Financial Modelling in Practice, with CD-ROM

Contents

Background, Objectives and Approach

About The Author

Acknowledgements

1 Building Blocks: Selected Excel Functions and Tools

Core Functions for Financial Modelling

Arithmetic Operations

Logical Operations

Financial Calculations

Database Functions, Features and Pivot Tables

Statistical Functions

Lookup and Reference Functions

Text Functions

Information Functions

Array Functions, Formulae and Matrix Calculations

GoalSeek and Solver

The Analysis ToolPak and Other Add-ins

Selected Excel Short-cuts

2 Principles of Modelling

What is a Good Model?

Model Design

Selection of Model Variables and their Dependencies

Level of Detail or Aggregation

Model Structure and Planning

Logical Flow

Compactness

Named Ranges

Circular References

Model Building

Formatting and Comments

Creating Robust Formulae

Results Presentation and Other Uses of Sensitivity Analysis

General Remarks on Presentation

Using Data Tables to Conduct Sensitivity Analysis

Hiding and Protecting Models

Model Auditing

3 Financial Statement, Cash Flow and Valuation Modelling

Financial Statement Modelling: Core Points and Example

General Comments

Income Statement Forecasting

Balance Sheet Forecasting

Cash Flow Statement Forecasting

Error Checks and Feasibility Checks

General Error Checking Tools

Feasibility Checking and Ratio Analysis

Adding Generality

Cash Flow Valuation

Calculation of Free Cash Flow

Discounting Free Cash Flow

Terminal Value Calculations

Further Adjustments

Sensitivity Analysis

4 Risk Modelling

Benefits and Challenges of Risk Modelling

The Risk Modelling Process

An Introduction to Simulation Techniques

The Language of Probability Distributions

Quick Guide to using @RISK

Types of Dependency Relationships in Risk Models

The Selection and Use of Distributions

Pragmatic Approaches and Distributions

Data-Driven

Michael Rees gained a BA with First Class Honours and a Doctorate in Mathematics from Oxford University in 1985 and 1988 respectively. In 1992 he gained an MBA with Distinction from INSEAD, and in 2003 graduated in first position on the Certificate in Quantitative Finance program, also winning the Wilmott award.
Since 2002 Michael has worked independently as a consultant and trainer in financial modelling. Prior to this he worked as a strategy consultant with Braxton Associates and Mercer Management Consulting, and also as an analyst at J.P. Morgan.
Michael lives in Richmond, UK. He was born in Canada, has lived in several countries, and is fluent in French and German.