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Course Outline

Batch:

2014-16

Term:

VI

Course: FINANCIAL MODELING USING EXCEL (Elective)


Credits: 2.5
Course Instructor: Prof. Jasbir Singh Matharu

Objectives of the course:

1.

This course introduces the basics of financial modeling with the help of
Microsoft Excel. Student managers have already been introduced to
various concepts in Finance and the basics of Excel. This course will
attempt to widen and deepen their knowledge of financial theory and
practice by explaining how financial models and techniques can be
implemented with the help of Excel spreadsheets.
The aim of the course is to:
Familiarize students with the popular financial models
Identify the characteristics of various financial models and compare their
pros and cons
Develop skills in translating financial models into spreadsheets using MS
Excel

Student Learning Outcomes:

2.

At the end of the course, the students would be able to:


1.
2.
3.
4.

Design and layout a financial model


Use the advanced features of Excel spreadsheets, and create macros
Appraise valuation models related to stocks, bonds and options
Conduct tests of market efficiency, measure mutual fund performance,
analyze portfolios and distribution of stock prices
5. Appreciate concepts like financial statement forecasting, capital
budgeting, and financial analysis of leasing

Prerequisites

3.

The students of this course should have a sound knowledge of basic


financial concepts and Excel.

Basic Text Book:

4.

Sengupta, C. (2010), Financial Analysis and Modeling- Using Excel


and VBA, Wiley, India

Reference Books:

5.

I.
II.
III.

Mayes, T. R., (2012) Financial Analysis with Microsoft Excel, South


Western Cengage, Australia
Benninga, S. (2008), Financial Modeling, MIT Press, USA.

Proctor, K. S. (2010), Building Financial Models with Microsoft Excel,


Wiley, India
IV.
Day, A. L. (2007), Mastering Financial Modelling in Microsoft Excel,
Prentice Hall
V.
Fairhurst, D. S. (2012), Using Excel for Business Analysis, Wiley India

VI.
VII.

Rees, M. (2008), Financial Modelling in Practice, Wiley, USA


Ho, T.S.Y. and Lee, S.B. (2004), The Oxford Guide to Financial Modeling,
Oxford, USA

6.
Class rules/Expectations from students:
Students must go through pre-class preparations/reading materials, and come
prepared for class.
7.

Session Plan:

Sessio
n No

Topic

Pre class
preparation/readin
g required

Introduction to Modeling:
Steps in creating a model
Basic Excel concepts:

Keyboard shortcuts, Copying


formulas using Absolute and Relative
Cell referencing, Custom number
formats, Naming Techniques, Using
comments, Logical Functions,
Protecting Cells and Worksheets,
Array formulas, Pivot Tables, The
Analysis ToolPak

Ch. 1, 3 & 4,
Sengupta

Financial Statement (FS) Analysis


and Forecasting:
2, 3

Historical FS, Common Size


Statements, Financial Indicators, FS
forecasting, FS Sensitivity Analysis,
FS Scenario Analysis

Ch.13, Sengupta

Basic Time Value of Money


calculations:
4

Future Value, Present Value, Simple


Annuities, Growing Annuities,
Compounding Frequency, Loan
Amortization

Ch. 14, Sengupta

Capital Budgeting:

5&6

Calculating the cost of capital


Beta calculation using formula and
various functions
Calculating the relevant cash flows
Evaluate the project using various

Ch.2, Benninga

8.

Pedagogy:

The Pedagogy consists of a mix of use of Excel spreadsheets, lectures,


numerical exercises, individual assignments, group project, and guest lectures.
9.

Evaluation Scheme:
Sr.
No.

10.

Components

Weightage
s

Learning Outcomes

Individual Assignments

20%

Learning outcome 2 to
5

Group Project (Building a


financial model)

20%

Learning outcome 1

Class Test

20 %

End Term Examination

40%

Learning outcome 1 to
5
Learning outcome 1 to
5

Career Focus
Financial modeling is widely used in the field of equity research, fixed
income analysis, derivatives, investment banking, project finance, etc.

11.

Any other Remarks


The course will be taught entirely in the Lab.