Financial models are planning tools, and therefore consistent and thought-out definitions of time lines is one crucial aspect of the construction.
Annuities are fixed payments over a period of time. In financial models, annuities are especially relevant to modelling interest and redemption payments for loans, bonds or leasing contracts. Continue reading "Excel: Annuity Calculations"
Debt covenants are agreements between a company and a creditor usually stating limits or thresholds for certain financial ratios that the company may not breach. Their projection is a vital component of a financial model.
You have spent days and nights on your model, but something still will not work? That happens all too often. This article gives you a quick overview of the most common mistakes in financial modelling with Excel.
Inflation is the reason why elder generations like to complain about today's prices - even if nothing really has changed. But when and how should you consider it in your financial model?
Financial-Modelling.net, as many other websites about Excel, uses the English names of the Excel cell formulas. If you use Excel in another language, you will not be able to simply copy and paste the examples from the text; perhaps some of the examples are even much harder to understand if you are unfamiliar with the English function names. However, the University of Twente offers a useful overview over the international names: http://wwwhome.ewi.utwente.nl/~trieschn/excel/excel.html
With increasing complexity, financial models become more prone to errors. While you can never be sure if a model is completely correct (let alone accurate), you can avoid mistakes with a few easy best practices.
Sometimes, you will need to derive interest rate assumptions from your financial model. The big agencies make their rating methodologies a secret, but there are quick and dirty approaches such as Altman's Z-Score. Continue reading "Modelling Credit Ratings"
While it may seem self-explanatory, it is a good idea to clarify: What is "Financial Modelling"?
"Cash is king" - that's one lesson a lot of corporations need to learn the hard way. Include these ratios in your financial model so that management can plan ahead.