,591
(US$/sh)
$2.05
Terminal Growth Rate
1.5%
2.0%
2.85
2.96
2.58
2.66
2.35
2.42
2.16
2.21
1.99
2.03
2.5%
3.07
2.75
2.49
2.27
2.08
3.0%
3.20
2.85
2.57
2.33
2.13
Premium (Discount) to Stock Price
2.5%
104,986
94,046
85,072
77,572
71,208
3.0%
109,331
97,407
87,728
79,710
72,953
WACC
WACC
Equity Value
1.0%
94,433
85,716
78,377
72,109
66,693
(FD 000)
Equity Value per Share
WACC
Enterprise Value
Terminal Growth Rate
1.5%
2.0%
116,241
119,740
106,882
109,647
99,064
101,288
92,432
94,247
86,732
88,233
(End of 2022)
2.0%
13.5%
18,642
34,200
11.5%
12.5%
13.5%
14.5%
15.5%
1.0%
34.7%
22.3%
11.8%
2.9%
(4.9%)
Terminal Growth Rate
1.5%
2.0%
39.2%
44.2%
25.9%
29.8%
14.7%
17.9%
5.2%
7.8%
(2.9%)
(0.7%)
2.5%
49.7%
34.1%
21.3%
10.6%
1.6%
3.0%
55.9%
38.9%
25.1%
13.7%
4.1%
Fig 14: Example of a Dashboard
CF Valuation Modeling
corporatefinanceinstitute.com
Page 1 of 2
22
Financial Modeling Guidelines
Drivers
2023F
2024F
2025F
2026F
2027F
Term
2.0%
1.0%
1.0%
0.5%
0.5%
0.5%
3.0%
2.0%
1.0%
2.0%
1.0%
1.0%
2.0%
1.0%
0.5%
1.5%
0.5%
0.5%
1.5%
0.5%
0.5%
1.0%
0.5%
0.5%
3.0%
1.0%
1.0%
1.0%
0.5%
0.5%
3.5%
3.0%
1.0%
2.0%
1.0%
1.0%
2.0%
1.0%
0.5%
2.0%
1.0%
0.5%
1.5%
0.5%
0.5%
0.8%
0.5%
0.5%
4,550
4,700
4,850
5,000
5,125
5,300
Best Case
Base Case
Worst Case
4,000
4,550
5,000
4,300
4,700
5,200
4,400
4,850
5,400
4,600
5,000
5,500
4,800
5,125
5,600
4,900
5,300
5,800
Inflation Rate
3.5%
3.0%
3.0%
2.5%
2.5%
1.5%
45
25
40
45
25
40
45
25
40
45
25
40
45
25
40
45
25
40
All figures in USD thousands unless stated
Base Case
Driver Switch
2
Sales Volume Growth
Best Case
Base Case
Worst Case
Pricing Increases
Best Case
Base Case
Worst Case
Capital Expenditure
1
Working Capital
Accounts Receivable
Accounts Payable
Inventory
(Days)
(Days)
(Days)
We have assumed working capital amounts per day in terminal year are equal to the previous year. ⁽¹⁾
Fig 15: Example of Model Drivers
on Modeling
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Page 1 of 3
23
Financial Modeling Guidelines
Weighted Average Cost of Capital
All figures in USD thousands unless stated
Average
Name
Region
Surge Batteries Inc.
Future Energy Co.
Clean Green Ltd.
Full Power Solutions Ltd.
Earthcor Power Inc.
North America
North America
Europe
Europe
North America
Debt
Equity
63,702
43,422
26,211
15,109
22,676
375,499
311,425
131,996
95,746
666,541
Average
Median
Risk Premium for Equity
Debt/
Levered
Capital
Beta 2
Beta 3
31.5%
32.2%
31.9%
33.0%
30.2%
17.0%
13.9%
19.9%
15.8%
3.4%
14.5%
12.2%
16.6%
13.6%
3.3%
0.85
1.01
1.34
0.99
0.88
0.76
0.92
1.18
0.90
0.86
31.8%
31.9%
14.0%
15.8%
12.0%
13.6%
1.01
0.99
0.92
0.90
1
Unlevered
Cost of Equity
Risk Premium (Levered)
Average Unlevered Beta
4
Levered Beta
Risk Premium for Equity
4.5%
0.92
1.06
4.7%
Capital Structure
Total Debt
Market Capitalization
Total Capitalization
Debt/
Equity
Tax Rate
Risk Free Rate
Risk Premium for Equity
Risk Premium for Country
Risk Premium for Company Specific
Cost of Equity
2.4%
4.7%
–
8.0%
15.1%
Cost of Debt
19,102
126,120
145,222
Debt / Equity
Current
Target
13.2%
86.8%
100.0%
15.0%
85.0%
100.0%
15.1%
17.6%
Tax Rate is a 5-Year Average. ⁽¹⁾
Levered beta is based on 5-year monthly data. ⁽²⁾
Pre-Tax Cost of Debt
Tax Rate
After-Tax Cost of Debt
5.2%
20.0%
4.2%
Weighted Average Cost of Capital
Debt Capital
Equity Capital
Weight
Cost
15.0%
85.0%
4.2%
15.1%
Unlevered Beta = Levered Beta / (1 + (1 - Tax Rate) × Debt-to-Equity) ⁽³⁾
Levered Beta = Unlevered Beta x (1 + (1 - Tax rate) x (Debt-to-Equity)) ⁽⁴⁾
Weighted Average Cost of Capital
13.5%
Fig 16: Example of Model Inputs
on Modeling
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Page 2 of 3
24
Financial Modeling Guidelines
We present the remaining inputs
after the model drivers
The major model calculations are
contained in the remaining schedules
The next schedule that we recommend printing
The remaining schedules contain all the major
would be the remaining model inputs, as shown
calculations in the model. While these schedules
on the previous page in Fig 16. In this example,
are arguably the most important part of the
we have shown the inputs used to calculate the
model from a computation perspective, they are
weighted average cost of capital (WACC) for a com-
not necessarily the most important elements to
pany. Essentially, these are all the remaining inputs
present first to the audience. The audience first
to the model that didn’t meet our criteria of being
needs to know the key insight coming out of the
drivers. So, we present the most critical inputs first,
model and which variables contributed to that
which are the drivers, followed by the less import-
insight. For those that need to dig deeper and un-
ant inputs. This means that the audience has now
derstand the calculations, we always recommend
seen all the inputs required in the model.
including all the remaining model schedules.
Many audience members will only need
to see the outputs and the inputs
The remaining model schedules act
like an appendix in many ways
At this point, we’ve now printed the most import-
An example of one of these remaining model
ant parts of the model from a presentation per-
schedules is shown on the next page in Fig 17.
spective. The audience has seen a cover page, the
In this case, we’ve included a revenue schedule,
dashboard showing model outputs, the main driv-
which is where the revenue estimates are be-
ers, and other model inputs. Effectively, everyone
ing calculated in the model. Although it has not
has now seen the model outputs and every input
been shown below, this may be followed by other
that led to those outputs. Many of the audience
schedules dedicated to costs, working capital,
members would not require any more information
or depreciation. In many ways, these remaining
at this point in time. They know what is flowing
schedules are like an appendix. These are intend-
through the model and what it is saying to assist
ed for those who are curious about the various
them with their decision. If they were comfortable
methods used for the calculations in the model.
with the model building abilities of the team and
the internal model review process, then they likely
would not need to see the remaining schedules.
corporatefinanceinstitute.com
25
Financial Modeling Guidelines
Revenue Schedule
2020A
All figures in USD thousands unless stated
2021A
2022A
2023F
2024F
2025F
2026F
2027F
Term
Model Running: Base Case Drivers
Days in Period
Plant Capacity
365
1,500
365
365
365
365
365
365
365
365
365
2.0%
2.1%
2.0%
1.0%
1.0%
0.5%
0.5%
0.5%
1,510
1,500
100.7%
OPERATIONS
Sales Volume Growth
Sales Volume
Plant Capacity
Operational Efficiency
(Units/Day)
1,374
1,500
91.6%
1,401
1,500
93.4%
1,430
1,500
95.3%
1,459
1,500
97.2%
1,473
1,500
98.2%
1,488
1,500
99.2%
1,495
1,500
99.7%
1,503
1,500
100.2%
(Units/Day)
365
1,374
501,510
365
1,401
511,365
365
1,430
521,950
365
1,459
532,389
365
1,473
537,713
365
1,488
543,090
365
1,495
545,805
365
1,503
548,534
365
1,510
551,277
102.86
1.7%
104.61
2.1%
106.81
3.0%
110.01
1.0%
111.11
1.0%
112.23
1.0%
113.35
0.5%
113.91
0.5%
114.48
501,510
102.86
51,585
511,365
104.61
53,494
521,950
106.81
55,749
532,389
110.01
58,570
537,713
111.11
59,748
543,090
112.23
60,949
545,805
113.35
61,866
548,534
113.91
62,486
551,277
114.48
63,113
(Units/Day)
VOLUME
Days in Period
Sales Volume
Sales Volume
(Units)
PRICING
Pricing Increases
Unit Price
(USD/Unit)
REVENUE
Sales Volume
Sales Price
Revenue
(Units)
(USD/Unit)
Operational Capacity Exceeded?
No
No
No
No
No
No
No
Yes
Yes
Fig 17: Example of a Revenue Schedule
Valuation Modeling
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Page 1 of 12
26
Financial Modeling Guidelines
A driver interacts more with the
dashboard of a car than the engine
All pages should include a title at
the top and clearly marked units
If we think about the first four pages printed as
Now that we have positioned the high priority
being like the dashboard of an automobile, then
pages to the front of the model, we should pause
these remaining schedules would be the en-
to think about some important features to include
gine. It’s fair to say that people would regularly
on each page of the printout. In Fig 18 on the next
interact with the dashboard of an automobile
page, we have shown an example of a dashboard.
but would not look under the hood to check the
As indicated, all pages should have clear titles
engine as often. In this sense, we need to make
at the top indicating exactly what information is
sure that the first few pages of the dashboard
being presented. We’ve also included a global units
have all the elements that the driver would
marker at the top left, indicating that all figures are
need. The remaining schedules under the hood
in USD millions.
are where the real work is done through detailed calculations.
The remaining schedules are often
printed to match the model flow
Excel has very intuitive settings to include
many features as custom footers
Making use of Excel’s custom footer functionality
can also work really well. This feature was used in
These remaining schedules are often printed in
Fig 18. As you can see, we are showing the model
an order that matches the flow of information
name, number of pages, and a corporate logo in
in the model. This would be the default unless
the footer. Other common elements to include in
there was a compelling reason to deviate from
the footer would be the exact file name, file path,
this order matching the model flow. For instance,
or the print date and time. The custom footer
a company’s financial statements may be a part
settings are quite easy to use in Excel and also
of these remaining schedules. When we feel that
update dynamically as changes are made to the
this should be prioritized ahead of the other
workbook. These features can be found in the
schedules, we may move them to be positioned
Page Setup dialog box by using the shortcut ALT
next in the print ahead of other schedules that
PSP. Custom footer settings are in the Header/
may be showing revenue or costs.
Footer tab.
corporatefinanceinstitute.com
27
Financial Modeling Guidelines
Waterfall Chart: Impact on Enterprise Value
All figures in USD millions
Model Output Switch
1
2
3
4
5
6
Waterfall
2
Model Output
Description of Model Outputs
Dashboard
Waterfall
Use this mode to run the charts on the Dashboard tab.
Use this mode to run the Waterfall Chart below.
Initiative
Description
Green House Gas Reduction
Preparing for Weather Events
Labour Rights Issues
Plant Based Meat Sales
Macro: Revenue Increase
Macro: WACC Decrease
Targeting net zero CO2 emissions within 10 years.
Invest in supply chain to reduce unplanned downtime due to weather events.
Diversify hiring process and increase benefits to drive employee productivity.
Aiming for $1.2bn in plant based meat sales by 2025.
Forecasting marginally higher revenues from better ESG brand positioning.
Favorable market perception after implementing risk mitigation measures.
(166)
Status Quo
5,164
1,809
100,072
1
GHG Reduction
Fig 18: Example of a Dashboard
SG Integration & Financial Analysis
corporatefinanceinstitute.com
8,425
118,820
6
WACC Decrease
All Initiatives
5,386
(1,870)
2
Prep for Weather
3
Labour Issues
4
5
Plant-Based Meat Revenue Increase
Page 1 of 1
28
Financial Modeling Guidelines
It is important to understand how
to print a tall stack of schedules
Using the Smart Print Area tool from
Macabacus can save a lot of time
In the following section, we will be discussing
This requires individually selecting each page
model structure. In particular, we will explain
down through the stack, which can be quite
our preference for stacking the schedules on
time consuming. Macabacus has a great fea-
top of one another within one tab or worksheet.
ture that expedites this process called Smart
Knowing that this is where our discussion will
Print Area, which is shown below in Fig 19. This
be heading, it may be important now to address
feature can be executed quickly using the de-
how a tall stack of schedules might be printed.
fault shortcut CTRL ALT SHIFT B. It allows us to
quickly define the first print area using ‘Set as
Individual pages should always
be separated by at least one row
Without going into all the details of print settings
here, we should highlight the importance of
individually selecting each page in a tall stack of
print area.’ Then, as we progress down through
the model, we can select ‘Add to print area.’ This
intuitive function enables us to set up the print
areas very quickly for our models and saves an
incredible amount of time.
schedules. An example of such a stack of schedules is shown just ahead in Fig 21. If you look
closely, you can see a break of at least one row
between every page. Including these breaks is
critical to allow us to control the print settings
for each page or schedule.
Fig 19: Smart Print Area from Macabacus
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29
Financial Modeling Guidelines
Stacking Schedules
find more linking errors in these types of models.
Models can be organized with
each schedule on a worksheet
and check. Often, more advanced model review
Second, these models are more difficult to follow
techniques are needed in order to follow links
across from one tab to another.
As we have discussed, financial models are made
up of schedules or building blocks. These schedules can be assembled together in two general
ways. The first way is shown below in Fig 20. As
indicated, the schedules can be placed side by
side, with each one on its own tab or worksheet.
One reason many people like this structure is
that it is easy to see all the tabs at the bottom
of the file. In fact, the tabs appear as a button
and act like a table of contents which facilitates
navigation. Essentially, a user can see all the tabs
at the bottom of a file and easily click on one to
quickly navigate into that schedule.
Navigation can become difficult
with a large number of tabs
Another reason why this structure is not preferred is that it leads to models with a very large
number of tabs or worksheets. This not only
increases the amount of inter linking between
tabs, but navigation also becomes more difficult.
In many cases, all the tabs may not be visible
at the bottom of the Excel interface, and horizontal scrolling may be needed to see them. At
this point, the tabs no longer work very well as
a table of contents, leading to challenges with
model navigation.
Fig 20: Schedules Positioned Across Many Tabs
This structure often leads to
errors and is difficult to check
Although these models can be easy to navigate,
they have other more important disadvantages. First, their structure requires a lot of linking
between tabs or worksheets. One issue with this
is that it is easier to make errors when connect-
Stack the schedules to link the
model quickly with fewer errors
We prefer stacking the schedules on top of one
another, as shown in Fig 21. In this diagram, we
are showing five pages or stacked schedules
within a single tab. A model with this structure
is preferred since it is much easier to connect
and check. Stacked schedules can be easily
connected by simply linking directly upwards or
downwards within the tab.
ing from one tab to another. This is why we often
corporatefinanceinstitute.com
30
Financial Modeling Guidelines
Profit Summary
Profit
Summary
All figures in
USD thousands unless stated
All figures in USD thousands unless stated
Revenue
Aligning Columns
2021A
2022A
2023F
2024F
2025F
2026F
2027F
Term
2021A
50,380
2022A
53,034
2023F
56,428
2024F
58,134
2025F
59,537
2026F
60,854
2027F
62,077
Term
62,700
48,318
50,380
53,034
56,428
58,134
59,537
60,854
62,077
62,700
19,834
41.0%
19,834
41.0%
12,193
25.2%
12,193
25.2%
9,233
19.1%
9,233
19.1%
20,569
40.8%
20,569
40.8%
11,996
23.8%
11,996
23.8%
9,193
18.2%
9,193
18.2%
20,817
39.3%
20,817
39.3%
11,083
20.9%
11,083
20.9%
8,176
15.4%
8,176
15.4%
26,091
46.2%
26,091
46.2%
16,065
28.5%
16,065
28.5%
11,897
21.1%
11,897
21.1%
27,235
46.8%
27,235
46.8%
16,959
29.2%
16,959
29.2%
12,577
21.6%
12,577
21.6%
28,181
47.3%
28,181
47.3%
17,699
29.7%
17,699
29.7%
13,098
22.0%
13,098
22.0%
29,071
47.8%
29,071
47.8%
18,431
30.3%
18,431
30.3%
13,609
22.4%
13,609
22.4%
29,900
48.2%
29,900
48.2%
19,101
30.8%
19,101
30.8%
14,052
22.6%
14,052
22.6%
30,323
48.4%
30,323
48.4%
19,362
30.9%
19,362
30.9%
14,062
22.4%
14,062
22.4%
2020A
2021A
2022A
2023F
2020A
365
2021A
365
2022A
365
Revenue Schedule
Revenue
Schedule
All figures in USD
thousands unless stated
All figures in USD thousands unless stated
Days in Period
Days in Period
365
2024F
2025F
2026F
2027F
Term
2023F
365
2024F
365
2025F
365
2026F
365
2027F
365
Term
365
365
365
365
365
365
365
365
365
2.5%
3.1%
3.3%
1.5%
1.2%
1.1%
1.0%
0.5%
0.5%
1,582
1,582
-
OPERATIONS
OPERATIONS
Sales Volume Growth
Sales Volume Growth
Sales Volume
Plant Capacity
Sales Volume
Operational Efficiency
Plant Capacity
Operational Efficiency
Stack schedules with their periods aligned
and use the keyboard
2020A
2020A
48,318
Revenue
Gross Profit
Gross Profit Margin
Gross Profit
Gross Profit Margin
EBITDA
EBITDA Margin
EBITDA
EBITDA Margin
EBIT
EBIT Margin
EBIT
EBIT Margin
(Units/Day)
1,374
2.5%
1,409
3.1%
1,452
3.3%
1,500
1.5%
1,523
1.2%
1,541
1.1%
1,558
1.0%
1,574
(Units/Day)
(Units/Day)
1,600
1,374
85.9%
1,600
85.9%
1,600
1,409
88.0%
1,600
88.0%
1,600
1,452
90.8%
1,600
90.8%
1,600
1,500
93.8%
1,600
93.8%
1,600
1,523
95.2%
1,600
95.2%
1,600
1,541
96.3%
1,600
96.3%
1,600
1,558
97.4%
1,600
97.4%
1,600
1,574
98.4%
1,600
98.4%
(Units/Day)
Page 1
VOLUME
VOLUME
Days in Period
Sales Volume
Days in Period
Sales Volume
Sales Volume
Sales Volume
365
365
365
365
365
365
365
365
365
1,374
365
501,490
1,374
501,490
1,409
365
514,139
1,409
514,139
1,452
365
530,136
1,452
530,136
1,500
365
547,630
1,500
547,630
1,523
365
555,845
1,523
555,845
1,541
365
562,515
1,541
562,515
1,558
365
568,703
1,558
568,703
1,574
365
574,390
1,574
574,390
1,582
365
577,262
1,582
577,262
(USD/Unit)
96.35
(USD/Unit)
96.35
1.7%
97.99
1.7%
97.99
2.1%
100.04
2.1%
100.04
3.0%
103.04
3.0%
103.04
1.5%
104.59
1.5%
104.59
1.2%
105.84
1.2%
105.84
1.1%
107.01
1.1%
107.01
1.0%
108.08
1.0%
108.08
0.5%
108.62
0.5%
108.62
501,490
96.35
501,490
48,318
96.35
48,318
514,139
97.99
514,139
50,380
97.99
50,380
530,136
100.04
530,136
53,034
100.04
53,034
547,630
103.04
547,630
56,428
103.04
56,428
555,845
104.59
555,845
58,134
104.59
58,134
562,515
105.84
562,515
59,537
105.84
59,537
568,703
107.01
568,703
60,854
107.01
60,854
574,390
108.08
574,390
62,077
108.08
62,077
577,262
108.62
577,262
62,700
108.62
62,700
(Units/Day)
(Units)
(Units/Day)
(Units)
PRICING
PRICING
Pricing Increases
Unit Price
Pricing Increases
Unit Price
REVENUE
It is also important to align the columns with schedule stacking.
Each period should be in its own dedicated column, so schedules
are stacked with their respective periods aligned. This is illustrated
in Fig 22 and 23 on the next page, where 2023 data is in the same
column for both figures. This ensures consistency and further facilities connecting the schedules. Using the keyboard, we can be sure
to stay in the same column by simply using the up or down arrows
to avoid linking to the wrong period. This allows the schedules to
be connected quickly with fewer linking errors.
REVENUE
Sales Volume
Sales Price
Sales Volume
Revenue
Sales Price
Revenue
(Units)
(USD/Unit)
(Units)
(USD/Unit)
Capacity Exceeded?
-
-
-
-
-
Capacity Exceeded?
-
-
-
-
-
Cost Schedule
Cost
Schedule
All figures
in USD thousands unless stated
2020A
FIXED COSTS
FIXED COSTS
Labour
Insurance
Labour
Utilities
Insurance
Subtotal
Utilities
Subtotal
Labour
Utilities
Labour
Insurance
Utilities
Subtotal
Insurance
Subtotal
SUMMARY
SUMMARY
Variable Costs
Fixed Costs
Variable
Costs
Total Costs
Fixed
Total Costs
Variable Costs
Fixed Costs
Variable
Costs
Total Costs
Fixed
Total Costs
(USD/Unit)
(USD/Unit)
(USD/Unit)
(USD/Unit)
The blue arrows on the next page show the precedents from the
COGS line in the Income Statement. A standard version of Excel
can only trace one precedent at a time. We have used the Show
All Precedents feature below from Macabacus, which is very
helpful for formula auditing.
A model with stacked schedules is much easier to check
(USD/Unit)
(USD/Unit)
(USD/Unit)
(USD/Unit)
(USD/Unit)
(USD/Unit)
in the example, when we trace precedents or dependents.
2024F
2024F
2025F
2026F
2025F
2026F
2027F
2027F
Term
Operat
Term
Operat
555,845
1.5%
555,845
1.5%
562,515
1.2%
562,515
1.2%
568,703
1.1%
568,703
1.1%
574,390
1.0%
574,390
1.0%
577,262
0.5%
577,262
0.5%
9.51
0.82
9.51
1.54
0.82
11.87
1.54
11.87
4,769
411
4,769
772
411
5,953
772
5,953
9.72
0.84
9.72
1.58
0.84
12.14
1.58
12.14
4,997
432
4,997
812
432
6,242
812
6,242
9.91
0.86
9.91
1.62
0.86
12.39
1.62
12.39
5,254
456
5,254
859
456
6,568
859
6,568
10.21
0.89
10.21
1.67
0.89
12.76
1.67
12.76
5,590
485
5,590
914
485
6,989
914
6,989
10.36
0.90
10.36
1.69
0.90
12.95
1.69
12.95
5,759
500
5,759
941
500
7,200
941
7,200
10.48
0.91
10.48
1.71
0.91
13.11
1.71
13.11
5,898
512
5,898
964
512
7,374
964
7,374
10.60
0.92
10.60
1.73
0.92
13.25
1.73
13.25
6,028
523
6,028
985
523
7,537
985
7,537
10.71
0.93
10.71
1.75
0.93
13.39
1.75
13.39
6,149
534
6,149
1,005
534
7,688
1,005
7,688
10.76
0.93
10.76
1.76
0.93
13.45
1.76
13.45
6,211
539
6,211
1,015
539
7,765
1,015
7,765
31.17
7.28
31.17
4.91
7.28
43.36
4.91
43.36
15,630
3,651
15,630
2,463
3,651
21,744
2,463
21,744
30.96
7.25
30.96
4.87
7.25
43.09
4.87
43.09
15,918
3,729
15,918
2,505
3,729
22,152
2,505
22,152
30.73
7.15
30.73
4.87
7.15
42.76
4.87
42.76
16,293
3,792
16,293
2,583
3,792
22,668
2,583
22,668
30.64
7.13
30.64
4.86
7.13
42.63
4.86
42.63
16,782
3,906
16,782
2,660
3,906
23,348
2,660
23,348
30.64
7.13
30.64
4.86
7.13
42.63
4.86
42.63
17,034
3,964
17,034
2,700
3,964
23,698
2,700
23,698
30.64
7.13
30.64
4.86
7.13
42.63
4.86
42.63
17,238
4,012
17,238
2,733
4,012
23,983
2,733
23,983
30.64
7.13
30.64
4.86
7.13
42.63
4.86
42.63
17,428
4,056
17,428
2,763
4,056
24,246
2,763
24,246
30.64
7.13
30.64
4.86
7.13
42.63
4.86
42.63
17,602
4,097
17,602
2,790
4,097
24,489
2,790
24,489
30.64
7.13
30.64
4.86
7.13
42.63
4.86
42.63
17,690
4,117
17,690
2,804
4,117
24,611
2,804
24,611
11.87
43.36
11.87
55.23
43.36
55.23
5,953
21,744
5,953
27,697
21,744
27,697
12.14
43.09
12.14
55.23
43.09
55.23
6,242
22,152
6,242
28,394
22,152
28,394
12.39
42.76
12.39
55.15
42.76
55.15
6,568
22,668
6,568
29,236
22,668
29,236
12.76
42.63
12.76
55.40
42.63
55.40
6,989
23,348
6,989
30,337
23,348
30,337
12.95
42.63
12.95
55.59
42.63
55.59
7,200
23,698
7,200
30,898
23,698
30,898
13.11
42.63
13.11
55.74
42.63
55.74
7,374
23,983
7,374
31,356
23,983
31,356
13.25
42.63
13.25
55.89
42.63
55.89
7,537
24,246
7,537
31,783
24,246
31,783
13.39
42.63
13.39
56.02
42.63
56.02
7,688
24,489
7,688
32,177
24,489
32,177
13.45
42.63
13.45
56.09
42.63
56.09
7,765
24,611
7,765
32,377
24,611
32,377
2021A
2021A
2.2%
2.2%
2022A
2022A
2.3%
2.3%
2023F
2023F
3.0%
3.0%
2024F
2024F
2.5%
2.5%
2025F
2025F
2.0%
2.0%
2026F
2026F
1.5%
1.5%
2027F
2027F
1.5%
1.5%
Term
Term
1.5%
1.5%
52,185
31,368
52,185
20,817
31,368
20,817
56,428
30,337
56,428
26,091
30,337
26,091
58,134
30,898
58,134
27,235
30,898
27,235
59,537
31,356
59,537
28,181
31,356
28,181
60,854
31,783
60,854
29,071
31,783
29,071
62,077
32,177
62,077
29,900
32,177
29,900
62,700
32,377
62,700
30,323
32,377
30,323
SG&A
Other
SG&A
EBITDA
Other
EBITDA
5,877
1,764
5,877
12,193
1,764
12,193
6,642
1,931
6,642
11,996
1,931
11,996
7,708
2,026
7,708
11,083
2,026
11,083
7,939
2,087
7,939
16,065
2,087
16,065
8,138
2,139
8,138
16,959
2,139
16,959
8,300
2,182
8,300
17,699
2,182
17,699
8,425
2,214
8,425
18,431
2,214
18,431
8,551
2,248
8,551
19,101
2,248
19,101
8,680
2,281
8,680
19,362
2,281
19,362
Depreciation
EBIT
Depreciation
EBIT
2,960
9,233
2,960
9,233
2,803
9,193
2,803
9,193
4,168
11,897
4,168
11,897
4,382
12,577
4,382
12,577
4,600
13,098
4,600
13,098
4,823
13,609
4,823
13,609
5,049
14,052
5,049
14,052
5,300
14,062
5,300
14,062
Interest
Interest
EBT
EBT
1,488
1,488
7,745
7,745
2,580
2,580
6,613
6,613
2,907
8,176
2,907
Page 2 of 5
8,176
Page 2 of 5
2,448
2,448
5,728
5,728
2,520
2,520
9,377
9,377
2,520
2,520
10,057
10,057
2,520
2,520
10,578
10,578
2,520
2,520
11,089
11,089
2,520
2,520
11,532
11,532
–
14,062–
14,062
Current Tax
Current Tax
Deferred
Tax
Deferred
Total
TaxTax
Total Tax
–
1,972–
1,972
1,972
1,972
–
1,526–
1,526
1,526
1,526
–
1,577–
1,577
1,577
1,577
–
2,344–
2,344
2,344
2,344
132
132
2,382
2,382
2,514
2,514
2,353
2,353
291
291
2,645
2,645
2,586
2,586
186
186
2,772
2,772
2,793
2,793
90
90
2,883
2,883
3,515
3,515–
3,515–
3,515
Net Income
Net Income
5,773
5,773
5,087
5,087
4,151
4,151
7,033
7,033
7,543
7,543
7,934
7,934
8,316
8,316
8,649
8,649
10,546
10,546
Page 3
Working Capital Schedule
Working Capital Schedule
2020A
2020A
All figures in USD thousands unless stated
All figures in USD thousands unless stated
Days in Period
Days in Period
Revenue
Revenue
COGS
COGS
2021A
2021A
2022A
2022A
2023F
2023F
2024F
2024F
2025F
2025F
2026F
2026F
2027F
2027F
365
365
50,380
50,380
28,394
28,394
365
365
53,034
53,034
29,236
29,236
365
365
56,428
56,428
30,337
30,337
365
365
58,134
58,134
30,898
30,898
365
365
59,537
59,537
31,356
31,356
365
365
60,854
60,854
31,783
31,783
365
365
62,077
62,077
32,177
32,177
365
365
62,700
62,700
32,377
32,377
43
43
24
24
40
40
46
46
25
25
41
41
46
46
25
25
41
41
45
45
60
60
40
40
45
45
55
55
40
40
45
45
50
50
40
40
45
45
45
45
40
40
45
45
45
45
40
40
45
45
45
45
40
40
TOTAL AMOUNTS
TOTAL
AMOUNTS
Accounts
Receivable
Accounts Receivable
Inventory
Inventory
Accounts Payable
Accounts Payable
5,708
5,708
1,792
1,792
3,024
3,024
6,333
6,333
1,923
1,923
3,205
3,205
6,624
6,624
2,009
2,009
3,319
3,319
6,957
6,957
4,987
4,987
3,325
3,325
7,167
7,167
4,656
4,656
3,386
3,386
7,340
7,340
4,295
4,295
3,436
3,436
7,503
7,503
3,918
3,918
3,483
3,483
7,653
7,653
3,967
3,967
3,526
3,526
7,730
7,730
3,992
3,992
3,548
3,548
NET WORKING CAPITAL
NET
WORKING
Current
AssetsCAPITAL
Current Liabilities
Assets
Current
Current
Liabilities
Net
Working
Capital
Net Working Capital
7,500
7,500
3,024
3,024
4,476
4,476
8,256
8,256
3,205
3,205
5,051
5,051
8,633
8,633
3,319
3,319
5,314
5,314
11,944
11,944
3,325
3,325
8,619
8,619
11,823
11,823
3,386
3,386
8,437
8,437
11,636
11,636
3,436
3,436
8,199
8,199
11,421
11,421
3,483
3,483
7,938
7,938
11,620
11,620
3,526
3,526
8,094
8,094
11,722
11,722
3,548
3,548
8,174
8,174
182
182
238
238
261
261
AMOUNTS PER DAY
AMOUNTS
DAY
Accounts PER
Receivable
Accounts
Inventory Receivable
Inventory Payable
Accounts
Accounts Payable
(Days)
(Days)
(Days)
(Days)
(Days)
(Days)
Page 4
Cash from Working Capital Items
Cash from Working Capital Items
Capital Expenditure
Capital Expenditure
EXISTING ASSET DEPRECIATION
EXISTING
DEPRECIATION
Useful Life:ASSET
Existing
Assets
UsefulatLife:
PP&E
endExisting
of 2022Assets
PP&E at end of 2022
NEW ASSET DEPRECIATION
NEW ASSET
DEPRECIATION
Useful
Life: New
Assets
Useful
Life:Accounting
New Assets
First Year
Depreciation
First Year Accounting Depreciation
(575)
(575)
(263)
(263)
2020A
2020A
2021A
2021A
2022A
2022A
2023F
2023F
2024F
2024F
2025F
2025F
2026F
2026F
2027F
2027F
4,982
4,982
5,199
5,199
4,100
4,100
4,223
4,223
4,329
4,329
4,415
4,415
4,481
4,481
4,549
4,549
Yr 1
Yr 1
100%
100%
Percent of Full Year
Percent
of Full
Yr
2
Yr 3Year
Yr 2
Yr 3
100%
100%
100%
100%
Yr 4
Yr 4
100%
100%
Yr 5
Yr 5
100%
100%
Yr 1
Yr 1
50%
50%
Percent of Full Year
Percent
of Full
Yr
2
Yr 3Year
Yr 2
Yr 3
100%
100%
100%
100%
Years
Years
16.00
16.00
65,000
65,000
Years
Years
20.00
20.00
50%
50%
Year
2023F
2024F
2025F
2026F
2027F
Year
2023F
2024F
2025F
2026F
2027F
(3,305)
(3,305)
Capex
4,223
4,329
4,415
4,481
4,549
Per Yr
211
216
221
224
227
TOTAL ASSET DEPRECIATION
Existing Assets
New Assets
Total Depreciation
(156)
(156)
Yr 4
Yr 4
100%
100%
Yr 5
Yr 5
100%
100%
2023F
50.0%
–
–
–
–
Percent of Full Year
Percent of Full Year
2024F
2025F
2026F
100.0%
100.0%
100.0%
50.0%
100.0%
100.0%
–
50.0%
100.0%
–
–
50.0%
–
–
–
2027F
100.0%
100.0%
100.0%
100.0%
50.0%
2023F
106
-
Amounts for Depreciation
2024F
2025F
2026F
211
211
211
108
216
216
110
221
112
-
2027F
211
216
221
224
114
4,063
106
4,168
4,063
319
4,382
4,063
986
5,049
Page 5
Page 3 of 5
Page 3 of 5
Life
20.00
20.00
20.00
20.00
20.00
4,063
538
4,600
4,063
760
4,823
Operatio
Operatio
Term
Term
365
365
48,318
48,318
27,697
27,697
(79)
(79)
Operati
Operati
Asset Schedule
All figures in USD thousands unless stated
check the model since we are expecting vertical arrows, as shown
2023F
50,601
30,032
50,601
20,569
30,032
20,569
Statement linked directly upwards to a Cost Summary in Fig 22.
tency between periods and columns. This makes it easy for us to
2023F
547,630
3.0%
547,630
3.0%
48,828
28,994
48,828
19,834
28,994
19,834
we’ve shown the cost of goods sold (COGS) line on the Income
This clearly illustrates the alignment in the model and the consis-
2022A
530,136
2.3%
530,136
2.3%
Revenue
COGS
Revenue
Gross Profit
COGS
Gross Profit
All figures in USD thousands unless stated
All figures in USD thousands unless stated
since most of the links are within the same worksheet. In Fig 23,
2022A
514,139
2.2%
514,139
2.2%
2020A
2020A
2.4%
2.4%
All figures in USD thousands unless stated
Inflation
Inflation
Depreciation Schedule
Depreciation Schedule
A model with stacked schedules is also much easier to check
2021A
501,490
2.4%
501,490
2.4%
Page 2
(USD/Unit)
(USD/Unit)
Income Statement
Income
Statement
All figures in USD thousands unless stated
Show All Precedents using Macabacus
helps with model auditing
2021A
2020A
All figures in USD thousands unless stated
Sales Volume
Inflation
Sales
Volume
Inflation
VARIABLE COSTS
VARIABLE COSTS
Materials
Packaging
Materials
Transportation
Packaging
Subtotal
Transportation
Subtotal
Materials
Packaging
Materials
Transportation
Packaging
Subtotal
Transportation
Subtotal
Capital Expenditure
Blended Tax Depreciation Rate
2021A
2022A
2023F
2024F
2025F
2026F
2027F
5,199
4,100
4,223
15.0%
4,329
15.0%
4,415
15.0%
4,481
15.0%
4,549
15.0%
Fig 21: Stacking the Schedules
First Year Tax Depreciation
50%
Property Plant & Equipment
Beginning
Capital Expenditure
Accounting Depreciation
Ending
65,000
65,000
4,223
(4,168)
65,055
65,055
4,329
(4,382)
65,002
65,002
4,415
(4,600)
64,816
64,816
4,481
(4,823)
64,475
64,475
4,549
(5,049)
63,975
Tax Basis
Beginning
Capital Expenditure
Tax Depreciation
Ending
40,000
40,000
4,223
(6,317)
37,906
37,906
4,329
(6,011)
36,224
36,224
4,415
(5,765)
34,875
34,875
4,481
(5,567)
33,789
33,789
4,549
(5,409)
32,928
Income Tax Schedule
2022A
All figures in USD thousands unless stated
Earnings Before Tax (EBT)
Profitable Before Taxes?
Tax Rate
corporatefinanceinstitute.com
2024F
2025F
2026F
2027F
Term
10,057
Yes
10,578
Yes
11,089
Yes
11,532
Yes
14,062
Yes
9,377
4,168
(6,317)
7,229
10,057
4,382
(6,011)
8,428
10,578
4,600
(5,765)
9,414
11,089
4,823
(5,567)
10,344
11,532
5,049
(5,409)
11,172
25.0%
Adjustment for Depreciation
EBT
Add: Accounting Depreciation
Less: Tax Depreciation
EBT After Adjustment
Adjustment for Tax Losses
2023F
9,377
Yes
Page 4 of 5
14,062
31
-
14,062
Operat
EBIT
Current Tax
Deferred
Interest Tax
Total Tax
EBT
19
8,176
–
1,577
2,448
1,577
5,728
11,897
–
2,344
2,520
2,344
9,377
12,577
132
2,382
2,520
2,514
10,057
13,098
2,353
291
2,520
2,645
10,578
13,609
2,586
186
2,520
2,772
11,089
14,052
2,793
90
2,520
2,883
11,532
Net Income
Current
Tax
Deferred Tax
Total Tax
4,151–
1,577
1,577
7,033–
2,344
2,344
7,543
132
2,382
2,514
7,934
2,353
291
2,645
8,316
2,586
186
2,772
8,649
2,793
90
2,883
Net Income
4,151
7,033
7,543
7,934
8,316
8,649
2022A
2023F
2024F
2025F
2026F
2027F
12.39
2022A
42.76
55.15
12.76
2023F
42.63
55.40
12.95
2024F
42.63
55.59
13.11
2025F
42.63
55.74
13.25
2026F
42.63
55.89
13.39
2027F
42.63
56.02
Fig 19:
Financial Modeling Guidelines
Cost Summary
All figures in USD thousands unless stated
19
COST SUMMARY
Fig 19:
Cost Summary
Costs
AllVariable
figures in USD
thousands unless stated(USD/Unit)
Fixed Costs
Total
Costs
COST
SUMMARY
(USD/Unit)
(USD/Unit)
Variable Costs
Costs
Variable
Fixed
Costs
Fixed Costs
Total
Total Costs
Costs
20
(USD/Unit)
(USD/Unit)
(USD/Unit)
Variable Costs
Total Costs
Fig
20:
Revenue
Gross Profit
Revenue
COGS
Gross Profit
FORMATTING
21
7,200
12.95
23,698
42.63
30,898
55.59
7,374
13.11
23,983
42.63
31,356
55.74
7,537
13.25
24,246
42.63
31,783
55.89
7,688
13.39
24,489
42.63
32,177
56.02
6,568
6,989
29,236
2022A
30,337
2023F
7,200
23,698
30,898
2024F
7,374
23,983
31,356
2025F
7,537
24,246
31,783
2026F
7,688
24,489
32,177
2027F
Selected Income Statement
52,185 Items
56,428
AllCOGS
figures in USD thousands unless stated
21
6,989
12.76
23,348
42.63
30,337
55.40
Fixed
22,668 Items
23,348
Fig
20:Costs Selected Income Statement
Fig 22: Cost Summary
All figures in USD thousands unless stated
20
6,568
12.39
22,668
42.76
29,236
55.15
29,236
2022A
22,949
30,337
2023F
26,091
58,134
30,898
2024F
27,235
59,537
31,356
2025F
28,181
60,854
31,783
2026F
29,071
62,077
32,177
2027F
29,900
52,185
29,236
22,949
56,428
30,337
26,091
58,134
30,898
27,235
59,537
31,356
28,181
60,854
31,783
29,071
62,077
32,177
29,900
Fig 21:
Selected Income Statement Items
Fig 21:
Selected Income Statement Items
Fig
23: Selected Income Statement Items
FORMATTING
corporatefinanceinstitute.com
32
Financial Modeling Guidelines
Freezing Panes
We prefer placing logos and model
checks into the frozen panes
It is common to use the freeze
panes option to display periods
In Fig 24 to the left, we have shown how frozen
panes can be used for corporate logos for brand-
When using a model with a tall stack of schedules,
ing purposes. More importantly, the frozen panes
it can be helpful to use the freeze panes option in
are a perfect spot to place a summary of the mod-
the View section of the Excel ribbon. While many
el checks so that they are always within view. The
model builders like to have the periods displayed
frozen panes can have a ‘Check Model’ alert indi-
in the frozen panes, we prefer to display the peri-
cating that at least one of the model checks has
ods at the top of each schedule. This allows us to
been tripped. We would then know to move to the
use the frozen panes for other purposes.
cover page to review the checks to see which one
had been tripped. In Fig 25 below, we have shown
a cover page with model checks summary.
Fig 24: Freezing Panes Showing Model Alerts
DCF Valuation Modeling
DCF Valuation Modeling
Table of Contents
Outputs
Table of Contents
Inputs
Model
Outputs
Inputs
Model
Strictly Confidential
Strictly Confidential
Model Checks
Incorrect Date Set for Valuation?
No
Incorrect Date Set for First Cash Flow?
Terminal Growth Rate Greater Than or Equal To WACC?
No
No
Model exceeding operational capacity?
Unused Tax Losses Remaining? (Levered Schedule)
Unused Tax Losses Remaining? (Unlevered Schedule)
Yes
No
No
Two UFCF Methods Different?
No
© 2015 to 2022 CFI Education Inc.
Model Checks
Incorrect Date Set for Valuation?
Incorrect Date Set for First Cash Flow?
Terminal Growth Rate Greater Than or Equal To WACC?
Model exceeding operational capacity?
Unused Tax Losses Remaining? (Levered Schedule)
Unused Tax Losses Remaining? (Unlevered Schedule)
Two UFCF Methods Different?
No
No
No
Yes
No
No
No
This Excel model is for educational purposes only and should not be used for any other reason. All content is Copyright material of CFI Education Inc.
All rights reserved. The contents of this publication, including but not limited to all written material, content layout, images, formulas, and code, are protected
under international copyright and trademark laws. No part of this publication may be modified, manipulated, reproduced, distributed, or transmitted in any
form by any means, including photocopying, recording, or other electronic or mechanical methods, without prior written permission of the publisher,
except in the case of certain noncommercial uses permitted by copyright law.
https://corporatefinanceinstitute.com/
Fig 25: Example of a Cover Page
© 2015 to 2022 CFI Education Inc.
This Excel model is for educational purposes only and should not be used for any other reason. All content is Copyright material of CFI Education Inc.
All rights reserved. The contents of this publication, including but not limited to all written material, content layout, images, formulas, and code, are protected
under international copyright and trademark laws. No part of this publication may be modified, manipulated, reproduced, distributed, or transmitted in any
form by any means, including photocopying, recording, or other electronic or mechanical methods, without prior written permission of the publisher,
except in the case of certain noncommercial uses permitted by copyright law.
https://corporatefinanceinstitute.com/
corporatefinanceinstitute.com
33
Financial Modeling Guidelines
Column & Row Consistency
Consistency across rows speeds
up the model build and review
A consistent column structure within each worksheet is imperative
A consistent column structure within
each worksheet is imperative
always strive to have consistent forAs we just discussed, we should always keepWe
theshould
use of
columns consistent within
mulas
across
within our
a single worksheet. For instance, if a certain column of arows
worksheet
is models.
used toBy this, we
As weshow
just discussed,
we should
always keep
that thebe
formulas
should be identical in a
information
for a specific
period, then mean
that should
kept consistent
the use
of columns
consistent within
single
through
the worksheet
fromatop
to bottom. Many
model
designers
take
a This
given row
all the
way acrosswill
from
left this
to right.
step further
to make
the structure
of all columns
thefaster
workbook
file
worksheet.
For instance,
if a certain
column of
makesacross
the model
to buildor
and
also easier
consistent.
This
means
that
the
information
for
a
certain
period
would
always
be
a worksheet is used to show information for a
to check. Empty columns between periods should
found in the same column regardless of which worksheet it was located in. While
specific period, then that should be kept consisalso be
As shown
Fig 26tobelow,
this is not as important as the consistency within
a avoided.
worksheet,
it caninhelp
avoidthe
tent through
the worksheet
from
top to
cells from the year 2022 to 2027 are all contigulinking errors
and can
speed
upbottom.
a model review.
Many model designers will take this a step fur-
ous. When we’re building the model, we only need
Consistency
acrossofrows
speeds
up the model
build
andinreview
ther to
make the structure
all columns
across
to build
formulas
for 2022 since we can easily
the workbook or file consistent. This means
copy them from left to right. When it is time for a
We should always strive to have consistent formulas across rows within our
team member to do a review, they also only need
models. By this, we mean that the formulas should be identical in a given row all
always be found in the same column regardless
review
onefaster
column.
the
column
the way across from left to right. This makesto
the
model
toOnce
build
and
alsowith 2022
of which
worksheet
it was
located
in. While
this
information
has
been
they
easier
to check.
Empty
columns
between
periods
should
also
bereviewed,
avoided.
Ascan check
is notshown
as important
consistency
within
in Fig as
XXthe
below,
the cells
from the year
to 2027
are the
all contiguous.
for2022
consistency
across
rows. This can save
When we’re
the linking
model,errors
we only need
to buildamounts
formulas
in forenabling
2022 since
a worksheet,
it canbuilding
help to avoid
enormous
of time,
them to
we
can
easily
copy
them
from
left
to
right.
When
it
is
time
for
a
team
member
to
and can speed up a model review.
focus on the structure of a single column instead
do a review, they also only need to review one column. Once the column with
of checking all columns of the model.
2022 information has been reviewed, they can
check for consistency across the
rows. This can save enormous amounts of time, enabling them to focus on the
structure of a single column instead of checking all columns of the model.
that the information for a certain period would
Fig 7:
Selected Income Statement Items
All figures in USD thousands unless stated
2022A
2023F
2024F
2025F
2026F
2027F
Revenue
52,185
56,428
58,134
59,537
60,854
62,077
COGS
29,236
30,337
30,898
31,356
31,783
32,177
Gross Profit
22,949
26,091
27,235
28,181
29,071
29,900
Row differences can be checked very quickly using the CTRL \ shortcut
Fig 26: Selected Income Statement Items
The previous diagram in Fig XX shows an area highlighted in blue. Let’s suppose
we have checked the 2023 formulas in the first column. We could select columns
across the blue area and check for row differences by selecting F5, Special, Row
Differences. If there were differences, then the cursor would move instantly to
the cells that were different. If there weren’t any differences, then we would see
corporatefinanceinstitute.com
the dialog box shown below in Fig XX. Row differences can also be checked with
34
Financial Modeling Guidelines
Row differences can be checked very
quickly using the CTRL \ shortcut
The visualization features in Excel can
help to locate anomalies in a model
The previous diagram in Fig 26 shows an area
Macabacus has a number of visualization features
highlighted in blue. Let’s suppose we have
that can greatly assist with model reviews. In Fig
checked the 2022 formulas in the first column.
28 on the next page, we have shown an example
We could select columns across the blue area and
of one of these visualizations called Formula Flow.
check for row differences by selecting F5, Special,
To produce this effect, we selected all the cells on
Row Differences. If there were differences, then
the income statement in the next page from 2023
the cursor would move instantly to the cells that
to 2027 and ran the Formula Flow function. We
were different. If there weren’t any differences,
can tell instantly from the uninterrupted horizon-
then we would see the dialog box shown below
tal line patterns that there is perfect consistency
in Fig 27. Row differences can also be checked
from left to right over this area. These visualiza-
with the keyboard using CTRL \. The shortcut for
tion effects can really help to highlight areas of
column differences is CTRL SHIFT \.
possible concern in a financial model.
Fig 27: Result With No Row Differences
corporatefinanceinstitute.com
35
model reviews. In Fig XX below, we have shown an example of one of these
visualizations called Financial
Formula Flow.Modeling
To produce this
effect, we selected all the cells
Guidelines
on the income statement below from 2023 to 2027 and ran the Formula Flow
function. We can tell instantly from the uninterrupted horizontal line patterns that
there is perfect consistency from left to right over this area. These visualization
effects can really help to highlight areas of possible concern in a financial model.
Fig 18:
Income Statement
All figures in USD thousands unless stated
Revenue
2022A
2023F
2024F
2025F
2026F
2027F
52,185
56,428
58,134
59,537
60,854
62,077
COGS
31,368
30,337
30,898
31,356
31,783
32,177
Gross Profit
20,817
26,091
27,235
28,181
29,071
29,900
7,708
7,939
8,138
8,300
8,425
8,551
SG&A
Other
EBITDA
2,026
2,087
2,139
2,182
2,214
2,248
11,083
16,065
16,959
17,699
18,431
19,101
Depreciation
2,907
4,168
4,382
4,600
4,823
5,049
EBIT
8,176
11,897
12,577
13,098
13,609
14,052
Interest
2,448
2,520
2,520
2,520
2,520
2,520
EBT
5,728
9,377
10,057
10,578
11,089
11,532
–
–
132
2,353
2,586
2,793
Deferred Tax
1,577
2,344
2,382
291
186
90
Total Tax
1,577
2,344
2,514
2,645
2,772
2,883
Net Income
4,151
7,033
7,543
7,934
8,316
8,649
Current Tax
Fig 28: Income Statement
corporatefinanceinstitute.com
36
Financial
Guidelines
Annual models are
usually Modeling
preferred for
their simplicity
Another important attribute to consider when discussing model
structure is its periodicity. This refers to the frequency of the intervals
in the model. As a part of the design process, we need to consider
mixingmodel.
the periodicity
Periodicity
whether to build a monthly, quarterly,Avoid
or annual
Annual
across
adjacent
columns
models are the most simple and are preferred unless there is a
Annual
models arereason
usuallywhy a quarterly or monthly model is necessary. For
compelling
preferred
for their
simplicity
As you can
imagine,companies
some models need
example,
quarterly
models may be needed
by public
in to
both basis.
quarterly
and annual estimates.
order to publish financial results on a include
quarterly
Similarly,
Another
important
attributemay
to consider
when
In order to meet
these
needs, models
are often
monthly
models
be required
for budgeting
and
financial
planning
discussing
model structure is its periodicity. This
designed with four quarters across adjacent colpurposes.
refers to the frequency of the intervals in the
umns, summing annual results in a fifth column
model.
As a part
of the design
process, we need
shown below
in Fig 29. Although this strucAvoid
mixing
the periodicity
across as
adjacent
columns
to consider whether to build a monthly, quar-
terly, or
model.
Annual models
the
Asannual
you can
imagine,
somearemodels
ture can be relatively common, it is not general-
ly recommended.
The issue
with thisand
structure
need
to include both
quarterly
most simple
and
are preferredIn
unless
there
a
annual
estimates.
order
toismeet
these
needs,
models
are
often
is that
the formulas
in the
fifth
annual column
compelling
reason with
why a four
quarterly
or monthly
designed
quarters
across adjacent
columns,
summing
will be different
than those
in the preceding
modelannual
is necessary.
For example,
quarterly
modresults
in a fifth
column
as shown
below in
Figprevents
XX. Although
four columns.
This
formulas from
els may
be needed
by public
in order
this
structure
cancompanies
be relatively
common,
it copied
is notleft
generally
being
to right across all columns and
to publish
financial results on
a quarterly
basis.this structure
recommended.
The
issue with
that
formulas
the
increasesisthe
timethe
required
to buildin
the
modSimilarly,
monthly
models
may be
required
for
fifth
annual
column
will
be different
than
those
in theit is
preceding
four
el. For
this reason,
recommended
to avoid
columns.
Thisplanning
prevents
formulas frommixing
beingthe
copied
leftintotabs.
right
across
budgeting
and financial
purposes.
periodicity
In the
example
all columns and increases the time required
tohave
build
model.Flow
Forfeature
below, we
runthe
the Formula
this reason, it is recommended to avoid
mixing
the periodicity
in tabs.
from
Macabacus,
which shows row
consistency
In the example below, we have run theacross
Formula
Flow
featurefor
from
the first
four columns
revenue and
Macabacus, which shows row consistency
across
the
first
four
COGS, but an inconsistency in the fifth.
columns for revenue and COGS, but an inconsistency in the fifth
Fig
9:
Quarterly & Annual Calculations
column.
All figures in USD thousands unless stated
Revenue
Q1
Q2
Q3
Q4
2022
13,046
13,046
13,046
13,046
52,185
COGS
7,842
7,842
7,842
7,842
31,368
Gross Profit
5,204
5,204
5,204
5,204
20,817
Fig 29: Quarterly & Annual Calculations
corporatefinanceinstitute.com
37
Financial Modeling Guidelines
Begin building the model with
the most granular periodicity
Another approach is to have one
quarterly and one annual tab
When quarterly and annual figures are needed, it
Another approach that also works well involves
is best to place these figures in completely sepa-
using a dedicated tab for quarterly figures and
rate areas of the model. This can be done inside
another one for annual figures. The tab structure
one worksheet or tab, as shown below in Fig 30.
for a model like this may look similar to what is
In this example, we have built the logic using the
shown below in Fig 31. The first step would be to
most granular periodicity on the right, which is
build the entire model on the Quarterly tab. This
quarterly. Then, on the left, we have aggregated
follows our earlier guidance that we should always
the amounts up to show the annual figures. This
begin the build with the most granular periodicity.
approach provides a clear separation between
the quarterly
and annual
amounts,
is needBegin building
the model
withwhich
the most
granular periodicity
ed to avoid inadvertent copying of the formulas
When quarterly and annual figures are needed, it is best to place
these figures in completely separate areas of the model. This can be
done inside one worksheet or tab, as shown below in Fig XX. In this
example, we have built the logic using the most granular periodicity
Fig 31: Separate Quarterly and Annual Tabs
on the right, which is quarterly. Then, on the left, we have aggregated
the amounts up to show the annual figures. This approach provides a
clear separation between the quarterly and annual amounts, which is
needed to avoid inadvertent copying of the formulas across from one
section to another.
across from one section to another.
Fig 12:
Annual & Quarterly Periodity
2022
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
2023
2022
2022
2022
2022
2023
2023
2023
2023
14,986
Revenue
53,772
58,204
13,046
13,307
13,573
13,845
14,122
14,404
14,692
COGS
32,322
34,986
7,842
7,999
8,159
8,322
8,488
8,658
8,831
9,008
Gross Profit
21,450
23,218
5,204
5,308
5,415
5,523
5,633
5,746
5,861
5,978
All figures in USD thousands unless stated
Another approach is to have one quarterly and one annual tab
Another
that also
works well involves using a dedicated tab
Fig 30:
Annualapproach
& Quarterly
Periodicity
for quarterly figures and another one for annual figures. The tab
structure for a model like this may look similar to what is shown below
in Fig XX. The first step would be to build the entire model on the
Quarterly tab. This follows our earlier guidance that we should always
begin the build with the most granular periodicity.
Fig 10.
Separate Quarterly and Annual Tabs
corporatefinanceinstitute.com
38
Financial Modeling Guidelines
A Quarterly tab can be copied to produce an Annual one
The Quarterly tab would only have
consecutive quarterly periods
A Quarterly tab can be copied
towould
produce
an Annual
tab
look
below one
in Fig XX.
We’ve shown how such a Quarterly
With only quarterly information, the formulas will be easy to copy
In this example,
theto
Quarterly
tab
would only
We’ve
shown
how
suchof
a Quarterly
from left
right to
ensure
consistency.
Once
the
build
this tabtab
is would
have consecutive
quarters
any copied
annual to produce
look in Fig
below. With
inforcomplete,
then without
it can be
an32Annual
tab,only
as quarterly
shown in
sums. This
where the majority of time will be
mation, the formulas will be easy to copy from
Fig is
XX.
spent on the model build. With only quarterly
left to right to ensure consistency. Once the build
estimates,
could
behas
easilyonly
copiedformulas
across
of this tab
is complete, then
it can be copied to
Theformulas
Annual
tab
since
it aggregates
information
from left to right, which saves time and ensures
produce an Annual tab, as shown in Fig 33.
consistency.
If a different
required
monthBy copying
themodel
Quarterly
tab
to produce
the Annual tab, we ensure
ly estimates,
then structure
the model would
be built
that the
of each
tabonis identical from top to bottom. One
difference
between
the two
tabs in terms of structure is the
a Monthly
tab. As discussed,
the build
should
other
difference
is that the Annual tab should only
alwaysperiodicity.
be done in the The
tab that
has the
most
include
formulas that are aggregating figures from the Quarterly tab.
granular
periodicity.
Using SUMIF or SUMIFS functions in the Annual tab for aggregation
generally works quite well. Below in Fig XX, we can see only black font
in the Annual tab, indicating that it only has formulas used for
aggregation of quarterly results.
Fig 10:
Revenue
Quarterly Periodity
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
2022
2022
2022
2022
2023
2023
2023
2023
13,046
13,307
13,573
13,845
14,122
14,404
14,692
14,986
COGS
7,842
7,999
8,159
8,322
8,488
8,658
8,831
9,008
Gross Profit
5,204
5,308
5,415
5,523
5,633
5,746
5,861
5,978
All figures in USD thousands unless stated
Fig
11: Periodicity
Annual
Fig 32:
Quarterly
Periodity
2022
2023
2024
2025
Revenue
53,772
58,204
63,002
68,195
COGS
32,322
34,986
37,870
40,992
Gross Profit
21,450
23,218
25,132
27,204
corporatefinanceinstitute.com
39
complete, then it can be copied to produce an Annual tab, as shown in
Financial Modeling Guidelines
Fig XX.
The Annual tab has only formulas since it aggregates information
By copying the Quarterly tab to produce the Annual tab, we ensure
that the
of each tab is identical
from top
to bottom.
One
The Annual
tab structure
has only formulas
Considering
periodicity
is a part
since it
aggregatesbetween
information
of getting
the right level
of detail
difference
the two tabs in terms
of structure
is the
periodicity. The other difference is that the Annual tab should only
include
formulas
that
are the
aggregatingSeparating
figuresQuarterly
from the
tab.
By copying
the Quarterly
tab to
produce
andQuarterly
Annual information
or the
SUMIFS
functions
in the
Annual
tab
aggregation
AnnualUsing
tab, we SUMIF
ensure that
structure
of each
either
within one
tabfor
or across
two tabs is highly
generally
quite One
well.
Below in recommended.
Fig XX, we can
seebeing
onlyeasier
black
font
tab is identical
fromworks
top to bottom.
differBesides
and
faster
in the the
Annual
tab,
indicating
that it only
hasitformulas
used
ence between
two tabs
in terms
of structure
to build,
is also less likely
to for
lead to issues with
aggregation
of quarterly
is the periodicity.
The other
difference isresults.
that the
formula consistency. There is considerably more
Annual tab should only include formulas that are
work involved with building a model that shows
aggregating figures from the Quarterly tab. Using
more than one periodicity, like this example with
SUMIF or SUMIFS functions in
the Annual
tab for Q3
Q1
Q2
aggregation generally works
quite well.
On the 2022
2022
2022
Quarterly
and Annual
figures.
So, careful
conQ4
Q1
Q2
Q3
Q4
Annual tab, indicating that it only has formulas
Similarly, a team would want to make sure that
13,046
13,307
used Revenue
for aggregation of quarterly
results.
13,845 information
14,122
14,986
monthly
is14,404
needed 14,692
before begin-
Fig 10:
Quarterly Periodity
below in Fig 33, we can see only black font in the
13,573
COGS
7,842
7,999
8,159
Gross Profit
5,204
5,308
5,415
sideration
is recommended
to make
sure that
2022
2023
2023
2023
2023
the quarterly information is absolutely needed.
8,322
8,488
8,658
9,008
ning
the process
of building
a tab8,831
with monthly
5,523
5,633
5,746
5,861
5,978
periodicity. Finding the right level of detail for a
model is very important and thinking about the
All figures in USD thousands unless stated
periodicity is a part of this process.
Fig 11:
Annual Periodity
2022
2023
2024
2025
Revenue
53,772
58,204
63,002
68,195
COGS
32,322
34,986
37,870
40,992
Gross Profit
21,450
23,218
25,132
27,204
All figures in USD thousands unless stated
Considering periodicity is a part of getting the right level of detail
Fig 33: Annual Periodicity
Separating Quarterly and Annual information either within one tab or
across two tabs is highly recommended. Besides being easier and
faster to build, it is also less likely to lead to issues with formula
consistency. There is considerably more work involved with building a
corporatefinanceinstitute.com
model that shows more than one periodicity, like this example with
Quarterly and Annual figures. So, careful consideration is
40
Financial Modeling Guidelines
Modularity & Schedules
All major calculations in a model
should be done inside of schedules
We frequently use borders to separate
the items entering and exiting
In Fig 34, we are using the Days in Period, Reve-
We have discussed the recommended design
nue, and COGS in calculations to determine the
and structure for financial models in quite a bit
line at the bottom labeled as Cash from Working
of detail already. As noted earlier in the design
Capital Items. While it’s true that we also have
process, building blocks for models can include
some inputs in the middle of this schedule, the
dashboards, financial statements, or model
main function of the central section is to perform
schedules. While a financial model can include
our calculations. As we can see below in Fig 34,
many types of building blocks, it is the model
we frequently use borders to separate the top
schedules that truly make up the engine of a
items which are entering and the bottom items
financial model. The schedules also typically
which are exiting.
outnumber the dashboards and financial statements by a large margin. In fact, schedules make
up the bulk of a typical model and contain all the
important calculations that take us from inputs
through to outputs.
Many builders attempt to make
financial models too compact
In the previous example, the Cash from Working
Capital Items line at the bottom of the Working
All schedules should have three main
sections to keep things organized
Capital Schedule may flow into the company’s
In fact, the primary purpose of a schedule is to
shown previously in the Working Capital Sched-
perform calculations. Schedules have three main
ule into one line on the Cash Flow Statement.
parts, as shown on the next page in Fig 34, which
While they may be making the model more com-
uses an example of a Working Capital Sched-
pact by not including an entire Working Capital
ule. There is typically a section at the top where
Schedule, they are creating a model that is less
figures enter the schedule, then a central section
transparent and more difficult to understand.
Cash Flow Statement. In an effort to save space,
model builders may load all the calculations
where we calculate, followed by bottom items
that exit.
corporatefinanceinstitute.com
41
In fact, the primary purpose
of a schedule
is to perform
calculations. Schedules
Financial
Modeling
Guidelines
have three main parts, as shown below in Fig XX, which uses an example of a
Working Capital Schedule. There is typically a section at the top where figures
enter the schedule, then a central section where we calculate, followed by
bottom items that exit.
Fig 18:
Structure of a Schedule
All figures in USD thousands unless stated
Days in Period
Revenue
COGS
2022A
2023F
2024F
2025F
2026F
365
365
365
365
365
53,034
29,236
56,428
30,337
58,134
30,898
59,537
31,356
60,854
31,783
ENTER
AMOUNTS PER DAY
Accounts Receivable
(Days)
46
45
45
45
45
Inventory
(Days)
25
25
25
25
25
Accounts Payable
(Days)
41
40
40
40
40
TOTAL AMOUNTS
Accounts Receivable
6,624
6,957
7,167
7,340
7,503
Inventory
2,009
2,078
2,116
2,148
2,177
Accounts Payable
3,319
3,325
3,386
3,436
3,483
Current Assets
8,633
9,035
9,283
9,488
9,680
Current Liabilities
Net Working Capital
3,319
5,314
3,325
5,710
3,386
5,897
3,436
6,052
3,483
6,196
CALCULATE
NET WORKING CAPITAL
Cash from Working Capital Items
(396)
(187)
(154)
(145)
EXIT
We frequently use borders to separate the items entering and exiting
In Fig XX above, we are using the Days in Period, Revenue, and COGS in
calculations to determine the line at the bottom labeled as Cash from Working
Capital Items. While it’s true that we also have some inputs in the middle of this
schedule, the main function of the central section is to perform our calculations.
As we can see in the example above, we frequently use borders to separate the
top items which are entering and the bottom items which are exiting.
Fig 34: Structure of a Schedule
corporatefinanceinstitute.com
42
Financial Modeling Guidelines
Schedules provide the space needed to
make calculations clear and simple
A better approach is to create a Working Capital Schedule, as shown previously in Fig 34.
This schedule is dedicated to performing all the
necessary calculations for the working capital
items. This approach gives the model builder the
required space to break calculations into small
Although this type of stacking is preferred, navigation is one of the challenges that we will face
with this type of structure. Thankfully, there are
a few techniques that can help to ensure that users can easily locate and navigate to the various
schedules within a tall stack.
Many model designers set up navigational
columns to locate schedules
formulas and simple steps that others can easily
The first and most obvious technique which can
understand. Once all the steps have been shown
be used to navigate a tall stack of schedules is the
to arrive at the Cash from Working Capital Items
page up and page down buttons on a keyboard.
line at the bottom, this line can simply be linked
This is generally where many modelers would
into the company’s Cash Flow Statement. This ap-
start in terms of this type of navigation. We can
proach to spacing out calculations inside of sched-
also set up a navigational column on the left side
ules is critically important in model building.
of the model. On the next page in Fig 35 and 36,
Navigational Columns
There are a few techniques to help
navigate a tall stack of schedules
we have included a navigational column on the
left side. The stops for the navigational column
are shaded in blue and marked with a white X.
This allows users to use the CTRL key with the up/
down arrows to travel and stop at each schedule
in the model. Setting the navigational column
We understand now that schedules play a critical
up as Column A is very convenient since one can
and prominent role inside of financial models. It
simply tap the Home button to jump to Column A
is also preferred to stack a number of schedules
in order to begin navigating up or down.
on top of one another inside a single tab. As discussed previously, this allows for linking within
one tab and minimizes the amount of linking
Some model builders set up Custom
Views to navigate to each schedule
across from one tab to another. This makes the
model faster to build and also easier to check.
corporatefinanceinstitute.com
43
Financial Modeling Guidelines
NAVIGATION
12
Fig 12:
Cost Summary
All figures in USD thousands
x
Fixed Costs
Fig
12:Costs
Total
(USD/Unit)
(USD/Unit)
Cost Summary
(USD/Unit)
All figures in USD thousands
x
Variable Costs
Fixed Costs
COST SUMMARY
Total Costs
Variable Costs
Fixed Costs
Fig
13:Costs Gross
Total
13
(USD/Unit)
(USD/Unit)
Profit
(USD/Unit)
All figures in USD thousands
Fig
Variable Costs
Costs
35:x CostFixed
Summary
Revenue
Total Costs
COGS
Gross Profit
13
Fig 13:
2024F
2025F
2026F
2027F
12.39
42.76
55.15
12.76
42.63
55.40
12.95
42.63
55.59
13.11
42.63
55.74
13.25
42.63
55.89
13.39
42.63
56.02
2022A
6,568
22,668
29,236
2023F
6,989
23,348
30,337
2024F
7,200
23,698
30,898
2025F
7,374
23,983
31,356
2026F
7,537
24,246
31,783
2027F
7,688
24,489
32,177
12.39
42.76
55.15
12.76
42.63
55.40
12.95
42.63
55.59
13.11
42.63
55.74
13.25
42.63
55.89
13.39
42.63
56.02
2022A
6,568
22,668
52,185
29,236
31,368
20,817
2023F
6,989
23,348
56,428
30,337
30,337
26,091
2024F
7,200
23,698
58,134
30,898
30,898
27,235
2025F
7,374
23,983
59,537
31,356
31,356
28,181
2026F
7,537
24,246
60,854
31,783
31,783
29,071
2027F
7,688
24,489
62,077
32,177
32,177
29,900
2022A
2023F
2024F
2025F
2026F
2027F
Gross Profit
All figures in USD thousands
x
2023F
COST SUMMARY
NAVIGATION
Variable Costs
12
2022A
Revenue
COGS
Gross Profit
52,185
31,368
20,817
56,428
30,337
26,091
58,134
30,898
27,235
59,537
31,356
28,181
60,854
31,783
29,071
62,077
32,177
29,900
Fig 36: Gross Profit
corporatefinanceinstitute.com
44
Financial Modeling Guidelines
There are a few issues with Custom Views to note.
Excel also has a feature called Custom Views which
First, many users are not familiar with them and
can be set up in order to get to the various sched-
may not realize that they have been set up in the
ules within a model. Custom Views can be found
model. For this reason, this feature may go unno-
in the View menu or activated using the ALT WC or
ticed by many people accessing the model. Al-
ALT VV shortcut. The Custom Views dialogue box is
though Custom Views are quite fast and efficient
shown in Fig 37 below. As indicated below, we can
to set up and use with the keyboard, they are not
add a view for one of the financial statements.
as convenient or obvious for those using a mouse.
Many users are not familiar with Custom
Views and may not notice them
Custom Views do not adjust properly
to row insertions or deletions
Fig 37: Using Custom Views for Schedules
corporatefinanceinstitute.com
45
Financial Modeling Guidelines
Another more concerning issue with Custom
Views is that they don’t adjust to row insertions
or deletions. Inserting rows at the top of a tab
would move all Custom Views below to improper
Row Grouping
We prefer to use row grouping together
with a navigational column
locations. For this reason, Custom Views do not
work very well in a model that is still being built,
Our preferred technique for navigation through a
where rows may be inserted or deleted.
tall stack of schedules involves row grouping and
a navigational column. We have shown an ex-
Another issue with Custom Views is
that they always sort alphabetically
ample on the next page in Fig 38 with some row
grouping on the left hand side. We have placed
an ‘x’ in Column A to illustrate the stops in the
Another issue with using Custom Views for
navigational column. In practice, we would use a
schedules is that they always list in alphabetical
space in place of all the ‘x’ characters as it is in-
order instead of by their location in the stack.
visible but still provides a stop in the navigational
Some users will get around this deficiency by
column. With all the row grouping expanded, it is
preceding the name of the view with a number.
easy to navigate up and down through the model
The number would be associated with the or-
using the navigational column.
der that the schedule occurs in the stack. This
approach helps, but it also means adjusting the
numbering system when subsequent schedules
Collapsing the row groupings provides
us with a table of contents to use
are added to the stack.
In Fig 39 on page next page, we have shown the
model with the row groupings collapsed. The key
takeaway here is that the headings for each schedule are now acting like a Table of Contents. With
the row groupings collapsed, we can see a clear list
of all the schedules in the tab, which is very helpful
for navigation. Also, with the spaces inserted in the
navigational column, we can quickly move to the
correct schedule using the CTRL key and the up
and down arrows. This allows for quick and efficient navigation to the targeted schedule.
corporatefinanceinstitute.com
46
Gross Profit MarginGross Profit Margin
EBITDA
EBITDA Margin
EBIT
EBIT Margin
41.0%
40.8% 41.0% 39.3% 40.8% 46.2% 39.3% 46.8% 46.2% 47.3
EBITDA
12,193
11,99612,19311,08311,99616,06511,08316,95916,06517,6
Financial
Modeling Guidelines
EBITDA Margin
25.2%
23.8% 25.2% 20.9% 23.8% 28.5% 20.9% 29.2% 28.5% 29.7
EBIT
EBIT Margin
9,233
19.1%
9,193 9,233 8,176 9,19311,897 8,17612,57711,89713,0
18.2% 19.1% 15.4% 18.2% 21.1% 15.4% 21.6% 21.1% 22.0
501,490
2.4%
2020A
514,139
501,490530,136
514,139547,630
530,136555,845
547,6305
2.2% 2.4% 2.3% 2.2% 3.0% 2.3% 1.5% 3.0%
2021A2020A 2022A2021A 2023F2022A 2024F 2023F 202
Sales
VolumeSchedule
Sales
VolumeSchedule
Revenue
Revenue
Inflation
Inflation
All figures in USD thousands
All figures
unlessinstated
USD thousands unless stated
VARIABLE COSTS VARIABLE COSTS
X Days
Profit
Summary
in Period
Days in Period
365
365
365
365
365
365
365
365
365
3
Packaging
Packaging
(USD/Unit)
OPERATIONS
OPERATIONS
Revenue
Transportation
Transportation (USD/Unit)
Subtotal
Subtotal
Sales Volume Growth
Sales Volume Growth
2020A
2024F
2025F
(USD/Unit)
9.51 2021A 9.72 2022A
9.51
9.912023F
9.72 10.21
9.91 10.36
10.21
(USD/Unit)
0.82
0.84 0.82
0.86 0.84
0.89 0.86
0.90 0.89
48,318
56,428
58,134
59,537
(USD/Unit)
1.54 50,380 1.5853,034
1.54
1.62
1.58
1.67
1.62
1.69
1.67
11.87
12.1411.87 12.3912.14 12.7612.39 12.9512.76
2.5%
3.1% 2.5% 3.3% 3.1% 1.5% 3.3% 1.2
Gross
Profit
Materials
Materials
Sales Volume
Sales Volume (Units/Day)
Gross
Profit Margin Packaging
Packaging
Plant Capacity
Plant Capacity(Units/Day)
Transportation
Transportation
Operational Efficiency
Operational Efficiency
EBITDA
Subtotal
Subtotal
EBITDA Margin
19,8344,769
(Units/Day)
1,374
41.0% 411
(Units/Day)
1,600
772
85.9%
12,193
5,953
25.2%
All
figures in USD thousands
unless stated
Materials
Materials
EBIT
EBIT Margin
FIXED
COSTS
VOLUME
(USD/Unit)
9,233
19.1%
FIXED
COSTS
VOLUME
Days in Period
Labour
Days in Period (USD/Unit)
Labour
20,569 4,99720,817
26,091
27,235
28,181
4,769
5,254
4,997
5,590
5,254
5,590
1,409 1,374
1,452
1,409
1,500
1,452
1,5235,759
1,500
1,5
40.8% 432 39.3%
46.2%
46.8%
47.3%485
411
456
432
485
456
500
1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,6
772
914 859
941 96.3
914
88.0%812
85.9%
90.8%859
88.0%812
93.8% 90.8%
95.2% 93.8%
11,996
16,065
16,959
17,699
6,24211,083
5,953 6,568
6,242 6,989
6,568 7,200
6,989
23.8%
20.9%
28.5%
29.2%
29.7%
9,193
18.2%
8,176
15.4%
11,897
21.1%
12,577
21.6%
13,098
22.0%
365
365
365
365
3
30.96365
31.17 365
30.73
30.96365
30.64
30.7336530.64
30.64
1,409
1,374
1,4527.15
1,409
1,5007.13
1,4527.15
1,523 7.13
1,5007.13
1,5
7.25
7.28
7.25
Sales
Sales
(Units)
501,490
(Units) 4.91 2021A
514,139
501,490
530,136
514,139
547,630
555,845
562,5
Utilities
Utilities
(USD/Unit)
(USD/Unit)
4.87 2022A
4.91
4.872023F
4.87 530,136
4.86
4.87 547,630
4.86
4.86
All
figuresVolume
in USD thousands
unlessVolume
stated
2020A
2024F
2025F
Subtotal
Subtotal
43.36
43.0943.36 42.7643.09 42.6342.76 42.6342.63
Profit
Summary
Profit Summary
Days in Period
365
365
365
365
365
365
PRICING
PRICING
Labour
Labour
15,630
15,918
15,630
16,293
15,918
16,782
16,293
17,034
16,782
All figures in USD thousands
All figures
unlessinstated
USD thousands unless stated
2020A
2021A2020A 2022A2021A 2023F2022A 2024F 2023F 202
Utilities
Utilities
3,651
3,7293,651 3,7923,729 3,9063,792 3,9643,906
Pricing Increases Pricing Increases
1.7%
2.1% 1.7% 3.0% 2.1% 1.5% 3.0% 1.2
OPERATIONS
Insurance
Insurance
2,463
2,5052,463
2,583
2,505
2,660
2,583
2,660
Revenue
Revenue
48,318
50,380
53,034
50,380
56,428
53,034
58,1342,700
56,428
59,5
Unit Price
Unit Price
(USD/Unit)
(USD/Unit)
96.35
97.9948,318
96.35100.04
97.99103.04
100.04
104.59
103.04
105.
Subtotal
Subtotal
21,744
22,152
21,744 22,668
22,152 23,348
22,668 23,698
23,348
Sales Volume Growth
2.5%
3.1%
3.3%
1.5%
1.2%
X Revenue
Schedule
Sales Volume
Sales Volume
Insurance
Insurance
365
(USD/Unit)
31.17
(Units/Day)
1,374
(USD/Unit)
7.28
(Units/Day)
(USD/Unit)
Fig 38: Expanded Row Grouping
Gross
Profit
Gross
Profit
19,834
20,56919,83420,81720,56926,09120,81727,23526,09128,1
REVENUE
REVENUE
Sales Volume
(Units/Day)
1,374
1,409
1,452
1,500
1,523
1,541
Gross Profit MarginGross Profit Margin
41.0%
40.8% 41.0% 39.3% 40.8% 46.2% 39.3% 46.8% 46.2% 47.3
Plant Capacity
(Units/Day)
1,600
1,600
1,600
1,600
1,600
1,600
SUMMARY
SUMMARY
Sales
VolumeEfficiency
Sales Volume (Units)
501,490
(Units)
514,139
501,490
530,136
514,139
547,630
530,136
555,845
547,630
562,5
Operational
85.9%
88.0%
90.8%
93.8%
95.2%
96.3%
EBITDA
EBITDA
12,193
11,996
11,08311,996
16,065100.04
11,083104.59
16,959103.04
16,065105.
17,6
Sales Price
Sales Price
(USD/Unit)
(USD/Unit)
96.35
97.9912,193
96.35100.04
97.99103.04
EBITDA
Margin
Margin
25.2%
23.8%
25.2%
20.9%
23.8%
28.5%
20.9%
29.2%12.95
28.5%
29.7
Variable
Costs EBITDA
Variable
Costs (USD/Unit)
(USD/Unit)
11.87
12.14
11.87
12.39
12.14
12.76
12.39
12.76
Revenue
Revenue
48,318
50,380
48,318
53,034
50,380
56,428
53,034
58,134
56,428
59,5
Fixed Costs
Fixed Costs
(USD/Unit)
(USD/Unit)
43.36
43.0943.36 42.7643.09 42.6342.76 42.6342.63
EBIT
EBIT
9,233
9,193
9,233
8,176
9,193
11,897
8,176
12,57755.59
11,897
13,0
Total Costs
Total Costs
(USD/Unit)
(USD/Unit)
55.23
55.23
55.23
55.15
55.23
55.40
55.15
55.40
EBIT
Margin
EBIT
Margin
19.1%
18.2%
19.1%
15.4%
18.2%
21.1%
15.4%
21.6%
21.1%
Capacity
-22.0
VOLUME Exceeded?Capacity Exceeded?
Profit
Summary
Profit
Summary
Variable Costs
Variable Costs
5,953
6,2425,953 6,5686,242 6,9896,568 7,2006,989
Costs
Costs
21,744
22,152
21,744
22,668
22,152
23,348
22,668
23,698
23,348
AllFixed
figuresin
inPeriod
USD thousands
AllFixed
figures
unless
instated
USD thousands unless stated
2020A
2021A
2020A
2022A
2021A
2023F
2022A
2023F
Days
365
365
365
365
3652024F
365202
Total
CostsSchedule
Total CostsSchedule
27,697 1,40928,394
27,697
28,394
29,236 30,898
30,337
Revenue
Revenue
Sales Volume
(Units/Day)
1,374
1,452 29,236
1,500 30,337
1,523
1,541
(Units) unless stated501,490
530,136
547,630
555,845
562,515
Revenue
Revenue
48,318
50,380
48,318
53,034
50,380
56,428
53,034
58,134
56,428
AllSales
figuresVolume
in USD thousands
All figures
unlessinstated
USD thousands
2020A 514,139
2021A
2020A
2022A
2021A
2023F
2022A
2024F
2023F59,5
202
Cost ScheduleCost Schedule
Days
in Period
Days
in Period
All figures
in USD thousands
All figures
unless
instated
USD thousands unless stated
365
365 2020A
365 2022A
365 2021A
365 2023F
365 2022A
365 2024F
365 2023F
365 202
3
2020A
2021A
19,834
20,56919,83420,81720,56926,09120,81727,23526,09128,1
Gross Profit MarginGross Profit Margin
41.0%
40.8% 41.0% 39.3% 40.8% 46.2% 39.3% 46.8% 46.2% 47.3
AllPricing
figures in
USD thousands
All figures
unless
in USD
stated
thousands unless stated
2020A 1.7% 2021A
2020A
2021A
2022A 2024F
2023F
Increases
2.1% 2022A
3.0% 2023F
1.5%
1.2%
OPERATIONS
OPERATIONS
EBITDA
EBITDA
12,193
11,99612,193
11,08311,996
16,06511,083
16,95916,065
17,6
Unit Price
(USD/Unit)
96.35
97.99
100.04
103.04
104.59
105.84
Inflation
Inflation
2.4%
2.2%
2.4%
2.3%
2.2%
3.0%
2.3%
2.5%
3.0%
EBITDA
Margin
EBITDA
Margin
25.2%
23.8%
25.2%
20.9%
23.8%
28.5%
20.9%
29.2%
28.5%
Sales Volume Growth
Sales Volume Growth
2.5%
3.1% 2.5% 3.3% 3.1% 1.5% 3.3% 29.7
1.2
Gross
Profit Statement
Gross Profit Statement
PRICING
Income
Income
Fig 39: CollapsedEBIT
Row
EBIT
REVENUE
Sales Grouping
Volume
Sales Volume
(Units/Day)
EBIT
Margin
EBIT
Margin
Revenue
Plant
Capacity Revenue
Plant
Capacity(Units/Day)
Sales VolumeEfficiency
(Units)
COGS
COGS
Operational
Operational Efficiency
SalesProfit
Price
Gross
Gross Profit (USD/Unit)
Revenue Schedule
Revenue
Revenue Schedule
9,193 1,374
9,233 1,452
8,176 1,409
9,19311,897
8,17612,577
1,409
1,500 1,452
1,52311,897
1,50013,0
1,5
18.2%
19.1%
15.4%
18.2%
21.1%
15.4%
21.6%
21.1%
22.0
50,601
48,828
52,185
50,601
56,428
52,185
58,134
56,428
1,600
1,600
1,600
1,600
1,600
1,600
1,600
1,600
1,6
501,490
530,136
547,630
555,845
562,515
28,994514,139
30,032
28,994
31,368
30,032
30,337
31,368
30,898
30,337
85.9%
88.0%
85.9%
90.8%
88.0%
93.8%
90.8%
95.2%
93.8%
96.3
96.35
100.04 20,817
103.04
104.59
105.84
19,834 97.9920,569
19,834
20,569 26,091
20,817 27,235
26,091
48,318
50,380
53,034
56,428
58,134
59,537
All figures in USD thousands
All figures
unlessinstated
USD thousands unless stated
SG&A
SG&A
corporatefinanceinstitute.com
Capacity Exceeded?
VOLUME
Other
Days in Period
EBITDA
VOLUME
Other
Days in Period
EBITDA
9,233
(Units/Day)
1,374
19.1%
48,828
(Units/Day)
1,600
2020A
5,877
1,764
365
12,193
2021A2020A 2022A2021A 2023F2022A 2024F 2023F 202
6,6425,877 7,7086,642 7,9397,708 47
8,1387,939
1,9311,764 2,0261,931- 2,0872,026
2,1392,087
365 365 365 365 365 365 365 365 3
11,996
12,193 11,083
11,996 16,065
11,083 16,959
16,065
EBITDA
EBITDA Margin
EBIT
EBIT Margin
EBITDA
EBITDA Margin
11,99612,19311,08311,99616,06511,08316,95916,06517,6
23.8% 25.2% 20.9% 23.8% 28.5% 20.9% 29.2% 28.5% 29.
9,233
19.1%
9,193 9,233 8,176 9,19311,897 8,17612,57711,89713,0
18.2% 19.1% 15.4% 18.2% 21.1% 15.4% 21.6% 21.1% 22.
501,490
2.4%
2020A
514,139
501,490530,136
514,139547,630
530,136555,845
547,630
2.2% 2.4% 2.3% 2.2% 3.0% 2.3% 1.5% 3.0%
2021A2020A 2022A2021A 2023F2022A 2024F 2023F 20
Financial Modeling Guidelines
EBIT
EBIT Margin
Sales
VolumeSchedule
Sales
VolumeSchedule
Revenue
Revenue
Inflation
Inflation
All figures in USD thousands
All figures
unlessinstated
USD thousands unless stated
VARIABLE COSTS VARIABLE COSTS
Custom Views
Days in Period
Days in Period
Materials
12,193
25.2%
Materials
(USD/Unit)
Row grouping can
be expanded
or
Packaging
Packaging
(USD/Unit)
OPERATIONS
OPERATIONS
Transportation
Transportation
collapsed with the mouse or keyboard (USD/Unit)
Subtotal
Subtotal
Sales Volume Growth
Sales Volume Growth
Materials
Materials
Once we arrive at the
a row
Salestargeted
Volume schedule,
Sales Volume
(Units/Day)
Packaging
Packaging
Plant Capacity
Plant Capacity(Units/Day)
grouping can be expanded
with
the
mouse by
Transportation
Transportation
Operational Efficiency
Operational Efficiency
Subtotal
using the -/+ icons Subtotal
shown down the
left hand
We often use Custom Views to expand
365
365 365 365 365 365 365
or collapse all row groupings
(USD/Unit)
9.51
(USD/Unit)
0.82
1.54
This (USD/Unit)
is where
11.87
365
Views feature, which we discussed earlier. As
4,769
4,997
4,769
5,254
4,997
5,590
5,590
(Units/Day)
1,374
1,374
1,452
1,409
1,500
1,452
1,5235,759
1,500
1,5
shown
below in1,409
Fig
40,
we
can
program
a 5,254
411
(Units/Day)
1,600
411
485 456
500 485
1,600432
1,600
1,600 456
1,600432
1,600 1,600
1,600 1,600
1,6
‘Collapse
Row Grouping’
in as859
a Custom
View.
772
772
812
914
859
941 96.
914
85.9%
88.0%812
85.9%
90.8%
88.0%
93.8% 90.8%
95.2% 93.8%
5,953
5,953 6,5686,242 6,9896,568 7,2006,989
First, we
collapse6,242
all the
row groupings, navigate
to cell A1, and set the Zoom to our preferred
also be collapsed or expanded by clicking on
level. We set the Zoom level since Custom Views
the 1 or 2 in the top left corner of Fig 40 below.
record Zoom settings as well as positions. Next,
FIXED
COSTS
VOLUME
Days in Period
Days in Period (USD/Unit)
Labour
Labour
These numbers refer
to the row grouping
levels.
Sales Volume
Sales Volume (Units/Day)
Insurance
Insurance
(USD/Unit)
Groupings can alsoUtilities
be expanded
or collapsed
by
Sales
Volume
Sales
Volume (USD/Unit)
(Units)
Utilities
selecting across
Subtotal
them
and
Subtotal
the
Show/Hide
using
Profit Summary
Profit Summary
PRICING
Detail function inPRICING
the
Data Menu
(ALT AJ and ALT
Labour
Labour
365
(USD/Unit)
31.17
365
365
365
365
3
30.96365
31.17 365
30.73
30.96365
30.64
30.7336530.64
30.64
1,5
7.25 7.28
7.15 7.25
7.13 7.15
7.13 7.13
514,139
530,136
514,139
VV)
and501,490
program
the 547,630
view
as
4.87
4.91
4.87
4.87 530,136
4.86 555,845
4.87 547,630
4.86562,5
4.86
we (Units/Day)
open
the Custom
Views dialogue box (ALT
1,374
1,409 1,374 1,452 1,409 1,500 1,452 1,523 1,500
(USD/Unit)
7.28
501,490
(Units) 4.91
(USD/Unit)
WC or ALT
43.36
43.0943.36 42.7643.09 42.6342.76 42.6342.63
15,630
2020A
3,651
2,463
48,318
(USD/Unit)
96.35
21,744
15,918
15,630
16,293
15,918
16,782
16,293
17,034
16,782
2021A
2020A
2022A
2021A
2023F
2022A
2024F
2023F
20
3,7293,651 3,7923,729 3,9063,792 3,9643,906
1.7%
2.1% 1.7% 3.0% 2.1% 1.5% 3.0% 1.
2,5052,463
2,583
2,505
2,660
2,583
2,660
50,380
53,034
50,380
56,428
53,034
58,1342,700
56,428
59,5
97.9948,318
96.35100.04
97.99103.04
100.04
104.59
103.04
105.
22,152
21,744 22,668
22,152 23,348
22,668 23,698
23,348
19,834
41.0%
20,56919,83420,81720,56926,09120,81727,23526,09128,1
40.8% 41.0% 39.3% 40.8% 46.2% 39.3% 46.8% 46.2% 47.
501,490
(Units)
514,139
501,490
530,136
514,139
547,630
530,136
555,845
547,630
562,5
11,996
97.9912,193
96.3511,083
100.0411,996
97.9916,065
103.0411,083
100.0416,959
104.5916,065
103.0417,6
105.
23.8%
25.2%
20.9%
23.8%
28.5%
20.9%
29.2%12.95
28.5%
29.
12.14
11.87
12.39
12.14
12.76
12.39
12.76
50,380
48,318
53,034
50,380
56,428
53,034
58,134
56,428
59,5
‘Collapse Row Grouping.’
All figures in USD thousands
All figures
unlessinstated
USD thousands unless stated
AH). Although this Utilities
worksIncreases
with theUtilities
keyboard,
it
Pricing
Pricing
Increases
Insurance
Insurance
Revenue
Revenue
Unit
Price
Unit
Price
(USD/Unit)
involves a few keystrokes
involve more
Subtotal and may
Subtotal
keystrokes when multiple groupings are being
Gross Profit
Gross Profit
REVENUE
REVENUE
expanded or collapsed
together.
Gross Profit
MarginGross Profit Margin
SUMMARY
SUMMARY
Sales Volume
Sales Volume (Units)
EBITDA
EBITDA
Sales Price
Sales Price
(USD/Unit)
EBITDA
Margin
Margin
Variable
Costs EBITDA
Variable
Costs (USD/Unit)
Revenue
Revenue
Fixed Costs
Fixed Costs
(USD/Unit)
EBIT
EBIT
Total Costs
Total Costs
(USD/Unit)
EBIT
Margin
Margin
Capacity
Exceeded?EBIT
Capacity
Exceeded?
Profit
Summary
Summary
Variable
Costs Profit
Variable
Costs
Costs
AllFixed
figuresCosts
in USD thousands
AllFixed
figures
unless
instated
USD thousands unless stated
Total CostsSchedule
Total CostsSchedule
Revenue
Revenue
Revenue
Revenue
All figures in USD thousands
All figures
unlessinstated
USD thousands unless stated
Cost ScheduleCost Schedule
12,193
(USD/Unit)
96.35
25.2%
(USD/Unit)
11.87
48,318
(USD/Unit)
43.36
9,233
(USD/Unit)
55.23
19.1%
5,953
21,744
2020A
27,697
48,318
2020A
Days
in Period
Days
in Period
All figures
in USD thousands
All figures
unless
instated
USD thousands unless stated
365
2020A
19,834
Gross Profit MarginGross Profit Margin
41.0%
All figures in USD thousands
All figures
unless
in USD
stated
thousands unless stated
2020A
OPERATIONS
OPERATIONS
EBITDA
EBITDA
12,193
Inflation
Inflation
2.4%
EBITDA
EBITDA
25.2%
Sales Margin
Volume Growth
Sales Margin
Volume Growth
Gross Profit Statement
Gross Profit Statement
Income
Income
EBIT
Sales Volume
EBIT
Sales Volume (Units/Day)
Fig 40: CollapsedRevenue
Row
Grouping
as
aMargin
Custom
View
EBIT
Margin
EBIT
Plant
Capacity Revenue
Plant
Capacity(Units/Day)
COGS
COGS
Operational Efficiency
Operational Efficiency
Gross Profit
Gross Profit
Revenue Schedule
Revenue Schedule
All figures in USD thousands
All figures
unlessinstated
USD thousands unless stated
SG&A
SG&A
VOLUME
VOLUME
Other
Other
Days in Period
Days in Period
EBITDA
EBITDA
corporatefinanceinstitute.com
Days in Period
Days in Period
Sales Volume
Sales Volume (Units/Day)
3
9.72 9.51
9.91 9.72 10.21 9.91 10.3610.21
0.84 0.82
0.86 0.84
0.89 0.86
0.90 0.89
1.58 1.54
1.62 1.58
1.67 1.62
we often make use of the Custom 1.69 1.67
12.1411.87 12.3912.14 12.7612.39 12.9512.76
2.5%
3.1% 2.5% 3.3% 3.1% 1.5% 3.3% 1.
side below in Fig 40. The row groupings can
FIXED
COSTS
VOLUME
365
9,233
(Units/Day)
1,374
43.0943.36 42.7643.09 42.6342.76 42.6342.63
9,193
9,233
8,176
9,193
11,897
8,176
12,57755.59
11,897
13,0
55.23
55.23
55.15
55.23
55.40
55.15
55.40
18.2% 19.1% 15.4% 18.2% 21.1%-15.4% 21.6%-21.1%-22.
6,2425,953 6,5686,242 6,9896,568 7,2006,989
22,152
21,744
22,668
22,152
23,348
22,668
23,698
23,348
2021A
2020A
2022A
2021A
2023F
2022A
2024F
2023F
20
28,394
27,697 29,236
28,394 30,337
29,236 30,898
30,337
50,380
48,318
50,380
53,034
56,428
2021A
2020A53,034
2022A
2021A56,428
2023F
2022A58,134
2024F
2023F59,5
20
365 2020A
365 2022A
365 2021A
365 2023F
365 2022A
365 2024F
365 2023F
365 203
2021A
20,56919,83420,81720,56926,09120,81727,23526,09128,1
40.8% 41.0% 39.3% 40.8% 46.2% 39.3% 46.8% 46.2% 47.
2021A
2020A 2022A
2021A 2023F
2022A 2024F2023
11,99612,19311,08311,99616,06511,08316,95916,06517,6
2.2%
2.4%
2.3%
2.2%
2.3%
23.8%
25.2%
20.9%
23.8%
28.5%
20.9%
29.2%
28.5%
29.
2.5%
3.1%
2.5%
3.3%3.0%
3.1%
1.5% 2.5%
3.3%3.0%
1.
28,994
85.9%
19,834
9,193
1,409 9,233
1,374 8,176
1,452 9,193
1,40911,897
1,500 8,176
1,45212,577
1,52311,897
1,50013,0
1,5
18.2%
19.1%
15.4%
18.2%
21.1%
15.4%
21.6%
21.1%
22.
50,601
48,828
52,185
50,601
56,428
52,185
58,134
56,428
1,600
1,600
1,600
1,600
1,600
1,600
1,600
1,600
1,6
30,032
28,994
31,368
30,032
30,337
31,368
30,898
30,337
88.0%
85.9%
90.8%
88.0%
93.8%
90.8%
95.2%
93.8%
96.
20,569
19,834 20,817
20,569 26,091
20,817 27,235
26,091
2020A
5,877
1,764
365
12,193
365
(Units/Day)
1,374
2021A2020A 2022A2021A 2023F2022A 2024F 2023F 20
6,6425,877 7,7086,642 7,9397,708 8,1387,939
1,9311,764 2,0261,931 2,0872,026 2,1392,087
365 365 365 365 365 365 365 365 3
11,996
12,193 11,083
11,996 16,065
11,083 48
16,959
16,065
365 365 365 365 365 365 365 365 3
1,409 1,374 1,452 1,409 1,500 1,452 1,523 1,500 1,5
19.1%
48,828
(Units/Day)
1,600
Financial Modeling Guidelines
More Custom Views may be needed for
other tabs in the model
This is a very efficient way to expand and collapse all row groupings. One important point to
remember is that these Custom Views have only
Next, we could follow a similar procedure to
been set for one tab, which is the Model tab in
program an ‘Expand Row Grouping’ Custom View
this case. If similar Custom Views were needed in
as shown below in Fig 41. With these two Custom
other tabs, then they would need to be set with
Views set, we can now quickly hit ALT WC or ALT VV
appropriate names.
then use the arrows to select our preferred view.
Profit Summary
2020A
All figures in USD thousands unless stated
2021A
2022A
2023F
2024F
2025F
Revenue
48,318
50,380
53,034
56,428
58,134
59,537
Gross Profit
Gross Profit Margin
19,834
41.0%
20,569
40.8%
20,817
39.3%
26,091
46.2%
27,235
46.8%
28,181
47.3%
EBITDA
EBITDA Margin
12,193
25.2%
11,996
23.8%
11,083
20.9%
16,065
28.5%
16,959
29.2%
17,699
29.7%
9,233
19.1%
9,193
18.2%
8,176
15.4%
11,897
21.1%
12,577
21.6%
13,098
22.0%
2020A
2021A
2022A
EBIT
EBIT Margin
Revenue Schedule
All figures in USD thousands unless stated
Fig 41: CollapsedDays
RowinGrouping
as a Custom View
Period
365
2023F
2024F
2025F
365
365
365
365
365
2.5%
3.1%
3.3%
1.5%
1.2%
OPERATIONS
Sales Volume Growth
Sales Volume
Plant Capacity
Operational Efficiency
(Units/Day)
1,374
1,600
85.9%
1,409
1,600
88.0%
1,452
1,600
90.8%
1,500
1,600
93.8%
1,523
1,600
95.2%
1,541
1,600
96.3%
(Units/Day)
365
1,374
501,490
365
1,409
514,139
365
1,452
530,136
365
1,500
547,630
365
1,523
555,845
49 1,541
(Units/Day)
VOLUME
Days in Period
corporatefinanceinstitute.com
Sales Volume
Sales Volume
(Units)
365
562,515
Financial Modeling Guidelines
Adding Indents
Further subcategorization within
each schedule is recommended
Adjusting formats to indent can be
time consuming without Macabacus
This produces a result similar to what is shown
in Fig 42 on the next page. In this example, the
We just had a detailed discussion about some of
indents have been applied to the ‘Total Amount’
the techniques used to locate schedules nested
and ‘Margin’ labels in Column B. Macabacus can
in a tall stack. Given that schedules play such
greatly expedite this process since it has a ded-
a dominant role in financial models, we should
icated shortcut for the Left Indent Cycle (CTRL
make sure that they are divided into clear sec-
SHIFT I). This enables us to quickly insert indents
tions that are easy to navigate to. Earlier, we
using cell formatting. However, those who are
discussed the idea that every schedule should be
not using Macabacus may find it difficult to nav-
divided into three main sections. Starting from
igate to the settings required for these indents.
the top, we have a section to enter amounts,
Even when using the keyboard, navigating to
then we calculate, and finally, the figures will
these settings can be difficult.
exit. All schedules should follow this general
structure from top to bottom. However, it is
useful to have some further subcategorization
We can also use little columns
to produce indents in models
within each schedule.
As discussed, the settings for adding indents into
The format of cells can be changed
to produce visual indents
the format of cells can be difficult to get to. While
using this approach produces a visual indent, it
does not help us physically navigate to the var-
One way to achieve this additional subcategori-
ious headings shown on page 52 in Fig 43, like
zation is by creating visual indents. There are two
Gross Profit or EBITDA. To solve this, we can use a
common ways to do this. The first technique is to
different approach using little columns. In Fig 43,
change the format of the cells containing the la-
we’ve placed the bold headings like Gross Profit,
bels to include indents. This can be done by going
EBITDA, and EBIT in Column B. The secondary
into the Alignment Tab in the Format Cells dia-
labels like Total Amount and Margin have been
logue box (CTRL 1) and changing the default Text
placed in Column C.
Alignment Indent from zero to a higher number.
corporatefinanceinstitute.com
50
Financial Modeling Guidelines
Profit Summary
All figures in USD thousands unless stated
2020A
2021A
2022A
2023F
2024F
2025F
Revenue
48,318
50,380
53,034
56,428
58,134
59,537
Gross Profit
Total Amount
Margin
19,834
41.0%
20,569
40.8%
20,817
39.3%
26,091
46.2%
27,235
46.8%
28,181
47.3%
EBITDA
Total Amount
Margin
12,193
25.2%
11,996
23.8%
11,083
20.9%
16,065
28.5%
16,959
29.2%
17,699
29.7%
EBIT
Total Amount
Margin
9,233
19.1%
9,193
18.2%
8,176
15.4%
11,897
21.1%
12,577
21.6%
13,098
22.0%
Fig 42: Indents using the Format Cells dialogue box
This type of indenting is quick and
provides another navigational column
Also, an added benefit to the approach shown on
the next page is that we have turned Column B
into a second navigational column. This allows us
When we compare the diagram above in Fig 42
to navigate quickly to the Profit Summary using
to the one on the next page in Fig 43, the visual
Column A, then navigate to the subsections of the
result is almost identical. However, the approach
Profit Summary using Column B.
shown on Fig 43 can be really quick to key in since
no modification to formatting is required.
corporatefinanceinstitute.com
51
Financial Modeling Guidelines
Profit Summary
All figures in USD thousands unless stated
2020A
2021A
2022A
2023F
2024F
2025F
Revenue
48,318
50,380
53,034
56,428
58,134
59,537
Gross Profit
Total Amount
Margin
19,834
41.0%
20,569
40.8%
20,817
39.3%
26,091
46.2%
27,235
46.8%
28,181
47.3%
EBITDA
Total Amount
Margin
12,193
25.2%
11,996
23.8%
11,083
20.9%
16,065
28.5%
16,959
29.2%
17,699
29.7%
EBIT
Total Amount
Margin
9,233
19.1%
9,193
18.2%
8,176
15.4%
11,897
21.1%
12,577
21.6%
13,098
22.0%
Fig 43: Indents using little columns
Indenting with little columns can be
preferred for speed and simplicity
little columns. This technique is fast and simple
and does not introduce formatting that may not
be understood by others. By keeping things sim-
Although either of these indenting techniques can
ple, we can ensure that our models can be built
work in a model, some have a slight preference
quickly and are easy to understand.
for the technique we just discussed, which uses
corporatefinanceinstitute.com
52
Page 1 of 1
Financial Modeling Guidelines
Consistent Labeling
highlighted Total Costs in blue. We have also
shaded
COGS in model
blue in Fig 45. In a perfect
Clear labeling is necessary for every row in
a financial
Clear labeling is necessary for
world, these labels would be identical since they
everyWe’ve
row in
a financial
model
now
discussed
how indents can help to
upword
into‘Total’
clearisand
aredivide
linked schedules
together. The
needed
defined sections. If we elect to use mini columns
for
indenting,
then
we
get
the
in the first instance below to indicate that the
added
benefit
of
a
navigation
column
within
our schedules. Another important
We’ve now discussed how indents can help
Total Costs are the sum of the Variable and Fixed
topic that often gets overlooked is the importance
of clear labeling for the various
to divide schedules up into clear and defined
Costs.
In
the second instance below, we have
rows within a schedule.
sections. If we elect to use mini columns for
used the label Cost of Goods Sold, or COGS, as
indenting,
then
we
get
the
added
benefit
of
a
It is not always practical to use identical labels
for all linked
figures
this nomenclature
is common
on an income
navigation column within our schedules. Another
statement. While it may seem prudent to use
Let’s topic
now that
turnoften
our gets
attention
to the
two diagrams below. In Fig XX, we have
important
overlooked
is the
identical labels for all linked figures, we recognize
highlighted Total Costs in blue. We have also shaded COGS in blue in Fig XX. In a
importance of clear labeling for the various rows
that this is not always practical in all places in a
perfect world, these labels would be identical since they are linked together. The
financial
model. For
thisthe
reason,
recommend
word ‘Total’ is needed in the first instance below
to indicate
that
Totalwe
Costs
are the sum of the Variable and Fixed Costs.giving
In thethe
second
below,
we with
model instance
designer some
flexibility
It is not
always
practical
to use
have
used the
label Cost
of Goods Sold, or COGS,
as
this
nomenclature
is
regards to labeling, provided it is clear and easy
identical
labels
linkedstatement.
figures
common
onfor
anall
income
While it may seem prudent to use identical
for others to understand.
labels for all linked figures, we recognize that this is not always practical in all
places
a financial
model.
For
this reason, we recommend giving the model
Let’s now
turninour
attention to
the two
diagrams
designer some flexibility with regards to labeling, provided it is clear and easy for
below and on the next page. In Fig 44, we have
others to understand.
within a schedule.
Fig 19:
Cost Summary
All figures in USD thousands unless stated
2022A
2023F
2024F
2025F
2026F
2027F
COST SUMMARY
Variable Costs
(USD/Unit)
12.39
12.76
12.95
13.11
13.25
13.39
Fixed Costs
(USD/Unit)
42.76
42.63
42.63
42.63
42.63
42.63
Total Costs
(USD/Unit)
55.15
55.40
55.59
55.74
55.89
56.02
6,568
6,989
7,200
7,374
7,537
7,688
22,668
29,236
23,348
30,337
23,698
30,898
23,983
31,356
24,246
31,783
24,489
32,177
Variable Costs
Fixed Costs
Total Costs
Fig 20:
Selected Income Statement Items
Fig 44: Cost Summary
All figures in USD thousands unless stated
2022A
2023F
2024F
2025F
2026F
2027F
Revenue
52,185
56,428
58,134
59,537
60,854
62,077
COGS
29,236
30,337
30,898
31,356
31,783
32,177
Gross Profit
22,949
26,091
27,235
28,181
29,071
29,900
corporatefinanceinstitute.com
53
Total Costs
55.40
55.59
55.74
55.89
56.02
6,568
6,989
7,200
7,374
7,537
7,688
22,668
29,236
23,348
30,337
23,698
30,898
23,983
31,356
24,246
31,783
24,489
32,177
Financial Modeling Guidelines
Variable Costs
Fixed Costs
Total Costs
Fig 20:
55.15
(USD/Unit)
Selected Income Statement Items
All figures in USD thousands unless stated
2022A
2023F
2024F
2025F
2026F
2027F
Revenue
52,185
56,428
58,134
59,537
60,854
62,077
COGS
29,236
30,337
30,898
31,356
31,783
32,177
Gross Profit
22,949
26,091
27,235
28,181
29,071
29,900
Fig 45: Selected Income Statement Items
Capitalization
Our view on model formatting is that small discrepancies can make a big difference in financial
Capitalization seems trivial, but it can
have a big impact on the formatting
Another aspect of labeling, which seems trivial
but warrants a discussion, is that of capitalization.
models. Even small inconsistencies on something
like capitalization can multiply over hundreds of
cells to produce a result that is visually unappealing. For this reason, we feel that some consideration on this subject is warranted.
Fig 46: Capitalization Formats
corporatefinanceinstitute.com
54
Another aspect of labeling, which seems trivial but warrants a discussion, is that
of capitalization. Our view on model formatting is that small discrepancies can
Modeling
Guidelines
make a big difference Financial
in financial models.
Even small
inconsistencies on
something like capitalization can multiply over hundreds of cells to produce a
result that is visually unappealing. For this reason, we feel that some
consideration on this subject is warranted.
There are four types of capital conventions to consider for models
completed or reviewed. In many ways, it looks inThere are four types of capital
complete
and unprofessional.
these
conventions
consider
forcapitalization
models
There aretofour
types of
conventions
to consider,
as listed For
below
inreasons,
avoid lower
case formatting
in models.
Fig XX. The screenshot below was taken fromwe
thealways
Macabacus
section
of the Excel
ribbon
showing
Case Cycle
function. We will discuss this function later. But,
There
are four
types ofthe
capitalization
convenfor now let’s consider each of these four types
of capitalization
that
are listed.
Using
upper case to
separate
sections
tions to consider, as listed in the previous image
of a schedule can be quite effective
Fig 46.
screenshot
in Fig 46Formats
was taken from
FigThe
XX:
Capitalization
the Macabacus section of the Excel ribbon showing the Case Cycle function. We will discuss this
function later. But, for now let’s consider each of
these four types of capitalization that are listed.
The next example on the following page in Fig
48 of a Working Capital Schedule shows a couple
types of capitalization. First, we have used upper
case and bold to clearly define three sections
within the schedule. This makes it obvious to a
Lower case formatting looks
incomplete and unprofessional
reader that there are clear differences between
each of these three sections. We find that using
We would not advise using lower case format in
upper case to highlight parts of a schedule like
financial models. An example of some income
this can be quite effective.
Lower case formatting looks incomplete and unprofessional
statement
items not
withadvise
lower case
format
is shown
We would
using
lower
case format in financial models. An example of
some
statement
items
with lower case format is shown below in Fig XX.
below
in Figincome
47. This format
makes
the model
This
makes
the model
appear
appear
asformat
though the
formatting
has not
been as though the formatting has been
completed or reviewed. In many ways, it looks incomplete and unprofessional.
For these reasons, we always avoid lower case formatting in models.
Fig 21:
Selected Income Statement Items
All figures in USD thousands unless stated
revenue
2022A
2023F
2024F
2025F
2026F
2027F
52,185
56,428
58,134
59,537
60,854
62,077
cost of goods sold
29,236
30,337
30,898
31,356
31,783
32,177
gross profit
22,949
26,091
27,235
28,181
29,071
29,900
Fig 47: Selected Income Statement Items
corporatefinanceinstitute.com
55
Using upper case to separate sections of a schedule can be quite effective
Financial Modeling Guidelines
The next example in Fig XX below of a Working Capital Schedule shows a couple
types of capitalization. First, we have used upper case and bold to clearly define
three sections within the schedule. This makes it obvious to a reader that there
are clear differences between each of these three sections. We find that using
upper case to highlight parts of a schedule like this can be quite effective.
Fig 22:
Working Capital Schedule
All figures in USD thousands unless stated
2022A
2023F
2024F
2025F
2026F
2027F
365
365
365
365
365
365
Revenue
52,185
56,428
58,134
59,537
60,854
62,077
COGS
29,236
30,337
30,898
31,356
31,783
32,177
Days in Period
AMOUNTS PER DAY
Accounts Receivable
(Days)
46
45
45
45
45
45
Inventory
(Days)
25
25
25
25
25
25
Accounts Payable
(Days)
41
40
40
40
40
40
TOTAL AMOUNTS
Accounts Receivable
6,624
6,957
7,167
7,340
7,503
7,653
Inventory
2,009
2,078
2,116
2,148
2,177
2,204
Accounts Payable
3,319
3,325
3,386
3,436
3,483
3,526
Current Assets
8,633
9,035
9,283
9,488
9,680
9,857
Current Liabilities
3,319
3,325
3,386
3,436
3,483
3,526
Net Working Capital
5,314
5,710
5,897
6,052
6,196
6,331
NET WORKING CAPITAL
Cash From Working Capital Items
(396)
(187)
(154)
(145)
(135)
Decide between sentence case and title case and avoid mixing them
Fig 48: In
Working
Fig XXCapital
above,Schedule
we are also using title case, which puts a capital letter at the
beginning of every word in each label. Alternatively, we could have used sentence
case, which only places a capital letter on the first word of each text string. Our
view on title case and sentence case is that either of them work well in financial
models. However, it is quite common for model builders to mix these two formats
since they are quite similar. Although this is easy to overlook, it is something that
we feel should be kept consistent in financial models.
corporatefinanceinstitute.com
56
Financial Modeling Guidelines
Decide between sentence case and
title case and avoid mixing them
Even when differences are identified, it can be
quite tedious to make these types of formatting
changes in models. This is where we find the Case
In Fig 48, we are also using title case, which puts
Cycle feature in Macabacus to be very helpful.
a capital letter at the beginning of every word
in each label. Alternatively, we could have used
sentence case, which only places a capital letter
The Case Cycle function in Macabacus
can save enormous amounts of time
on the first word of each text string. Our view on
title case and sentence case is that either of them
As shown again below in Fig 49, the Case Cycle
work well in financial models. However, it is quite
function in Macabacus rotates through sentence,
common for model builders to mix these two
title, upper and lower case using the ALT SHIFT C
formats since they are quite similar. Although this
shortcut. This allows us to select large portions of a
is easy to overlook, it is something that we feel
financial model and quickly change the format with
should be kept consistent in financial models.
regard to capitalization. Without this function, we
would be forced to make changes manually or by
It is difficult to spot the differences
between sentence and title case
using text functions like UPPER, LOWER and PROPER which are more time consuming. Also, we are
not aware of a function in Excel that converts text
It is very easy to identify lower case and upper
strings to sentence case. Overall, this Macabacus
case formats in financial models. However, it can
function saves enormous amounts of time and
be difficult to spot the differences between
helps to ensure our models are consistent.
sentence and title case since they are so similar.
Fig 49: Macabacus Case Cycle Function
corporatefinanceinstitute.com
57
Financial Modeling Guidelines
Transparency
Components left inside cells will not
be visible when the model is printed
Always break large formulas up into
a series of small, simple steps
Let’s look at the Revolver Schedule below in Fig
50 as an example. There is a relatively complex
As we’ve
we recommend that calculaCash discussed,
From Operations
7,732
8,741
formula in
the
10,210 (Repayments
11,417
Additions
)13,678
line,
tions should be done inside schedules in a finan-
which is not easy to understand. We can see that
cial model. What is wonderful about using sched-
there are a few components being added togeth-
ules for detailed calculations is that they provide
er inside the MIN function below, but we would
the room
required
to complete these computaCash From
Investing
(18,264)
need
(3,725)
(5,326)to check
(5,645)
to navigate
to(3,024)
all these rows
them.
tions, which are often quite complex. Many mod-
Also, if we printed this model, we would not be
el builders make the error of trying to construct
able to see the components inside this cell to
Issuance
Of Long-Term
Debttoo
financial
models
which are
-
compact. In an
-
-
-
(20,000)
understand it. This type of structure may be
attempt to use fewer rows in the worksheet, they
Change In Common Stock
compact, but it is not very transparent.
-
-
-
(3,796)
(3,924)
(4,694)
(5,348)
(6,687)
2023F
2024F
2025F
2026F
2027F
3,134
2,042
-
end up building long, complex formulas. The
30,000
-
problem with this approach is that the models
Dividends
become
difficult for others to understand.
23
Fig 23:
Revolver Schedule
All figures in USD thousands unless stated
Revolver
Beginning
Additions (Repayments)
Ending
2022A
-
-
Interest Rate
Interest Expense
23
Fig 23:
-
-
-
-
=-MIN(J271+J280+J286+J290+J293+J296,J308)
3,134
(1,092)
(2,042)
3,134
2,042
7.8%
122
7.8%
202
7.8%
80
7.8%
-
7.8%
-
2023F
2024F
2025F
2026F
2027F
11,195
7,732
(18,264)
(3,796)
8,741
(3,725)
(3,924)
10,210
(3,024)
(4,694)
449
11,417
(5,326)
30,000
(5,348)
31,193
13,678
(5,645)
(20,000)
(6,687)
Revolver Schedule
All figures
in USD thousands
unless stated
Fig 50:
Revolver
Schedule
Cash Available For Revolver
Beginning Cash Balance
Cash From Operations
Cash From Investing
Issuance Of Long-Term Debt
Change In Common Stock
corporatefinanceinstitute.com
Dividends
2022A
58
Change In Common Stock
Financial Modeling- Guidelines
Dividends
23
(3,796)
Positioning Precedents
Fig 23:
Revolver Schedule
figures in USD
thousands unless
stated
2022A
We All
should
prioritize
transparency
over
many other design characteristics
Interest Rate
Interest Expense
Fig 23:
30,000
(4,694)
(5,348)
-
(6,687)
of the model. We need to remember that models
Revolver
Beginning
Instead
of aiming for the model to be compact,
Additions (Repayments)
model
builders should prioritize the transparencyEnding
23
(3,924)
-
are decision making tools. In order to have
2023F
2024F
confidence
that
the2025F
model can2026F
help with2027F
an
important decision, the audience must be able
to see into its working components. This is why
3,134
2,042
transparency
be prioritized over
3,134
(1,092) must(2,042)
3,134
2,042 characteristics.
model design
-
other -
7.8%
122
7.8%
202
7.8%
80
7.8%
-
7.8%
-
2023F
2024F
2025F
2026F
2027F
11,195
7,732
(18,264)
(3,796)
(3,134)
8,741
(3,725)
(3,924)
1,092
10,210
(3,024)
(4,694)
2,491
449
11,417
(5,326)
30,000
(5,348)
31,193
31,193
31,193
13,678
(5,645)
(20,000)
(6,687)
12,539
-
3,134
(1,092)
2,042
-2,042
(2,042) =-MIN(L328,L332)
-
7.8%
122
7.8%
202
Revolver Schedule
All figures in USD thousands unless stated
2022A
Cash Available For Revolver
Beginning Cash Balance
Cash From Operations
Cash From Investing
Issuance Of Long-Term Debt
Change In Common Stock
Dividends
Subtotal
Revolver
Beginning
Additions (Repayments)
Ending
-
Interest Rate
Interest Expense
3,134
3,134
7.8%
80
-
7.8%
-
7.8%
-
2026F
2027F
CIRCULARITY
27
Fig 51: Revolver Schedule
Fig 27:
Condensed Model Showing Two Common Circular Paths
All figures in USD thousands unless stated
2022A
2023F
2024F
2025F
CASH
INCOME STATEMENT
Net Interest Expense
Net Income
CASH FLOW STATEMENT
Net Income
Change in Cash
Change in Cash Excluding Revolver
corporatefinanceinstitute.com
REVOLVER
27
7,033
202
7,543
76
7,934
70
8,316
117
8,649
7,033
(11,195)
(3,134)
7,543
–
1,092
7,934
449
2,491
8,316
2,510
(2,541)
8,649
(1,254)
1,059
59
Financial Modeling Guidelines
Model Transparency: Why is it important
for all to see
above, we are showing all the precedent cells
adding to a subtotal which then feeds into the
revolver line labeled as Additions (Repayments).
In order to ensure that everyone can see into all
parts of a model, large formulas should be broken down into small components. Please refer to
Fig 51 on the previous page to see the Revolver
Schedule from the last example with an improved
structure. In the top section of this schedule in
Fig 51, labeled as Cash Available for Revolver, we
have shown all the figures and how they add to a
subtotal. Each one of these line items will show up
clearly in a print. This layout is much easier to understand since we can see that the deficit of $3.1
million in fiscal 2023 will be drawn as an addition
to the revolver. Similarly, the excess of $1.1 million in the fiscal 2024 can repay a portion of the
revolver balance.
We should try to print the precedents on
every page of the financial model
Our team should be comfortable
using the model to make decisions
Given the importance of model transparency,
we have also provided Fig 52 on the next page.
As you can see, we have navigated into one cell
and hit the F2 key to display the formula . We are
printing the precedents since we can clearly see
every cell which is contributing to the accounts
receivable balance in 2023. Following our guidelines for printing precedents will use more rows
in your financial models. But, the advantage to
pursuing this approach is that you will produce
models that are truly transparent and easier
for others to understand. We should always be
striving to create an environment that makes our
team more comfortable with using the model to
inform their decisions.
A great way to make sure that a model has good
transparency is to always print the precedents.
When we review a model and look at each page,
we ideally would want to be able to see all the
precedent cells in print. Having them printed in
close proximity makes the model so much easier
to understand. Also, positioning precedent cells
close by will help others understand the model
during a peer-review process. In the example
corporatefinanceinstitute.com
60
2022A
All figures in USD thousands unless stated
revenue
cost of goods sold
gross profit
22
Fig 22:
2023F
2024F
2025F
Financial 52,185
Modeling
Guidelines
56,428
58,134
59,537
29,236
22,949
30,337
26,091
30,898
27,235
2026F
60,854
31,783
29,071
31,356
28,181
2027F
62,077
32,177
29,900
Working Capital Schedule
2022A
All figures in USD thousands unless stated
2023F
2024F
2025F
2026F
2027F
365
52,185
29,236
365
365
56,428
56,428
30,337
365
58,134
30,898
365
59,537
31,356
365
60,854
31,783
365
62,077
32,177
46
25
41
45
45
25
40
45
25
40
45
25
40
45
25
40
45
25
40
TOTAL AMOUNTS
Accounts Receivable
Inventory
Accounts Payable
6,624 =(I250/I$244)*1245
6,957
7,167
2,009
2,078
2,116
3,319
3,325
3,386
7,340
2,148
3,436
7,503
2,177
3,483
7,653
2,204
3,526
NET WORKING CAPITAL
Current Assets
Current Liabilities
Net Working Capital
8,633
3,319
5,314
9,488
3,436
6,052
9,680
3,483
6,196
9,857
3,526
6,331
Days in Period
Revenue
COGS
AMOUNTS PER DAY
Accounts Receivable
Inventory
Accounts Payable
(Days)
(Days)
(Days)
Cash From Working Capital Items
Fig 52:Beginning
Working
Capital
Schedule
Cash
Balance
corporatefinanceinstitute.com
9,035
3,325
5,710
(396)
11,195
9,283
3,386
5,897
(187)
(154)
-
-
(145)
449
(135)
31,193
61
Financial Modeling Guidelines
Corkscrews
depreciation, then sum all the components to
arrive at the ending PP&E balance.
Corkscrews are great structures to
track balances changes over time
A sum function is often used at
the bottom of a corkscrew
Within model schedules, there are a few common structures that work really well and should
be used as standard practice. One such structure is a corkscrew, as shown in Fig 53 below
A number of additions or subtractions may be
performed within the period to arrive at an ending balance. However, one common consistency
that the ending
balance
usually just the sum
greatplant
structures
balances
changes
overis time
using Corkscrews
an example ofare
property,
& equip-to track is
of the additions or subtractions above it. In the
ment (PP&E). These structures are typically re-
Within model schedules, there are a few common
structures
work
reallythen
wellflows
below example,
thethat
ending
balance
and should be used as standard practice. One such structure is a corkscrew, as
directly into the beginning balance of the next
information
left to right
following
a
shownflows
in Figfrom
XX below
using
an example
of property, plant & equipment (PP&E).
period. As the(or
information
flows top-to-bottom
corkscrew
pattern.
They are
generally
startreferred
on the to as corkscrews
These
structures
typically
roll-forwards)
since
and
left-to-right,
it
follows
a
corkscrew
pattern.
information
from
leftbalance.
to rightThe
following a corkscrew pattern. They generally
left side
of a model flows
with an
ending
start
on the
left
side
of a model
with an ending balance. The ending balance from
ending
balance
from
this
starting
period then
this starting period then flows directly into the beginning balance for the next
flows directly into the beginning balance for the
period. Looking below, we start with beginning PP&E, add capital expenditure,
next period.
Looking
below, wethen
startsum
with all
be-the components to arrive at the ending PP&E
subtract
depreciation,
ginning
PP&E, add capital expenditure, subtract
balance.
ferred to as corkscrews (or roll-forwards) since
Make sure the corkscrew stays aligned properly with the figure below.
Fig 1:
Property, Plant & Equipment Corkscrew
All figures in USD thousands unless stated
2022A
2023F
2024F
2025F
2026F
2027F
65,231
65,286
65,191
64,933
64,504
Property Plant & Equipment
Beginning
Capital Expenditure
Accounting Depreciation
Ending
65,231
4,223
4,286
4,338
4,385
4,429
(4,168)
(4,381)
(4,596)
(4,814)
(5,035)
65,286
65,191
64,933
64,504
63,898
A sum function is often used at the bottom of a corkscrew
numberPlant
of additions
or subtractions
Fig 53:AProperty,
& Equipment
Corkscrew may be performed within the period to
arrive at an ending balance. However, one common consistency is that the ending
balance is usually just the sum of the additions or subtractions above it. In the
example above, the ending balance then flows directly into the beginning balance
of the next period. As the information flows top-to-bottom and left-to-right, it
follows a corkscrew pattern.
corporatefinanceinstitute.com
Corkscrews are regularly used to model and track debt balances
62
Make sure the corkscrew stays aligned properly with the figure below.
Fig 1:
Financial Modeling Guidelines
Property, Plant & Equipment Corkscrew
All figures in USD thousands unless stated
2022A
2023F
2024F
2025F
2026F
2027F
65,231
65,286
65,191
64,933
64,504
Property Plant & Equipment
Beginning
Corkscrews
are regularly used to
Capital Expenditure
model
and track
debt balances
Accounting
Depreciation
Ending
Corkscrews
to
4,223
4,286 are often
4,338 used
4,385
track changes
in(4,596)
equity as
well
(4,168)
(4,381)
(4,814)
65,231
65,286
65,191
64,933
64,504
4,429
(5,035)
63,898
Corkscrews are a great way to track any balance
Equity schedules also use corkscrews to track
the next. Debt schedules in financial models are
ty may actually use three corkscrews in its equity
sum function
is from
often
used
at into
the bottom
ofbalances.
a corkscrew
that isAchanging
over time
one
period
their
A company with two types of equiA number of additions or subtractions may be performed within the period to
often built using corkscrews. In Fig 54 below,
schedules. There could be one corkscrew for
arrive at an ending balance. However, one common
consistency is that the ending
we’vebalance
shown anisexample
of
a
Long
Term
Debt
preferred
equity, one for
the common
usually just the sum of the additions or subtractions
above
it. In theequity, and
example
above,
thecorkscrew
ending balance
directly
the
beginning
balance
corkscrew.
Generally,
one
would then flows
a third
one tointo
track
retained
earnings.
In Fig 55 on
of
the
next
period.
As
the
information
flows
top-to-bottom
and
left-to-right,
it
be used for each piece of debt in a model. For
the next page, we have shown an example of a
follows
a
corkscrew
pattern.
instance, a company with long-term debt, mezretained earnings corkscrew. This example starts
zanine debt, and a revolver would likely have
with the beginning retained earnings balance; we
Corkscrews are regularly used to model and
track debt balances
three separate corkscrews to track the balances
add net income and subtract dividends to arrive
for each
piece of debt.
at thethat
ending
balance forover
retained
Corkscrews
are a great way to track any balance
is changing
timeearnings.
from Lay-
one period into the next. Debt schedules in financial
are often
using like
ing out all models
the components
intobuilt
a corkscrew
corkscrews. In Fig XX below, we’ve shown anthis
example
of a Long Term Debt
makes the model easy to follow on the comcorkscrew. Generally, one corkscrew would be used for each piece of debt in a
puter and in printed format.
model. For instance, a company with long-term debt, mezzanine debt, and a
revolver would likely have three separate corkscrews to track the balances for
each piece of debt.
Fig 2:
Long Term Debt Corkscrew
All figures in USD thousands unless stated
2022A
2023F
2024F
2025F
2026F
2027F
Beginning
110,000
100,000
90,000
80,000
70,000
Additions (Repayments)
(10,000)
(10,000)
(10,000)
(10,000)
(10,000)
100,000
90,000
80,000
70,000
60,000
6.2%
6.2%
6.2%
6.2%
6.2%
6,510
5,890
5,270
4,650
4,030
Long Term Debt
Ending
Interest Rate
Interest Expense
110,000
Fig 54: Long Term Debt Corkscrew
corporatefinanceinstitute.com
63
Financial Modeling Guidelines
Corkscrews are often used to track changes in equity as well
Equity schedules also use corkscrews to track their balances. A company with two
types
of equity
may
actually
three changes
corkscrews
its equity
schedules. There
Corkscrews
are
often
useduse
to track
in in
equity
as well
could be one corkscrew for preferred equity, one for the common equity, and a
will
often
use
corkscrews
to an
keep
tracktwo
of their
one
to track
retained
earnings. IntoFig
XX
below,
we have
example
Thesethird
formations
are used
in many
Equity
schedules
also
use
corkscrews
track
their
balances.
Ashown
company
with
a retained
earnings
corkscrew.
This corkscrews
example
starts
with
the schedules.
beginning
retained
otherof
places
financial
reserves
resources.
We have shown
types
ofin
equity
may models
actually
use three
in or
its
equity
Therean exearnings
balance;
we
add
net
income
and
subtract
dividends
to
arrive
at
the
could be one corkscrew for preferred equity,ample
one for
common
equity,
and
of athe
Reserve
Corkscrew
in Fig
56abelow.
ending
balance
for
retained
earnings.
Laying
out
all
the
components
into
a
third
one to
retained
earnings.
below,
we have
an example
Another
example
of track
a schedule
that often
uses In Fig XX
This
schedule
showsshown
consistent
depletion over
corkscrew
like
this
makes
the
model
easy
to
follow
on
the
computer
and
in
of
a
retained
earnings
corkscrew.
This
example
starts
with
the
beginning
retained
corkscrews
is aformat.
tax schedule where a pool of
time due to production as well as some expected
printed
earnings balance; we add net income and subtract dividends to arrive at the
tax losses may need to be tracked over time as
over the next
ending balance for retained earnings. Layingreserve
out alladditions
the components
intotwo
a years.
Fig
3:
Retained
Earnings
Corkscrew
changes
occur. Also,
natural
companies
corkscrew
like
this resource
makes the
model easy to follow on the computer and in
All
figures
in
USD
thousands
unless
stated
printed format.
2022A
2023F
2024F
2025F
2026F
2027F
Fig 3:
Retained Earnings Corkscrew
Retained Earnings
AllBeginning
figures in USD thousands unless stated
2022A
Net Income
Dividends
Retained
Earnings
Ending
Beginning
79,120
79,120
2023F
8,167
85,654
2024F
9,106
92,938
2025F
5,423
97,277
2026F
5,606
101,762
2027F
6,706
(1,633)
(1,821)
(1,085)
(1,121)
(1,341)
85,654
79,120
92,938
85,654
97,277
92,938
101,762
97,277
107,126
101,762
8,167
9,106
5,423
5,606
6,706
Net Income
These
formations are used in many other
places(1,821)
in financial
Dividends
(1,633)
(1,085)models
(1,121)
Ending
79,120
85,654
92,938
97,277
101,762
(1,341)
107,126
Another example of a schedule that often uses corkscrews is a tax schedule
where
a pool of tax are
losses
may
be tracked
time as changes
These formations
used
inneed
manytoother
placesover
in financial
modelsoccur.
Also, natural resource companies will often use corkscrews to keep track of their
reserves
or
resources.
We have that
shown
an uses
example
of a Reserve
Corkscrew
of a schedule
often
corkscrews
is a tax
schedulein Fig
Fig 55:Another
Retainedexample
Earnings Corkscrew
XX
below.
Thisofschedule
shows
overtime
timeasdue
to production
where
a pool
tax losses
may consistent
need to bedepletion
tracked over
changes
occur.
as
well
as
some
expected
reserve
additions
over
the
next
two
years.
Also, natural resource companies will often use corkscrews to keep track of their
reserves or resources. We have shown an example of a Reserve Corkscrew in Fig
XX 4:
below. This
schedule
showsCorkscrew
consistent depletion over time due to production
Fig
Mineral
Reserve
as well as some expected reserve additions over the next two years.
All figures in USD thousands unless stated
Fig 4:
2022A
2023F
2024F
2025F
2026F
2027F
(000 t)
204,561
2023F
40,000
226,683
2024F
40,000
248,742
2025F
-
230,216
2026F
-
212,530
2027F
-
(000 t)
(17,878)
(17,941)
(18,526)
(17,686)
(17,486)
226,683
204,561
248,742
226,683
230,216
248,742
212,530
230,216
195,044
212,530
Mineral Reserve Corkscrew
Mineral Reserves
t)
AllBeginning
figures in USD thousands unless(000
stated
Additions
Production
Mineral
Reserves
2022A
Ending
Beginning
(000 t)
Additions
(000 t)
40,000
40,000
-
-
-
Production
(000 t)
(17,878)
(17,941)
(18,526)
(17,686)
(17,486)
Ending
(000 t)
226,683
248,742
230,216
212,530
195,044
Fig 56: Mineral Reserve Corkscrew
corporatefinanceinstitute.com
204,561
204,561
64
Financial Modeling Guidelines
Waterfalls
Waterfall formations are often
used in depreciation schedules
Each time period is given its own
dedicated row in a waterfall
Waterfalls are helpful in this case as they allow
us to calculate the depreciation for new assets
Another common formation that is used in fi-
that are expected to go into service in future
nancial modeling is a waterfall. These are easy to
periods. In the first row in Fig 57, we are showing
spot in models as they are organized in a triangu-
the depreciation for new assets expected to go
lar structure. In Fig 57 on the next page, it is easy
into service in 2023. In the subsequent row, we
to spot the triangular formation since we have
show depreciation for assets beginning service
shaded it in grey. These formations are often
in 2024. And so on, as we progress downwards
used in depreciation schedules as shown in this
through the waterfall.
example.
Time periods are shown on both
a horizontal and vertical axis
Waterfalls use more space but
make the model easier to follow
This structure is helpful since it clearly shows
Without stating the obvious, financial models
when a group of assets goes into service. It
usually have time periods shown from left to
also shows how much depreciation is expected
right across columns. In a waterfall schedule,
for that group of assets in every future period.
the time periods are shown from left to right
Essentially, each period of capital investment is
and also from top to bottom. We can see this
given its own dedicated row in the model. One
below in the grey shaded waterfall with years
disadvantage of using a waterfall structure is
extending down the left side and also years
that they can use a lot of rows in a model that
across the top. In this sense, the waterfall forms
extends for many periods. However, a big advan-
a matrix with periods on both the horizontal
tage of waterfall formations is that they are well
and the vertical axis. This matrix is then divided
spaced out and very clear. Essentially, they make
into two triangles, with the top triangle in grey
the model easier to understand and follow.
being used for calculated values. These values,
which are in a triangular formation, are often
referred to as a waterfall.
corporatefinanceinstitute.com
65
the grey shaded waterfall with years extending down the left side and also years
across the top. In this sense, the waterfall forms a matrix with periods on both
Financial Modeling Guidelines
the horizontal and the vertical axis. This matrix is then divided into two triangles,
with the top triangle in grey being used for calculated values. These values, which
are in a triangular formation, are often referred to as a waterfall.
Fig 5:
Depreciation Waterfall
All figures in USD thousands unless stated
2022A
2023F
2024F
2025F
2026F
2027F
Corkscrews are used extensively when modeling debt and equity
NEW ASSET DEPRECIATION
Usefulof
Lifethese
in Yearsstructures
20.00
Some
we’ve discussed, like corkscrews and waterfalls, are
common
in
model
schedules.
In fact, corkscrews are used extensively in debt and
First Year Depreciation
50%
equity schedules. If a company only has equity in its capital structure, then the
debt
couldPer
beYr
omitted unless the
company
was considering
debt 2027F
Yearschedules
Capex
2023F
2024F
2025F
2026F
financing
in the
2023F
4,223future.211
106
211
211
211
211
2024F
4,286
214
-
107
214
214
214
2026F
4,385
219
-
-
-
110
219
2023F
2024F
2025F
2026F
2027F
The
capital structure
is one of the most difficult
parts
to build
2025F
4,338
217
- of the
108 model
217
217
The
models for
companies with more complex
capital
structures
can
have
2027F
4,429mature
221
111
multiple schedules for the company’s debt and its equity. Levered buyout (LBO)
models
canDepreciation
have even more complex capital106
structures.
the capital
New Asset
318 In fact,
534
752
972
structure can be one of the most difficult parts of a financial model to build. Using
schedules that provide the space necessary for detailed debt and equity
Each
time period
is given
its own dedicated
row
in athese
waterfall
calculations
is highly
recommended
in all cases.
Within
schedules, it is best
to use a corkscrew to track each piece of capital individually. As a reminder, an
Fig 57: Depreciation Waterfall
Waterfalls
helpful in this
case
as they allow
us to
calculate
for
example ofare
a Long-Term
Debt
corkscrew
is shown
below
in Figthe
XX.depreciation
Using a
new
assetsstructure
that are expected
to go into
future periods.
Inthe
the various
first row
consistent
with corkscrews
willservice
help toinsimplify
and track
in
Fig
XX
above,
we
are
showing
the
depreciation
for
new
assets
expected
to go
pieces of debt and equity for the company.
into service in 2023. In the subsequent row, we show depreciation for assets
Fig
2:
Long Term
Debt
beginning
service
in 2024.
AndCorkscrew
so on, as we progress downwards through the
waterfall.
All figures in USD thousands unless stated
2022A
Waterfalls use more space but make the model easier to follow
Long Term Debt
Beginning
110,000
90,000
80,000
This
structure is helpful since it clearly shows
when100,000
a group of
assets goes
into 70,000
Additions (Repayments)
(10,000)
(10,000) for(10,000)
(10,000)
(10,000)
service.
It also shows how much depreciation
is expected
that group
of assets
Ending
110,000
100,000of capital
90,000 investment
80,000
in
every future period. Essentially,
each period
is70,000
given its60,000
own dedicated row in the model. One disadvantage of using a waterfall structure
Interest
6.2% extends
6.2% for many
6.2% periods.
6.2%
6.2%
is
that Rate
they can use a lot of rows in a model that
Interest Expense
6,510
5,890 they 5,270
4,650
4,030
However,
a big advantage of waterfall formations
is that
are well spaced
out
and very clear. Essentially, they make the model easier to understand and follow.
The financial statements should just link to schedules or to each other
Fig 58: Long Term Debt Corkscrew
Keeping the complex calculations limited to the schedules means that we should
not need to perform calculations within the financial statements. For example, we
would not calculate the company’s revenue on the top line of the income
statement. We would build a Revenue Schedule and then link the resulting
revenue into the income statement. This limits the calculations to the schedules
corporatefinanceinstitute.com
and means that the company’s financial statements are primarily just links.
66
Financial Modeling Guidelines
Debt & Equity Schedules
Corkscrews are used extensively
when modeling debt and equity
The financial statements should just
link to schedules or to each other
Keeping the complex calculations limited to the
schedules means that we should not need to
Some of these structures we’ve discussed, like
perform calculations within the financial state-
corkscrews and waterfalls, are common in model
ments. For example, we would not calculate the
schedules. In fact, corkscrews are used extensive-
company’s revenue on the top line of the income
ly in debt and equity schedules. If a company only
statement. We would build a Revenue Sched-
has equity in its capital structure, then the debt
ule and then link the resulting revenue into the
schedules could be omitted unless the company
income statement. This limits the calculations
was considering debt financing in the future.
to the schedules and means that the company’s
The capital structure is one of the most
difficult parts of the model to build
financial statements are primarily just links.
Balancing the financial statements
is easier if they are just links
The models for mature companies with more
complex capital structures can have multiple
Only putting links in the financial statements
schedules for the company’s debt and its equity.
makes them easier to connect and balance. Any-
Levered buyout (LBO) models can have even more
one that has had the experience of trying to link
complex capital structures. In fact, the capital
and balance a company’s financial statements
structure can be one of the most difficult parts of
might agree that it is not always easy. Adding
a financial model to build. Using schedules that
complex calculations into the financial state-
provide the space necessary for detailed debt and
ments will make this process even more difficult.
equity calculations is highly recommended in all
Limiting the statements to just links will greatly
cases. Within these schedules, it is best to use a
simplify this process.
corkscrew to track each piece of capital individually. As a reminder, an example of a Long-Term Debt
corkscrew is shown on the previously in Fig 58.
Using a consistent structure with corkscrews will
help to simplify and track the various pieces of
debt and equity for the company.
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67
Financial Modeling Guidelines
Financial Statements
Many model designers will match the order in
which the statements have been presented by
Companies often have flexibility to
present their statements in any order
A company’s financial statements include the
income statement, cash flow statement, and the
balance sheet. Companies do not always present
these statements in the same order. In fact, the
the company, which can be the best solution in
many cases. However, one downside to this approach may be that the model components don’t
always flow from top-to-bottom.
The blue arrows below show the top
to bottom flow with the statements
governing bodies in many jurisdictions around
the world often give the companies the flexibility
When prioritizing top to bottom flow in a financial
to present the financial statements in any order,
model, it may be best to start with the income
provided that all the statements are included.
statement, then the cash flow statement, followed
by the balance sheet. This order is shown in Fig 59
They will often lead with a statement
that highlights a valuable attribute
We often find that companies may follow an order that highlights their most valuable attributes.
For example, a company with high quality assets
may present its balance sheet first. Similarly, a
company with an impressive level of profitability
may lead with its income statement.
Selecting the best order involves
balancing model flow and presentation
When planning the structure of a financial model, a decision will need to be made regarding the
order of the financial statements. When planning this order, we may need to balance what is
best from a presentation perspective with what
makes sense in terms of flow for the model.
corporatefinanceinstitute.com
on the next page. The blue arrows illustrate how
this order provides a good flow from the top to
bottom. The income statement always ends with
net income, which flows directly to the beginning
of the cash flow statement. The bottom of the
cash flow statement will show the company’s end
of period cash balance, which flows directly down
into the top of the balance sheet.
This order is sometimes preferred to
prioritize the top to bottom flow
While this order does not achieve perfect top
to bottom flow in all places, it is often preferred
unless there is a compelling reason to change
from this order. As discussed earlier, matching
the order in which a company presents its financial statements may be a good reason to deviate
from this order.
68
Financial Modeling Guidelines
Even a small error in the statements
can prevent them from balancing
Following our recommendations can
help to balance a financial model
Having the financial statements in an order for
To help with this process, we recommend avoid-
smooth top-to-bottom flow provides a good
ing calculations on the financial statements as
structure for a financial model. However, even
discussed earlier. This limits the statements to
with this structure, linking and balancing the
only links and will facilitate the process of con-
financial statements can prove to be quite diffi-
necting and balancing them. This, together with
cult. In fact, many people struggle to correctly
a structure that provides sound top-to-bottom
balance a company’s financial statements. Even
flow, will help professionals through this more
just one small error in the statements can easily
difficult part of the model building process.
Interest Income
preventNet
the
balance sheet
Interest Expense
24
Fig 24:
95
27
from balancing.
-
4
76
202
29
70
40
117
Simplified Financial Statements to Illustrate Flow
2023F
2024F
2025F
2026F
2027F
INCOME STATEMENT
Net Interest Expense
Net Income
520
7,033
566
7,907
517
7,934
617
8,316
999
8,649
CASH FLOW STATEMENT
Net Income
Ending Cash Balance
7,033
1,846
7,907
4,422
7,934
1,380
8,316
4,504
8,649
1,571
1,846
65,753
4,422
69,878
1,380
72,468
4,504
75,309
1,571
77,695
All figures in USD thousands unless stated
2022A
BALANCE SHEET
Cash
Liabilities & Shareholders' Equity
30 Fig 59:
Fig Simplified
30:
Example
with Currency
Format
Financial Statements
to Illustrate
Flow
All figures in thousands unless stated
2022A
Retained Earnings
Beginning
$61,014
Net Income
Dividends
$8,167
($1,633)
Ending
31
Fig 31:
2023F
$61,014
$67,548
2024F
$67,548
$9,106
($1,821)
$74,832
2025F
$74,832
$5,423
($1,085)
$79,171
2026F
$79,171
$5,606
($1,121)
$83,656
2027F
$83,656
$6,706
($1,341)
$89,020
Example with Number Format
corporatefinanceinstitute.com
All figures in USD thousands unless stated
2022A
2023F
2024F
2025F
2026F
2027F
69
Financial Modeling Guidelines
Circularity
In Fig 60 on the next page, we have shown the
two most common circular paths that occur in
Modeling community members often
have polarized views on circularity
Another element that can make financial statements difficult to connect and balance is that
they are often circular. Circularity is a subject
in financial modeling that is quite complex and
often debated. Members of the modeling com-
financial models. As indicated, there can be a circular loop that flows through a company’s cash
schedule and another loop through the revolver.
Let’s start by walking through the loop that flows
through the cash schedule.
We have used grey shading to highlight
the nodes on the cash loop
munity often have polarized views with respect
to circularity. Some avoid circularity since it re-
In Fig 60, we have highlighted the loop through
quires more advanced modeling and Excel skills
the cash schedule in the column showing the
and can lead to errors. Others will advocate that
information for 2024. We have also highlighted
it is necessary in order to make the models as
the nodes or stops along the circular loop with
accurate as possible.
grey shading to make its path clear. A company
that has a cash balance will earn interest in-
We prefer to discuss possible circularity
issues and how to address them
We like to take a more balanced approach and
understand the benefits as well as the risks
associated with model circularity. We strive to
provide our learners with a clear understanding
of how circular models work. We also discuss the
issues that can arise and how to address them if
they occur. Before we dive into a discussion on
circularity, it is important to understand where it
often occurs in financial models.
The most common circular loops
are from cash balances and revolvers
corporatefinanceinstitute.com
come, which lowers its net interest expense and
has a positive effect on net income. Net income
flows into the cash flow statement, increases
the change in cash, and leads to a higher ending
cash balance. The higher ending cash balance
has a positive impact on the interest income
calculation. This is due to the fact that interest
income is calculated based on the average of the
beginning and ending balance multiplied by the
interest rate. The higher interest income lowers
net interest expense, which flows back up to the
income statement to begin the loop again. In this
example, cash leads to incrementally more cash
as the model cycles through the iterations.
70
calculated based on the average of the beginning and ending balance multiplied
by the interest rate. The higher interest expense increases the net interest
Financial
Guidelines
expense and circles back
up to the Modeling
income statement.
Thus, as the company
draws on its revolver, it causes the need to draw more on the revolver. The
process is thus circular or depends on itself.
Fig 27:
Condensed Model Showing Two Common Circular Paths
All figures in USD thousands unless stated
2022A
2023F
2024F
2025F
CASH
2026F
2027F
REVOLVER
INCOME STATEMENT
Net Interest Expense
Net Income
27
202
76
70
117
7,033
7,543
7,934
8,316
8,649
7,033
7,543
7,934
8,316
8,649
CASH FLOW STATEMENT
Net Income
Change in Cash
Change in Cash Excluding Revolver
(11,195)
–
449
2,510
(1,254)
(3,134)
1,092
2,491
(2,541)
1,059
REVOLVER SCHEDULE
Beginning
-
3,134
2,042
-
2,541
3,134
(1,092)
(2,042)
2,541
(1,059)
3,134
2,042
-
2,541
1,482
Interest Rate
7.8%
7.8%
7.8%
7.8%
7.8%
Interest Expense
122
202
80
99
157
11,195
–
–
449
2,959
(11,195)
–
449
2,510
(1,254)
–
–
449
2,959
1,705
1.7%
1.7%
1.7%
1.7%
1.7%
95
–
4
29
40
Interest Expense
122
202
80
99
157
Interest Income
95
-
4
29
40
Net Interest Expense
27
202
76
70
117
Additions (Repayments)
Ending
-
CASH SCHEDULE
Beginning
Change in Cash
Ending
Interest Rate
Interest Income
11,195
NET INTEREST EXPENSE
Fig 60: Condensed Model Showing Two Common Circular Paths
corporatefinanceinstitute.com
71
Financial Modeling Guidelines
Drawing on the revolver leads to
incrementally more need to draw
that the model is using an average of beginning and end balances to calculate the interest
amounts. The reason model builders prefer to
Let’s bring up Fig 60 again to now walk through
use an average of beginning and ending balances
the circular loop involving the revolver. A compa-
is that this makes financial models more accu-
ny that is drawing on its revolver will be paying
rate. So, in order for our models to be as accu-
incrementally more net interest expense. The
rate as possible, they will need to be circular.
higher net interest expense will result in lower net
income, which flows into the cash flow statement.
As it progresses through the cash flow statement,
We discuss circularity topics in detail
in our financial modeling courses
it will change the line labeled as Change in Cash
Excluding Revolver. The Change in Cash Exclud-
Managing model circularity is something that
ing Revolver line then dictates how much may be
we discuss in detail in our courses on financial
added or repaid on the revolver and influences
modeling. In this document, we have covered
the ending revolver balance. This impacts the
two of the most common circular loops that
interest expense since it is calculated based on
appear in financial models. However, there are
the average of the beginning and ending balance
other circular paths that are required in more
multiplied by the interest rate. The higher interest
advanced financial models. Also, it is important
expense increases the net interest expense and
to understand how to properly manage circulari-
circles back up to the income statement. Thus, as
ty through the use of circuit breakers or formulas
the company draws on its revolver, it causes the
that allow the model to self-correct in the event
need to draw more on the revolver. The process is
that an error is introduced into one of the cir-
thus circular or depends on itself.
cular paths. Finally, an understanding of some
common techniques for finding circular loops
Circularity is needed in models to
make them as accurate as possible
is helpful. This allows us to be confident when
working with a circular model that someone else
has designed. These are all topics that we discuss
This means that a model with a schedule for cash
in detail in our courses.
and another schedule for its revolver will have
two circular loops. This will hold true provided
corporatefinanceinstitute.com
72
Financial Modeling Guidelines
Formatting
the model. A clean and professional format will
instill confidence in the audience and make them
Models should be well structured with
clean and professional formats
comfortable with the idea of using the model to
Let’s turn our attention now from model cir-
Great formatting is from the combined
impact of many individual factors
cularity over to formatting. While circularity is
inform their decisions.
needed for model accuracy, formatting is critically important in financial models for a number
In order to achieve the best possible format for a
of reasons. When considering formatting, we
financial model, a number of attributes will need to
need to remember that financial models are
be considered. Taken individually, these attributes
decision-making tools. In order for someone
may seem insignificant. But, together, they can
to be comfortable using the model to make an
have a very large impact on the overall look and
important decision, they must have confidence
feel of the model. Model formatting is something
in the model and be comfortable with it. One of
that is often overlooked or rushed in the process
the primary ways that we can instill confidence
of model design. However, it can be the difference
in others is by having a format that is well struc-
between a model that gains significant traction and
tured, clean, and professional.
trust and one that is discarded by the team.
A well-formatted model helps to
instill confidence in the audience
The format of a model is often the first thing that
readers notice. An example of a well-formatted
Income Statement is shown on the next page in
Fig 61. Before someone considers the amount or
magnitude of the figures in the model, they often
make an unconscious judgment about the overall
look of the model. This is the moment when the
formatting matters the most. It helps to ensure
that everyone has a good first impression of
corporatefinanceinstitute.com
73
attributes will need to be considered. Taken individually, these attributes may
seem insignificant. But, together, they can have a very large impact on the overall
Financial Modeling Guidelines
look and feel of the model. Model formatting is something that is often
overlooked or rushed in the process of model design. However, it can be the
difference between a model that gains significant traction and trust and one that
is discarded by the team.
Fig 18:
Income Statement
All figures in USD thousands unless stated
2022A
2023F
2024F
2025F
2026F
2027F
Revenue
52,185
56,428
58,134
59,537
60,854
62,077
COGS
31,368
30,337
30,898
31,356
31,783
32,177
Gross Profit
20,817
26,091
27,235
28,181
29,071
29,900
SG&A
7,708
7,939
8,138
8,300
8,425
8,551
Other
2,026
2,087
2,139
2,182
2,214
2,248
11,083
16,065
16,959
17,699
18,431
19,101
EBITDA
Depreciation
2,907
4,168
4,382
4,600
4,823
5,049
EBIT
8,176
11,897
12,577
13,098
13,609
14,052
Interest
2,448
2,520
2,520
2,520
2,520
2,520
EBT
5,728
9,377
10,057
10,578
11,089
11,532
–
–
132
2,353
2,586
2,793
Deferred Tax
1,577
2,344
2,382
291
186
90
Total Tax
1,577
2,344
2,514
2,645
2,772
2,883
Net Income
4,151
7,033
7,543
7,934
8,316
8,649
Current Tax
Fig 61: Income Statement
corporatefinanceinstitute.com
74
Financial Modeling Guidelines
Font Types
All workbooks and building blocks should have
the same font type throughout the model. The
A clear and professional font type
should be used in financial models
One of the formatting choices that model designers often consider early in the process is the font
type. The font type can have a significant impact
on the look of the model. There are thousands of
font colors and sizes can be adjusted in the model to highlight sections or convey key metrics.
However, the type of font used should always be
kept consistent throughout the model.
A change to the font type should
be considered for an entire schedule
font types available, and model designers have
plenty of choices here. Generally, a font should
In the font section in the home menu in Excel,
be selected that has a clean and professional
there are samples that provide an overview of
look. We need to remember that the model
the various fonts. Although these are helpful,
needs to be clear and instill confidence in the
they are often not sufficient to gauge the overall
reader. The selection of font type can help in this
impact of a font type change on the look and
regard. It is one of the primary formatting choic-
feel of the model. It can be helpful to select one
es that can establish the overall aesthetic of the
schedule of the model to view the impact of a
financial model.
change to the font type. For instance, making
multiple copies of a particular schedule or page
Many companies may have brand
standards that define the font type
in a model and setting each copy to a different
font type can be quite helpful.
If the model is being designed for a particular
company with established branding standards,
then the font used in the model should be consistent with those standards. Also, only one font
type should ever be used in the model.
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75
Financial Modeling Guidelines
Custom Number Formats
Branding standards often do not
specify the detailed number formats
We recommend avoiding currency
symbols to avoid a busy looking model
A decision that will need to be made regarding
Custom Number Formatting is whether or not to
Once the font type has been selected, the num-
display currency symbols in the number for-
ber formats should be considered. Again, it is
mats. In the examples on page 78 in Fig 63 and
important to check whether the model should
64, we have shown two options. The first one is
adhere to defined corporate branding standards.
a currency format, which places a dollar sign at
While standards will often set the required font
the beginning of each number. The only differ-
type, they don’t always define all aspects of the
ence with the second format is that it omits the
number formats.
dollar sign. As you can see, the second option
We can define how positives, negatives,
zeroes, and text are displayed
In Fig 62 on the next page, we have shown the
Format Cells dialogue box, which can be accessed using the CTRL 1 shortcut. As shown in
Fig 62, we have navigated down the left-hand
looks cleaner with more white space since it
omits the repetitive dollar signs. To make up for
the missing dollar signs in Fig 64, the note at the
top left has been adjusted to ‘All figures in USD
thousands unless stated.’ This note provides adequate information to the reader about the units
without the need to repeat the dollar signs.
side to the Custom Category. There is a long syntax that has been keyed into the Type box. This is
where we can control the formatting that Excel is
using for numbers. With these settings, we can
define the way Excel displays positives, negatives, zeroes, and text. Setting this syntax up is
referred to as Custom Number Formatting.
corporatefinanceinstitute.com
76
Financial Modeling Guidelines
Fig 62: Custom Number Formatting
corporatefinanceinstitute.com
77
only difference with the second format is that it omits the dollar sign. As you can
We recommend
avoiding
currency
symbols
avoid
a busy
looking
model
see,
the second option
looks
cleaner with
moreto
white
space
since
it omits
the
Financial
Modeling
Guidelines
repetitive dollar signs. To make up for the missing dollar signs in Fig XX, the note
A decision
thathas
willbeen
needadjusted
to be made
regarding
Custom
Number Formatting
is
at
the top left
to ‘All
figures in
USD thousands
unless stated.’
whether
not to display
currency
symbols
number
formats.
In the
This
noteor
provides
adequate
information
to in
thethe
reader
about
the units
without
examples
below
in
Fig
XX
and
XX,
we
have
shown
two
options.
The
first
one is a
the need to repeat the dollar signs.
currency format, which places a dollar sign at the beginning of each number. The
only difference with the second format is that it omits the dollar sign. As you can
Fig
30:
Example with Currency Format
see, the second option looks cleaner with more white space since it omits the
All
figures in thousands
stated
2023F
2024F signs
2025F
2026F
2027F
repetitive
dollarunless
signs.
To make up2022A
for the missing
dollar
in Fig XX,
the note
at the top left has been adjusted to ‘All figures in USD thousands unless stated.’
This note
provides adequate information to the reader about the units without
Retained
Earnings
the
need
to
repeat the dollar signs.
Beginning
$61,014
$67,548
$74,832
$79,171
$83,656
Net Income
Fig
30:
Dividends
$8,167
$9,106
$5,423
$5,606
$6,706
($1,821)
($1,085)
($1,121)
($1,341)
$67,548
2023F
$74,832
2024F
$79,171
2025F
$83,656
2026F
$89,020
2027F
Example with Number Format
$61,014
$67,548
$74,832
$79,171
$83,656
$8,167
2023F
$9,106
2024F
$5,423
2025F
$5,606
2026F
$6,706
2027F
($1,633)
($1,821)
($1,085)
($1,121)
($1,341)
$67,548
$74,832
$79,171
$83,656
$89,020
61,014
67,548
74,832
79,171
83,656
8,167
9,106
5,423
5,606
6,706
(1,821)
(1,085)
(1,121)
(1,341)
67,548
2023F
74,832
2024F
79,171
2025F
83,656
2026F
89,020
2027F
61,014
67,548
74,832
79,171
83,656
8,167
9,106
5,423
5,606
6,706
(1,633)
(1,821)
(1,085)
(1,121)
(1,341)
67,548
74,832
79,171
83,656
89,020
Example with Currency Format
($1,633)
Ending
All figures in thousands unless stated
$61,014
2022A
Retained Earnings
Fig
31:
Beginning
Fig 63:
Example
with
Currency
AllNet
figures
in USD
thousands
unless Format
stated
Income
2022A
Dividends
Ending Earnings
Retained
$61,014
Beginning
Net Income
Fig
31:
Dividends
Example with Number Format
(1,633)
Ending
All figures in USD thousands unless stated
61,014
2022A
Retained Earnings
Beginning
Net Income
Dividends
Ending
61,014
Fig 64: Example with Number Format
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78
Financial Modeling Guidelines
We prefer to use brackets for negatives
Some model designers use red for
Sometomodel
use
red
for negatives
makedashes
them stand
out more
andto
simple
for zeroes
negatives
makedesigners
them stand
out
more
We also have the ability to control the way negative numbers and zeroes are
The third example in Fig 67 shows our preferdisplayed with custom formats. In Fig XX-XX below, we have shown a few
for formatting
for negative
numbers and
tive numbers
and The
zeroes
areexample
displayedin
with
examples.
first
FigcusXX shows ence
negatives
formatted
using a minus
zeroes.
As shown,
we tend
to usewith
brackets
tom formats.
In Fig
65-67,not
webe
have
shown
a few as the
sign. This
would
our
preference
negatives
are easy
to miss
only for
a minus
sign.example
The formatting
in thenegsecond example
Fig XXchanging
is slightly
negativesin
without
thebetter,
colour to red.
examples.
The first
in Fig 65 shows
with
the
negatives
formatted
using
brackets
which
are
much
easier
to
spot.
Using brackets for negatives is the preference for
atives formatted using a minus sign. This would
Although some designers prefer using a red color for negatives, we tend not to
financial model designers in many jurisdictions
not be our preference as the negatives are easy
do this as we reserve colors to indicate other attributes about the numbers, as we
and is also very common in the accounting field.
to miss
with
only a shortly.
minus sign. The formatting
will
discuss
We also have the ability to control the way nega-
We also like using a dash for zeroes as this makes
in the second example in Fig 66 is slightly bet-
Wethe
prefer
to use
brackets
negatives and
simpleformatting
dashes for
the model
lookzeroes
cleaner and also
ter, with
negatives
formatted
usingfor
brackets
makes the zeroes easy to spot.
which are much easier to spot. Although some
The third example below in Fig XX shows our preference for formatting for
designers prefer using a red color for negatives,
negative numbers and zeroes. As shown, we tend to use brackets for negatives
we tend
not to do
this as we
to Using brackets for negatives is the preference
without
changing
thereserve
colourcolors
to red.
indicate
attributes
about
the numbers,
as jurisdictions and is also very common in
forother
financial
model
designers
in many
accounting
we willthe
discuss
shortly. field. We also like using a dash for zeroes as this makes the model
formatting look cleaner and also makes the zeroes easy to spot.
Fig 32:
Negatives With a Minus Sign
All figures in USD thousands unless stated
2022A
2023F
2024F
2025F
2026F
2027F
Beginning
61,014
52,847
46,741
48,797
54,403
Net Income
-8,167
-6,106
2,056
5,606
6,706
0
0
0
0
0
52,847
46,741
48,797
54,403
61,109
Retained Earnings
Dividends
Ending
Fig 33:
61,014
Negatives With Red Colour and Brackets
Fig 65:
a Minus
All Negatives
figures in USDWith
thousands
unless Sign
stated
2022A
2023F
2024F
2025F
2026F
2027F
Beginning
61,014
52,847
46,741
48,797
54,403
Net Income
(8,167)
(6,106)
2,056
5,606
6,706
0
0
0
0
0
52,847
46,741
48,797
54,403
61,109
Retained Earnings
Dividends
Ending
corporatefinanceinstitute.com
61,014
79
the accounting field. We also like using a dash for zeroes as this makes the model
Retained
Earnings
formatting
look cleaner and also makes the zeroes easy to spot.
Financial Modeling
Guidelines
61,014
52,847
46,741
Beginning
Net Income
Dividends
Fig
32:
Ending
-8,167
Retained
Fig 33: Earnings
Negatives
Beginning
61,014
2022A
Net Income
Dividends
Retained Earnings
Ending
Beginning
2022A
61,014
Net Income
Dividends
Fig
33:
Ending
Negatives With Red Colour
All figures in USD thousands unless stated
Retained
Fig 34: Earnings
Negatives
Beginning
61,014
2022A
2022A
Fig 66: Net
Negatives
Income With Red Colour and Brackets
Dividends
Retained
Ending Earnings
Beginning
61,014
Net Income
Ending
5,606
6,706
0
0
0
0
0
52,847
2023F
46,741
2024F
48,797
2025F
54,403
2026F
61,109
2027F
61,014
2023F
-8,167
52,847
2024F
-6,106
46,741
2025F
2,056
48,797
2026F
5,606
54,403
2027F
6,706
0
0
0
0
0
52,847
61,014
46,741
52,847
48,797
46,741
54,403
48,797
61,109
54,403
(8,167)
(6,106)
2,056
5,606
6,706
0
0
0
48,797
2025F
54,403
2026F
61,109
2027F
and0
52,847
2023F
0
Brackets
46,741
2024F
with Brackets & Dashes for Zeroes
All figures in USD thousands unless stated
Dividends
Fig
34:
2,056
With Red Colour and Brackets
All figures in USD thousands unless stated
61,014
2023F
(8,167)
52,847
2024F
(6,106)
46,741
2025F
2,056
48,797
2026F
5,606
54,403
2027F
6,706
0
0
0
0
0
52,847
61,014
46,741
52,847
48,797
46,741
54,403
48,797
61,109
54,403
(8,167)
(6,106)
2,056
5,606
6,706
–
–
–
Negatives with Brackets & Dashes
for –Zeroes
–
52,847
2023F
46,741
2024F
48,797
2025F
54,403
2026F
61,109
2027F
Beginning
61,014
52,847
46,741
48,797
54,403
Net Income
(8,167)
(6,106)
2,056
5,606
6,706
All figures in USD thousands unless stated
61,014
2022A
54,403
-6,106
Negatives With a Minus Sign
All figures in USD thousands unless stated
48,797
Retained Earnings
Dividends
Ending
61,014
–
–
–
–
–
52,847
46,741
48,797
54,403
61,109
Fig 67: Negatives with Brackets & Dashes for Zeroes
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80
Financial Modeling Guidelines
Font Colors
We recommend using blue font for
inputs and black for formulas or links
Other types of links include workbook
links, hyperlinks, and external data
There are other categories of links which can
be marked with a different font color. Some
Font colors are often used to communicate
of these types of links are listed on page 83 in
information about the contents of a cell. It has
Fig 68, which shows the Macabacus AutoColor
become common in most jurisdictions around
settings. Apart from using green for worksheet
the world to use blue font for inputs and black
links as discussed, there doesn’t seem to be
font for formulas or links. A model designer that
a clear convention for the colors of the other
is striving to keep the number of font colors to
types of links. These additional categories of
a minimum should use at least these two colors
links include workbook links, hyperlinks, and
to help users locate inputs. In order to be consis-
external data. Workbook links are connections
tent with the global financial modeling communi-
to other workbooks or Excel files. A hyperlink
ty, we recommend blue font for inputs and black
could include a link to an external website or a
font for formulas or links.
link to another location within the same work-
It is becoming more common to use
green font for links to other tabs
Some model designers extend beyond the use
of blue and black font and utilize other colors to
signify cells with other types of data. It is starting
book. There are also links to external data to
consider. Examples of external data providers
include Capital IQ, Bloomberg, Factset, and
PitchBook. Microsoft has also recently added
external data types to Excel, which allows users
to access a number of different data sources.
to become more common to use green font to
indicate a link to another worksheet. When this
is deployed, it means that links within one worksheet are in black font, and links to other worksheets are in green font. This can help show users
where data is entering from another worksheet.
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81
Financial Modeling Guidelines
Macabacus can AutoColor a selection,
sheet, or an entire workbook
Partial inputs should always be avoided
when building financial models
It is worth highlighting the Macabacus AutoColor
Partial inputs should be avoided when building
settings, which were shown in Fig 68. Macabacus
financial models since they are difficult for oth-
has the ability to AutoColor a selection, sheet,
ers to locate and will not show up when printed.
or an entire workbook using the settings shown
When models are first built, they often don’t
on the next page. This is particularly helpful for
contain any partial inputs. These are often added
models that were not colored correctly when
over time by users who are rushed and looking
built. It is also very valuable for models that were
for ways to make quick modifications to a model.
constructed by another team and may not be up
This can present problems as these partial inputs
to the standards that you are accustomed to. It
are often left behind and can accumulate over
can also AutoColor on Entry, which is particularly
time. The AutoColor tool from Macabacus can
useful when loading actual numbers in as inputs
locate these quickly so that they can be repaired.
over formulas. One of the most valuable features
in the AutoColor list is its ability to locate partial
inputs, which we will discuss next.
Partial inputs are very difficult to
find using standard Excel tools
Another category of inputs worth mentioning is
partial inputs. An example of a partial input is
shown on the next page in Fig 69, where we have
added 45 to the Net Income in 2024. Examples
like these are considered to be inputs, but they
are quite difficult to find in models. This is because Excel categorizes anything starting with an
equals sign as a formula. Hence these show up as
formulas in a search using standard Excel tools.
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82
Financial Modeling Guidelines
Interest Income
Net Interest Expense
24
Fig 24:
95
27
2022A
29
70
40
117
2023F
2024F
2025F
2026F
2027F
INCOME STATEMENT
Net Interest Expense
Net Income
520
7,033
566
7,907
517
7,934
617
8,316
999
8,649
CASH FLOW STATEMENT
Net Income
Ending Cash Balance
7,033
1,846
7,907
4,422
7,934
1,380
8,316
4,504
8,649
1,571
1,846
65,753
4,422
69,878
1,380
72,468
4,504
75,309
1,571
77,695
BALANCE
SHEET AutoColor Settings
Fig 68:
Macabacus
Cash
Liabilities & Shareholders' Equity
Fig 30:
Example with Currency Format
All figures in thousands unless stated
2022A
Retained Earnings
Beginning
Dividends
Ending
Fig 31:
2023F
2024F
$61,014
$67,548
$8,167 =J454+45
$9,106
Net Income
31
4
76
Simplified Financial Statements to Illustrate Flow
All figures in USD thousands unless stated
30
202
$61,014
2025F
2026F
2027F
$74,832
$79,171
$83,656
$5,423
$5,606
$6,706
($1,633)
$67,548
($1,821)
$74,832
($1,085)
$79,171
($1,121)
$83,656
($1,341)
$89,020
2023F
2024F
2025F
2026F
2027F
Example with Number Format
All figures in USD thousands unless stated
2022A
Fig 69: Example of a Partial Input
Retained Earnings
Beginning
Net Income
Dividends
Ending
corporatefinanceinstitute.com
61,014
61,014
8,167
67,548
9,106
74,832
5,423
79,171
5,606
83,656
6,706
(1,633)
67,548
(1,821)
74,832
(1,085)
79,171
(1,121)
83,656
(1,341)
89,020
83
Financial Modeling Guidelines
Marking Units
We prefer using a global units marker
to avoid marking units for each row
It is a prudent idea to dedicate one
column specifically for marking units
In the example below in Fig 70, we marked all
units individually for each row. While this makes
Always marking units clearly is very important
things very clear, it can also make the model look
in financial models. When thinking about the
cluttered and busy. If most of the rows in this
structure of a model, it is prudent to consider
model are expected to be in units of (USD 000),
whether a units column may be appropriate. An
then we would use a global units marker, which
example of a units column is shown below in Fig
is preferred in most cases. An example of this
70, where we have marked (USD/Unit) for some
is shown on the next page in Fig 71, where we
of the It
costs.
units column
a single
column
is aAprudent
ideaisto
dedicate
one column
specifically
marking
units
have
included thefor
following
marker
in the top left
dedicated for the purpose of marking the units
corner ‘All figures in USD thousands unless indi-
Always
clearly
isto
very
important in financial models. When thinking
for each
row. Itmarking
is usuallyunits
a prudent
idea
have
cated.’ With this marker in place, we only need
about the structure of a model, it is prudent to consider whether a units column
to use the
column
when
theXX,
units deviate
may be appropriate. An example of a units column
is units
shown
below
in Fig
column
shouldwe
also
be kept
consistent
from top
thecosts.
globalAmarker.
where
have
marked
(USD/Unit)
for somefrom
of the
units column is a
to bottom
within
a worksheet
and for
should
be
single
column
dedicated
thealso
purpose
of marking the units for each row. It is
usually aacross
prudent
idea totabs
haveinaa units
kept consistent
the various
file. column in any financial model. The units
column should also be kept consistent from top to bottom within a worksheet
and should also be kept consistent across the various tabs in a file.
a units column in any financial model. The units
Fig 36:
Using a Units Column
2022A
2023F
2024F
2025F
2026F
2027F
COST SUMMARY
Variable Costs
(USD/Unit)
12.39
12.76
12.95
13.11
13.25
13.39
Fixed Costs
(USD/Unit)
42.76
42.63
42.63
42.63
42.63
42.63
Total Costs
(USD/Unit)
55.15
55.40
55.59
55.74
55.89
56.02
Variable Costs
(USD 000)
6,568
6,989
7,200
7,374
7,537
7,688
Fixed Costs
Total Costs
(USD 000)
22,668
29,236
23,348
30,337
23,698
30,898
23,983
31,356
24,246
31,783
24,489
32,177
(USD 000)
We prefer using a global units marker to avoid marking units for each row
Fig 70: Using a Units Column
In the previous example in Fig XX, we marked all units individually for each row.
While this makes things very clear, it can also make the model look cluttered and
busy. If most of the rows in this model are expected to be in units of (USD 000),
then we would use a global units marker, which is preferred in most cases. An
corporatefinanceinstitute.com
example of this is shown below in Fig XX, where we have included the following
marker in the top left corner ‘All figures in USD thousands unless indicated.’ With
84
busy. If most of the rows in this model are expected to be in units of (USD 000),
then we would use aFinancial
global units marker,
whichGuidelines
is preferred in most cases. An
Modeling
example of this is shown below in Fig XX, where we have included the following
marker in the top left corner ‘All figures in USD thousands unless indicated.’ With
this marker in place, we only need to use the units column when the units deviate
from the global marker.
Fig 37:
Using a Global Units Marker
All figures in USD thousands unless stated
2022A
2023F
2024F
2025F
2026F
2027F
COST SUMMARY
Variable Costs
(USD/Unit)
12.39
12.76
12.95
13.11
13.25
13.39
Fixed Costs
(USD/Unit)
42.76
42.63
42.63
42.63
42.63
42.63
Total Costs
(USD/Unit)
55.15
55.40
55.59
55.74
55.89
56.02
6,568
6,989
7,200
7,374
7,537
7,688
22,668
29,236
23,348
30,337
23,698
30,898
23,983
31,356
24,246
31,783
24,489
32,177
Variable Costs
Fixed Costs
Total Costs
Fig 71: Using a Global Units Marker
Naming
It is much more common to find static names in
Excel supports both static
naming and dynamic naming
discussion here on static naming.
There are two types of naming that can be done
financial models. For this reason, we will focus our
The most common type of static naming
involves renaming individual cells
in Excel: static naming and dynamic naming. Static
naming involves modifying the default name of a
Every cell in a spreadsheet has a default name
cell or an array. It is referred to as ‘static’ since the
assigned that is made up of its column and row
location of the cell or array is fixed and does not
number. For instance, the cell located in Column
move. By contrast, a dynamic name has at least
A and Row 1 is assigned the name A1. This de-
one component that moves. Dynamic naming
fault naming system works really well as it is easy
can be useful when charting to produce a graph
for someone to locate any cell by referring to the
of an expanding range of data. This is a skill that
appropriate column and row.
we cover in some of our advanced Excel courses.
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85
Financial Modeling Guidelines
Cells names can be changed from
their default column/row format
locating cell C2 in the correct worksheet. However,
the downside to using static names in this way is
that the model becomes more difficult to audit. A
The names of cells and even the names of
person checking the model may not know where
arrays can be changed in Excel. As mentioned
TaxRate is physically located or how to navigate
earlier, this is referred to as static naming. We
there to check the figure. This is why static nam-
have shown an example of static naming below
ing can expedite the model build process, but it
in Fig 72. In this example, we have loaded the
can make a model review more difficult.
tax rate of 35% into cell C2. Then, we changed
the default name of this cell from C2 to TaxRate
by typing ‘TaxRate’ into the Name Box in the top
Deleting a defined name can lead to
a litany of errors throughout the file
left corner. Many model designers use static
naming like this when building a model.
The other issue is that if the name TaxRate is
deleted from the file, the formulas that were de-
Static naming makes models easier
to build but more difficult to audit
pendent on it do not revert back to their default
cell names. This could result in a litany of errors
showing up throughout the model. This is anoth-
In Fig 73 below, we have shown how the name
er potential issue that supports the idea of avoid-
TaxRate can now be used in a formula. This
ing cell naming in financial models. Our approach
can make formulas faster to build since we can
to this subject in most cases would be to simply
simply type TaxRate into a formula instead of
use standard cell references.
EBT
Taxes
$3,441
=C6*TaxRate
Fig 73: Using Static Names in Formulas
Fig 72: Defining Static Cell Names
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86
Financial Modeling Guidelines
The Name Scrubber lists name
dependencies and can unapply names
hidden. More importantly, it lists any dependent
cells in the bottom window. In the example below,
we can see that cell C7 is dependent on the cell
In the event that someone finds themselves in a
named TaxRate. The Name Scrubber gives us the
model that has a lot of defined names, the Name
option to unapply names, which reverts formulas
Scrubber from Macabacus can be very helpful.
back to their native cell locations. This can be a
As shown below in Fig 74, it can locate all names
very helpful first step towards removing names
in a model regardless of whether or not they are
from a model as a part of a clean-up process.
Fig 74: Macabacus Name Scrubber
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87
Financial Modeling Guidelines
Macros
Macros can often be avoided by understanding everything that Excel can do
Excel is evolving more quickly, and
many new features have been added
So, we believe that there are some legitimate use
cases for macros. And for this reason, we don’t
A document on modeling guidelines would not
categorically discourage them. We do encourage
be complete without a discussion on the use of
model designers to explore everything that is
macros. In many cases, we find that model build-
available in a modern version of Excel. Often,
ers use macros for things that can be done using
the functionality that they are looking for exists
standard features that already exist in Excel or
with a standard version of the software or by
in a robust add-in like Macabacus. In this sense,
installing an add-in like Macabacus. Also, Excel
macros can sometimes be indicative of a model
has been evolving in recent years, and there are
builder that doesn’t know about all the tools and
many features that some users wouldn’t yet be
features that are available without writing code.
aware of.
There are times when macros are needed
to go beyond what is possible
However, there are times when we are truly
limited by the functionality of the software. In
these cases, we may need to add some code to
complete something beyond the abilities of the
software. This is where we are open to the use
of macros if they are well written and properly
documented. For example, we have built macro-enabled M&A models that contemplate the
acquisition of multiple targets. With the click of a
button, the model iterates through various scenarios and updates an analysis showing outputs
like IRR and accretion/dilution for each scenario.
corporatefinanceinstitute.com
Protection
There are many ways to protect
the integrity of a financial model
Designing, building, and reviewing a financial
model requires a considerable investment of
time and effort. Once the model has been completed and reviewed, it is very important to
protect its integrity. There are a number of ways
to add protection to a financial model, which we
will discuss.
88
Financial Modeling Guidelines
The entire workbook can be protected
with a required password
to access this functionality is shown below in Fig
75. From the Excel interface, the user would click
File, Info, Protect Workbook, then Encrypt with
The first way to add protection in Excel is by
Password. This setting can also be accessed with
protecting the entire file or workbook with a
the keyboard by clicking ALT FIP to get into File
password. This means that the file can not be
Information.
opened at all without the password. The setting
Fig 75: Protecting the Workbook
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89
Financial Modeling Guidelines
It is more common to control file
access with shared drive settings
A protected file structure prevents users
from deleting tabs or worksheets
While protecting the workbook may seem at-
This type of protection can be particularly use-
tractive, it is becoming less common these days
ful since it protects the structure of a workbook.
for a couple of reasons. First, file access can now
This means that a user without the password
be easily controlled with cloud storage. Files can
cannot delete, rename, or move existing tabs
be moved into certain folders that have restrict-
or worksheets in the model. This can be seen
ed access. The access to these folders can be
clearly in Fig 77 on the next page, where many
controlled through shared drive settings. This is
of the tab options are disabled or greyed out.
quite convenient as it is relatively easy to man-
With this type of protection in place, users are
age who has access to those folders and remove
also not able to insert any new sheets. Without
access to certain individuals if necessary. The
the ability to create or delete worksheets, the
other reason that workbook protection is not as
structure of the model is protected. This can
common is that passwords can get lost. Once a
be particularly useful for Cover pages, which
password is lost, even company administrators
often contain legal disclaimers. With the model
will not be able to open the file.
structure protected, users would not be able to
delete the Cover page and its important legal
The structure of a financial model can
also be protected with a password
disclaimers without the password.
The next level of protection that could be applied
is to the structure of a workbook. The settings
for this type of protection can be found in the
Review section of the Excel ribbon, as shown
in the first image on the right in Fig 76. By clicking the ‘Protect Workbook’ icon, we are able to
protect the structure of the workbook. The user
will then be prompted for a password to protect
the structure of the file, as shown in the second
image in Fig 76.
Fig 76: Protecting File Structure
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90
Financial Modeling Guidelines
Protecting cells with formulas
or links can be particularly useful
The final level of protection that could be considered is protection to individual cells. This can be
particularly useful but requires more consideration
and time to set up. Below in Fig 78, we have shown
an excerpt from a revenue schedule. As discussed
earlier in this document, the inputs are shown in
blue font with black font indicating a formula or
a link within the worksheet. Once this model has
been thoroughly reviewed, it may be prudent to
limit access to only the inputs that have blue font.
A couple of steps are required
for
this typecells
of protection
Protecting
with formulas or links can be particularly useful
The final level of protection that could be considered is protection to individual
Incells.
orderThis
to do
this,
couple of steps
arebut
required.
can
beaparticularly
useful
requires more consideration and time to
First,
we need
cells in
set up.
Belowtoinlock
Figthe
XX,appropriate
we have shown
anthe
excerpt from a revenue schedule. As
discussed
earlier
in
this
document,
the
inputs
are shown in blue font with black
worksheet. We can do this in the Format Cells
font indicating a formula or a link within the worksheet. OnceFig
this
has Worksheet Options
77:model
Disabled
dialogue
box
(CTRL
1)
as
shown
on
the
next
page
in
been thoroughly reviewed, it may be prudent to limit access to only the inputs
that
blue
font.
Fig
79.have
This is
where
we can control the protection
attributes for a given cell.
Fig XX: Revenue Schedule with Inputs Shown in Blue Font
Revenue Schedule
2019A
All figures in USD thousands unless stated
2020A
2021A
2022F
2023F
2024F
2025F
2026F
2.0%
2.1%
2.0%
2.0%
2.0%
2.0%
2.0%
1,579
OPERATIONS
Sales Volume Growth
Sales Volume
(Units/Day)
1,374
1,401
1,430
1,459
1,488
1,518
1,548
Plant Capacity
(Units/Day)
1,500
1,500
1,500
1,500
1,500
1,500
1,500
1,500
91.6%
93.4%
95.3%
97.2%
99.2%
101.2%
103.2%
105.3%
Operational Efficiency
A couple of steps are required for this type of protection
Fig 78: Revenue Schedule with Inputs Shown in Blue Font
In order to do this, a couple of steps are required. First, we need to lock the
appropriate cells in the worksheet. We can do this in the Format Cells dialogue
box (CTRL 1) as shown below in Fig XX. This is where we can control the
protection attributes for a given cell.
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91
Financial Modeling Guidelines
Fig 79: Locking Cells in the Protection tab
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92
Financial Modeling Guidelines
With the cell attributes set, we can
now select a password to lock them
Now that locked or unlocked attributes have been
set for the appropriate cells, we can activate the
protection and select a password. This can be done
by clicking into the Review section of the Excel
ribbon and selecting Protect Sheet, as shown in the
first image on the right in Fig 80. This brings up the
dialogue box shown in the second image below,
where we can select a password to complete the
protection of the cells.
We protect the logic of the model by only
unlocking cells with inputs
As indicated in the second image in Fig 80, there
are many options available. As shown in this example, we have unchecked most of the options,
only allowing the user to select cells without
a password. In this case, all other options will
require the user to have a password. This means
that a user that does not have the password
will only be able to modify model inputs. This
will prevent them from changing any cells with
Fig 80: Protecting Sheet Structure
formulas or links. This effectively will protect the
logic and functionality of the financial model by
only allowing them to modify its inputs.
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Financial Modeling Guidelines
More Resources
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Macabacus Help Center: https://macabacus.com/help
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seamlessly transfer to real-world scenarios.
The FMVA® program
The CBCA™ will enhance
The CMSA® program will
The BIDA™ program will
covers all of the skills
your team’s knowledge
teach your team vital trad-
upskill your team across
required to turn your team
across the entire lending
ing strategies, as well as
various programming and
into world-class financial
process and ready them to
market conventions and
analytics tools, enabling
analysts and Excel power
excel as a credit analyst in
the tools used in capital
them to analyze data like
users. Learn more.
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