Excel Tips

© EduPristine Financial Modeling © EduPristine – www.edupristine.com

Financial Modeling in Excel

© EduPristine Financial Modeling 1

Agenda

Introduction and Context

Efficiently using excel – preparation for modeling

Excel – Summarization Using Pivot Tables

Creating a template for integrated model

© EduPristine Financial Modeling

Key Authorization

2

GARP (2007-11)

Authorized Training provider -FRM

Largest player in India in the area of risk management training. Trained 1000+ students in risk management

PRMIA (2009-11)

Authorized Training provider – PRM/ APRM

Sole authorized training for PRM Training in India. Largest player in India in the area of risk management training. Trained 1000+ students in risk management

CFA Institute (2010-11)

Authorized Training provider – CFA

Pristine is now the authorized training provider for CFA Exam trainings . Pristine is largest training provider for CFA in India with presence across seven major cities.

FPSB India (2010-11)

Authorized Training provider -CFP

An authorized Education Provider for Chartered Financial Planner Charter.


Key Associations1

3

1. Indicative List

HSBC (2008)

Risk Management and Quant. Analysis

New joinees in HSBC had a gap in knowledge of Risk Management and quantitative skills. Conducted trainings (On campus) to bridge the gap

Mizuho (2010)


Bankers were using excel models that they could not understand. Conducted financial modeling in Excel trainings to bridge the gap

Bank Of America

Continuum Solutions (2010)

Finance for Finance

Associates were trained on valuation and mergers and acquisitions

J. P. Morgan (2010)


The Real Assets Group were trained in Excel for infrastructure and real-estate modeling

Franklin Templeton

CFA (2010)

Students were facing a gap in the overall understanding of finance topics like corporate finance, FSA and valuation. Provided training for over 100 hours to bridge the gap

Credit-Suisse India (2009)

Risk Management and Quant. Analysis

IT Professionals of Credit-Suisse India were trained on risk management.

Ernst & Young (2010)

Real Estate Modeling

Senior Associates were trained on building valuation models for real estate

ING Vyasa (2010)

Infrastructure & Project Finance

Bankers were trained on making integrated models for project finance and infrastructure.


… Key Associations

4

IIM Calcutta (2010-11)


Students about to go for internships and join jobs found a gap in their grasp of knowledge of excel for financial modeling. Conducted training for 75+ students with an average rating of 4.5+

BITS Pilani (2009)

Workshops on Basics of Finance

Most of the students desire a career in finance. Conducted training for 350+ students with an average rating of 4.5+

IIT Delhi (2009)

Corporate finance

Students get placed in finance companies (UBS, GS, MS, etc) with no understanding of the subject/ Job Profile. Conducted workshop to bridge the gap

NUS Business School (2011)


Second year MBA students were given a full 2-day workshop on creating financial models. They learnt how to create integrated

models of valuation.

NISM (2008-11)

Derivatives in Hedging (2008)

Financial Modeling (2011)

Corporate in Ludhiana incurred huge losses because of derivative trades (for hedging). Conducted trainings for directors and CFOs for better understanding of derivative products

FMS Delhi (2010-11)


Final Year MBA students of Faculty of Management Studies, Delhi University were trained in financial modeling so as to prepare them better for a job in finance.

IEMR Delhi (2010-11)


Final Year MBA students of IEMR went through extensive financial modeling workshop to acquire skills of financial modeling.

SIMSREE (2010)

Final Year MBA students of Sydenham MBA, Mumbai were trained in financial modeling so as to prepare them better for a job in finance.


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

Create your own models Rather than just using them

Improve & enhance productivity in work

Extend these models for your use

Debug Problems

5


Agenda






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 to navigate 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 involvement of the users, having a strong command over the keyboard shortcuts is a must!

A well designed excel sheet is easy to understand as well

7


Lets take a moment to understand components of Excel

8

Toolbar

Formula Bar Cells

Name Worksheet

Excel 2007 Interface

Excel 2003 and 2007 are being widely used in the industry. Most of features of 2007 are backward compatible


… Lets take a moment to understand components of excel

9

Excel 2007 Interface

Excel 2003 and 2007 are being widely used in the industry. Most of features of 2007 are backward compatible


Basic Editing and Saving Excel

CTRL + S

CTRL + C

CTRL + V

CTRL + X

CTRL + Z

CTRL + A

CTRL + B

ALT + TAB

ALT + F4

CTRL + TAB

Save Workbook

Copy

Paste

Cut

Undo

Select All

Bold

Switch Program

Close Program

Switch workbooks

Some Special Shortcuts

CTRL + ALT + V

CTRL + 9

SHIFT + CTRL + 9

CTRL + 0

SHIFT + CTRL + 0

ALT + H + O + I

SHIFT + F11

SHIFT + Spacebar

CTRL + Spacebar

SHIFT + ALT +

SHIFT + ALT –

CTRL + Minus sign

F2

Paste Special

Hide Row

Unhide Row

Hide Column

Unhide Column

Fit column width

New worksheet

Highlight row

Highlight column

Group rows/columns

Ungroup rows/columns

Delete selected cells

Edit cells

Formatting

CTRL + 1

ALT + H + 0

ALT + H + 9

SHIFT + CTRL + ~

SHIFT + CTRL + !

SHIFT + CTRL + #

SHIFT + CTRL + $

SHIFT + CTRL + %

CTRL + ;

Format Box

Increase decimal

Decrease decimal

General format

Number format

Date format

Currency format

Percentage format

Enter the date

Inside the cell Editing

ALT + ENTER

SHIFT + Arrow

SHIFT + CTRL + Arrow

F4

ESC

Start new line in same cell

Highlight within cells

Highlight contiguous items

Toggle “$”

Cancel a cell entry

Formulas

= (equals sign)

ALT + “=“

CTRL + „

CTRL + ~

F9

SHIFT + CTRL + Enter

Start a formula

Insert AutoSum formula

Copy formula from above cell

Show formulas/values

Recalculate all workbooks

Enter array formula Auditing Formulas

ALT + M + P

ALT + M + D

ALT + M + A + A

CTRL + [

CTRL + ]

F5 + Enter

SHIFT + CTRL + {

SHIFT + CTRL + }

Trace immediate precedents

Trace immediate dependents

Remove tracing arrows

Go to precedent cells

Go to dependent cells

Go back to original cell

Trace all precedents (indirect)

Trace all dependents (indirect)

Navigating / Editing

Arrow keys

CTRL + Pg Up/Down

CTRL + Arrow keys

SHIFT + Arrow keys

SHIFT + CTRL + Arrow

Home

CTRL + Home

SHIFT + ENTER

TAB

SHIFT + TAB

ALT +

Move to new cells

Switch worksheets

Go to end of continuous range Select a cell

Select range

Select continuous range

Move to beginning of line

Move to cell “A1”

Move to cell above

Move to cell to the right

Move to cell to the left

Display a drop-down list

Change all Inputs to Blue:

Press F5 then Select "Special" then "Constants", "OK” then Manually change

selection to blue font color

Change all Formulas to Black: Select "Formulas" instead of "Constants“ then

change selection to black color


Moving across toolbars in Excel 2003 and 2007

Press Alt Key to activate Main toolbar

For Example, Alt F for file

11

Use CTRL + TAB to Go to next toolbar

Use Arrow key to navigate further

In 2007, Pressing the “ALT” key automatically shows the options


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

12

Refer Worksheet A

Source Destination

$A$1 $A$1

A$1 C$1

$A1 $A3

A1 C3


Simple Exercises in Excel

The financials of a start-up company are given to you. The company would be eligible for funding if their operating profit margin is greater than 35% and CAGR in revenue growth is greater than 50%. Create a model to check if the company is eligible for funding. Also visually indicate the eligibility.

• Use worksheet B

• Hint

– Use (P(t)/ P(t-k))^(1/k) -1 to calculate CAGR

– Use AND function to calculate eligibility

– Use IF function to print it

– Use conditional formatting to output the results

Email ids of 100 people are given to you. They all need to be migrated to a new domain of edupristine.com. Write a function to migrate all email ids to new domain

• Use worksheet C

• Hint

– Use FIND to find the common character

– Use LEFT function

– Use CONCATENATE function

13


Arrays in Excel

Array (Can be loosely thought of as a list) is a group 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 independent entities, so they cannot be changed individually

• Enables apply a formula to every cell in the range using 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

14

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


Frequently Used Array functions

15

Function Name Function

SUMPRODUCT() To Sum product 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 lookup reference


Using the VLookUp Function

VLOOKUP() function

• The V in VLOOKUP() stands for vertical

• Works by looking in the first column of a table for the value you specify

• It then looks across the appropriate number of columns (which you specify) and returns whatever value it finds there

• The final option (range_lookup) is a Boolean value that determines how Excel finds the value. Always use FALSE- for exact match

• Whenever looking for data picked from the net, trim the strings before comparison

Question (Use WorkSheet E)

The ID of defaulters and their amount and phone number has been provided by the Credit Bureau in Columns A to D.

Column F contains the IDs of your clients. Use Vlookup function to find out the default amount of your clients.

16

One of the most widely used functions in Excel


Using the HLookup Function

HLOOKUP() function is

• H in HLOOKUP() stands for horizontal

• Similar to VLOOKUP()

• It searches for the lookup value in the first row of a table

Question: Use Worksheet F

Various expenses of Pristine are given in a table. Write a function to calculate the total expenses for any desired month (user should be able to change this value, and automatically the expenses should be updated)

17

Both Vlookup and Hlookup have a limitation of using the first Column/ Row as reference


Index & Match Functions

INDEX() returns the reference or the value of a cell at the intersection of a row and column inside a reference

MATCH() function

• looks through a row or column of cells for a value

• If it finds a match, it returns the relative position of the match in the row or column

• Use the usual wildcard characters within the lookup_value argument (provided that match_type is 0 and lookup_value is text)

• Use the question mark (?) for single characters and the asterisk (*) for multiple characters

• See Worksheet G

18


Use Index and Match – Any Column & row Lookup

Index and Match can be used in conjunction to perform complex lookup functions

• Use Match to generate the row number that you are interested in

• Use Index to generate the value that you are looking for

• Similar to implementation of a new kind of directory service

Use Worksheet H

Various expenses of Pristine are given in a table. Write a function to calculate the desired expense head for any desired month (user should be able to change both the values, and automatically the expenses should be updated)

19

Always Use FALSE in the Boolean required for

comparison

Easily Extendible approach to get any generalized kind of search (where both row and column can be variable)


Agenda






Pivot Tables – An introduction

21

Easy Summarization & Analysis Tool


Pivot Tables

Summarize data in one field

• called a data field

and break it down according to the data in another field.

• The unique values in the second field (called the row field) become the row headings

Further break down your data by specifying a third field

• called the column field

22


Terms used in Excel

Data source: The original data

• Range, a table, imported data, or an external data source.

Field: A category of data, such as Region, Quarter, or Sales

• Most PivotTables are derived from tables or databases, a PivotTable field is directly analogous to a table or database field

Row field: A field with a limited set of distinct text, numeric, or date values to use as row labels in the PivotTable

Column field: A field with a limited set of distinct text, numeric, or date values to use as column labels for the PivotTable

Report filter: A field with a limited set of distinct text, numeric, or date values that you use to filter the PivotTable view

PivotTable items: The items from the source list used as row, column, and page labels

23


Summarize Large Data

To start the pivot wizard:

• ALT D + P

• To complete the process, press finish

Use Example I

• Calculate Region Wise, Year wise sales

• Give Product wise Data for 2008 Only

24


Summarize Large Data

To start the pivot wizard:

• ALT D + P

• To complete the process, press finish

Use Example I



25


Filtering for Particular Rows/ Columns

Use Example I



• Get Data only for Delhi

26


Other Customization Options …

Selecting the entire PivotTable: Choose Options, Select, Entire PivotTable

Selecting PivotTable items: Select the entire PivotTable, then choose Options, Select. In the list, click the PivotTable element you want to select: Labels and Values, Values, or Labels

Formatting the PivotTable: Choose the Design tab and then click a style in the PivotTable Styles gallery

Sorting the PivotTable: Click any label in either the row field or the column field, choose the Options tab, and then click either Sort A to Z or Sort Z to A. (If the field contains dates, click Sort Oldest to Newest or Sort Newest to Oldest, instead.)

Refreshing PivotTable data: Choose Options and then click the top half of the Refresh button

Filtering the PivotTable: Click-and-drag a field to the Report Filter area, drop down the report filter list, and then click an item in the list

27


Give the average sales in regions

Use Example I




• Instead of Total, give the average sales

28


Changing the Pivot Table

Click any cell in the PivotTable’s data area

Choose Formulas, Calculated Field

• Excel displays the Insert Calculated Field dialog box

• Use the Name text box to enter a name for the calculated item

• Use the Formula text box to enter the formula you want to use for the calculated item

Use Example I




• Instead of Total, give the average sales

• Calculate the forecast for sales in 2009

29


Errors in Functions

30

Important to understand what kind of error can occur and handle it properly

Error Meaning

# DIV/ 0! Divide by Zero Error

Generally seen when trying to divide by empty cell

# NAME? Function name not found error

Generally seen in misspelling of function

# N/A Data Not available

Quite often seen Vlookup cannot find data

# REF! Invalid Cell reference

Typically when a cell is referenced, which has been deleted

# VALUE! Argument/ Operand of the wrong type

# NUM! Problem in value

Typically when a +ve number is expected, and –ve number is given as

argument


Use ISERROR() to Handle Errors

Excel 2003 has ISERROR() to determine, if there are any exceptions in the formulas

• Handle exception and exit the error gracefully

Excel 2007 also has an IFERROR() function to handle errors

Use Worksheet E to handle the errors and display “Not Defaulted”

31


Agenda






Creating the template for financial modeling – Matrix Integrity across sheets and tower model for within the sheet

Tower Model within sheet

• Reduce the size of the first 1-2 columns to create the headings

– Ctrl + arrow keys to move faster from 1 section to another

• Larger column width to put in the names and text information

Matrix integrity to be maintained across multiple sheets

• Eases copy paste and faster dragging of formulas

• Reduces chances of errors in writing the formulas linked across sheets


Freeze panes at the right spots to ease navigation in the model

The years (indicating Actual and Projected) are put in one of the top row

Rows and columns are frozen at the intersection of the left hand information column and the years row at the top

• Hint: Shortcut – Alt + w + f


Thank you! Contact:

© EduPristine – www.edupristine.com

EduPristine

702, Raaj Chambers, Old Nagardas Road, Andheri (E), Mumbai-400 069. INDIA

www.edupristine.com

Ph. +91 22 3215 6191

Excel Tips

Documents

Transcript of Excel Tips