DEMO Excel Tips

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Financial Modeling in Excel

2011


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Excel as the most important tool for modeling

• Excel is one of the most widely used tools in financial industry

– Easy to use

– High reach & access to software across geographies

– Flexibility

– Robustness

– Inbuilt features (Most people would not even be using 95% of the features) & Extendibility

– Modular and Object Oriented Architecture

• Excel as a data-store

– Easy to store and retrieve information – Flexibility to put many data-types in the same sheet

• Functions and a range of features

– Excel is easily extendible to be used as a Modeling tool

• Modeling Context

– Understand the industry models being used

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Create your own models Rather than just using them – Improve & enhance productivity in work

– Extend these models for your use

– Debug Problems

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Key aspects of Modeling & Excel Usage

• Building a ROBUST model is a must for other people to use your model

– It should generate the correct results

– It should have proper area for Inputs/ Outputs

– It should be able to handle errors properly

– Naming/ Labeling of data items should be done properly

– Accidental changing of model parameters should be avoided

– The model should be easy to understand on computer and in printout

– Reusable components can be made in the excel sheet, which can be made later

• SPEED is the key in modeling

– A large model might have multiple excel sheets and a lot of formulas and calculations. It is necessary tonavigate through the excel sheet in a speedy manner and understand it

– It is a fact that mouse is 5 times slower than using the keyboard to use excel. Due to heavy involvementof the users, having a strong command over the keyboard shortcuts is a must!

– A well designed excel sheet is easy to understand as well

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Cell Referencing - $

• Use $ for Absolute Reference

– A1 vs $A1 vs A$1 vs $A$1

• What happens when you copy paste cells

• Change the referencing of a cell by F2 + F4

Source Destination

$A$1 $A$1

A$1 C$1

$A1 $A3

A1 C3

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Refer Worksheet A


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Arrays in Excel

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• Array (Can be loosely thought of as a list) is agroup of cells or values that Excel treats as a

unit – No longer treats the cells individually, but list of

cells as an individual entity

– Since individual cells are not independententities, so they cannot be changed individually

– Enables apply a formula to every cell in the rangeusing just a single operation

• For any matrix Operation

– Calculate the exact size of the transposed Matrix

• Select the appropriate range

– Use the function

– Press SHIFT + CTRL + ENTER

• Use Worksheet D

To Run Array Functions – Remember to use CTRL + SHIFT + ENTER


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Frequently Used Array functions

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Function Name Function

SUMPRODUCT() To Sumproduct 2 matrices

TRANSPOSE() To transpose a matrix

MATCH() Match and Index are used in conjunction as a lookup function

INDEX() Match and Index are used in conjunction as a lookup function

VLOOKUP() To lookup for a particular value in array, with the starting column acting as a

lookup reference

COLUMN() Returns the column number of the cell referenced

ROW() Returns the row number of the cell referenced

HLOOKUP() To lookup for a particular value in array, with the top row acting as lookupreference


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