Excel Advanced skills for financial modelling

Session -4

PREPARE FINANCIAL MODEL

A publisher sells books to stores A and B at a discount of 40% of the list price. Calculate the publishers revenues at the list prices and its actual revenues for years 2000, 2001, and 2002. The list prices of the books and the sales volumes for each store for the three years are given below: Book price 20, 30 & 25 respectively for three years

Sales volume to A : Yr 2000-1000, Yr 2001-2500, Yr 2002-4000 Sales volume to B : Yr 2000-2500, Yr 2001- 5000, Yr 2002-7000 (All prices are in $)

Choosing the Right Cell Reference When Creating Formulas

Whenever you create a formula to be copied and pasted into other cells, you should think ahead to decide which type of cell reference to use for each cell address in the formula. It is easier to learn to make the right choice through practice and trial and error than by studying some abstract rules. Nonetheless, if you want some rules, here they are: If when you copy a formula into other cells in the same row you do not want the column letter of a cell reference in it to change, then that cell address should use mixed references with absolute reference for the column. If when you copy a formula into other cells in the same column you do not want the row number of a cell reference in it to change, then that cell address should use mixed references with absolute reference for the row number.

 If when you copy a formula into other cells anywhere in your model you do not want the column letter and the row number of a cell reference in it to change, then that cell address should use absolute reference. To look at it another way, if the value of a variable will come from one particular cell throughout your model (as with the discount rate in our example), then you should use absolute reference for its cell address.

For all other cell addresses in formulas, use relative reference.

Remember to always check if a copied formula is working properly using hand calculations or other methods.

CREATING NAMES FOR CELLS AND RANGES

Formulas written using cell or range addresses can get difficult to understand and check because you have to keep referring to the cells used in the formulas to remember what is in a particular cell. You can make your formulas easier to understand and check if you give cells and ranges short descriptive names and use those names instead of cell or range addresses in your formulas. Also, you can jump directly to a named cell or range, which will save a lot of time if you are working with a large worksheet.

Choosing Names
Excel lets you give names to cells and ranges and use those names as variables that represent the cells and ranges as well as their values. You can view the names as alternatives to the cell and range addresses. Excel requires that all cell and range names start with a letter, but otherwise you can use any combination of letters and numbers in a name. A name cannot have an embedded space and the only symbols you can use in a name are the underscore and the period. For example, January Sales is not a valid name but January_Sales and January.Sales

Creating Names Manually

Select the cell or range you want to name and then do one of the following: Click the Name Box (at the left end of the Formula Bar), type in the name you want to assign, and press Enter. Note that whenever you select a cell or a range that already has a name, the name appears in the Name Box.