Using Financial Models
CWCF Conference 2009
By
Peter Hough
Objective

To learn to develop and use basic financial
models to assist with budgeting and other
financial decisions.
Benefits

Assists in decision making:
– Shows relationship between financial
parameters
– Easy comparison of options
– Sensitivity analysis – easy to vary the
assumptions of multiple relationships
– Helps to make judgments on level of risk a
decision carries
Basic Skill & Knowledge
Required
Basic spreadsheet skills – formulas, linking
cells and worksheets etc.
 Understanding of financial concepts

– E.g. – margins, expenses, revenue, assets, etc.
Building a Model

Determine the issue the model is to address
 Identify the financial factors involved
 Determine the relationships between the
financial factors
 Set up spreadsheet based upon relationships
including determining which variables
(assumptions) you want to be able to change
for the analysis
Sample Models
Profit Sharing – Equity – Retirement
 Setting wage rates and prices
 Budgeting/forecasting
 Cash flow

Let’s Build a Model

Suggest a relatively simple financial issue
that your co-op is facing.
 What at the relevant financial concepts?
 What are the key relationships?
 How would you begin to structure the
model?