financial model

Powerful Essays
MODEL CREATION
Introduction
The main purpose of using financial model is to analyse and understand the financial situation of business for decision-making. .Finance needs various calculations to get precise information. There are different types of user e.g. managers and owners need the financial model to evaluate the risk and return to make business decisions for the smooth operation, Individual investors make logical investment decisions – ‘’Risk aversion’’ and etc.(Wild, Subramanyam and Halsey 2009,34) Excel provided many functions and tools to analysis statistical data, it assists those users to make their financial decision such as evaluating the risk and return by mean, variance with using excel function((Packages 2006,1)) . In this report, it examines general concepts of model creation, then discusses the portfolio theory and efficient frontier applications
General Concepts of creating a model
• The model must be objectives driven as the model assisting decision-making; its allowed sensitivities and structure should be aligned with the decisions which will be taken with it. (DMUU Training Team 2009)
• For minimizing error, Error-checks system should be included in. For example, there are different ways to calculate the same quantity and the difference between those calculations that should always be zero could be formulated as an output. Excel DataTables can be applied to check whether the error is zero under a board range of input scenarios. when using DataTables, the cell with any non-zero values can be highlighted by using conditional formatting(DMUU Training Team 2009)
• Calculation should be related to the purpose.
• Sufficient documentation should be provided in the model, such as main restriction or limitation on the logic and key assumptions.
• In the model, logical flow should be clear (usually top-to-bottom ,left-to-right), with no “mixed” formulae, every numerical quantity should be either a number or a calculation . The time unit should



References: Wild,John J,K.R.Subramanyam,Robert F.Halsey.2009.Financial statement analysis.Boston: McGraw-Hill Irwin Benninga,Simon.2006.Principles of finance with Excel.NewYork:Oxford University press Packages.2006.Statistical Software. Stat 5969 Statistical Software Packages: 1–23.http://home.business.utah.edu/mgtdgw/stat5969/Analysis_Tools.pdf DMUU Training Team.2009. Some Best Practice Principles in Excel Modelling. http://www.excelgoodies.com/Finance_Excel_Guru.html Financial Modeling Guide.2007. Financial Modeling Discipline – Guiding Principles. http://www.financialmodelingguide.com/modeling-discipline/financial-modeling-discipline/ Spencer,Philip.1997. Applications of the Geometric Mean:1.University of Toronto. http://www.math.toronto.edu/mathnet/questionCorner/geomean.html

You May Also Find These Documents Helpful

  • Good Essays

    subsidiary, CareWise, Inc., the organizations provided help and assistance to over 3.3 million customers in creating and formulating important decisions about health care (Phycor, Inc. History, 2001). Individuals started to realize that PhyCor’s economic model wasn’t operating right with these physician…

    • 249 Words
    • 1 Page
    Good Essays
  • Good Essays

    Financial Models in Excel

    • 1424 Words
    • 6 Pages

    Exam, F65 April 2009 Exam F65: Financial Models in Excel Copenhagen Business School 1. April 2009 Open book exam, 4 hours Own computers allowed General information You must hand in your solution in Excel spreadsheet format. You must hand in 2 copies at floppy disks or CD-ROMs. Each of the exercises has been given an individual weight. These indicate to the student how much time should be used on each exercise. However, the final grade will not rely on these weights only, but might be…

    • 1424 Words
    • 6 Pages
    Good Essays
  • Better Essays

    Financial Reporting Model

    • 809 Words
    • 3 Pages

    Phase 1: DB 2—Financial Reporting Model Colorado technical University ACCT300-1202B-01: Intermediate Accounting I I am a coworker and friend to Mr. Ethics. This morning at break, he appeared to look worried and under a lot of stress. Being his friend, I ask if he needed to talk. He told me that Mr. Fraud, the CEO of the company for which we work, called him into his office and asked him to adjust the books so that a spot of land purchased is recorded at book value of $50,000 rather than the price…

    • 809 Words
    • 3 Pages
    Better Essays
  • Powerful Essays

    Al-Qaeda Financial Model

    • 3273 Words
    • 14 Pages

    It is currently highly unlikely that the local groups receive significant financial support from the core leadership. Although they may receive funding from other traditional sources, the Al-Qaeda cells, branches and affiliates are currently obliged to act independently, and to a great extent finance themselves to varying degrees…

    • 3273 Words
    • 14 Pages
    Powerful Essays
  • Satisfactory Essays

    to give an overview of the financial planning model and its main function within the financial planning process, with specific focus on the review stage of the process and how it is affected by an individual’s life course or changes in the social or economic context. The financial planning model is a cyclical model, and is designed to help individuals or households achieve financial goals by managing their income and expenditure. [pic] Figure 1: Stages of Financial Planning (Brown, 2007, pg…

    • 518 Words
    • 3 Pages
    Satisfactory Essays
  • Powerful Essays

    Time Series Models for Forecasting New One-Family Houses Sold in the United States Introduction The economic recession felt in the United States since the collapse of the housing market in 2007 can be seen by various trends in the housing market. This collapse claimed some of the largest financial institutions in the U.S. such as Bear Sterns and Lehman Brothers, as they held over-leveraged positions in the mortgage backed securities market. Credit became widely available to unqualified borrowers…

    • 2282 Words
    • 10 Pages
    Powerful Essays
  • Powerful Essays

    Testing A Model of Islamic Corporate Financial Reports : Some Experimental Evidence 1. Introduction Religion can exert a profound influence on individuals and societies. There has been a growing religious commitment during the past two decades which has led to more Muslim countries seeking to manage their economies in line with the precepts of Islam (Hassan, 1998). Central issue in Islamic accounting is weather the external financial reporting system currently adopted by Muslim countries serves…

    • 3179 Words
    • 13 Pages
    Powerful Essays
  • Powerful Essays

    Coursework: Financial Analysis and Valuation of OJSC Megafon, Russia using DCF as the base model Prepared by: Victor Amoasii Word count: 3697 CONTENTS 1. Megafon overview and analysis of agency costs 2. Risk Profile Analysis 3. Weighted Average Cost of Capital 4. Megafon valuation 5. Capital investments risk analysis 6. Capital structure and dividend policy Megafon overview and analysis of agency costs…

    • 3561 Words
    • 15 Pages
    Powerful Essays
  • Good Essays

    Financial

    • 619 Words
    • 3 Pages

    Financial Risk is one of the major concerns of every business across fields and geographies. This is the reason behind Financial Risk Manager FRM Exam gaining huge recognition among financial experts across the globe. FRM is the top most credential offered to risk management professionals worldwide. Financial Risk again is the base concept of FRM exam. Before understanding the techniques to control risk and perform risk management, it is very important to realize what risk is and what the types of…

    • 619 Words
    • 3 Pages
    Good Essays
  • Better Essays

    International Business Research; Vol. 5, No. 8; 2012 ISSN 1913-9004 E-ISSN 1913-9012 Published by Canadian Center of Science and Education A Model for Evaluating Financial Performance of Companies by Data Envelopment Analysis A Case Study of 36 Corporations Affiliated with a Private Organization Reza Tehrani1, Mohammad Reza Mehragan1 & Mohammad Reza Golkani1 1 School of Management, University of Tehran, Tehran, Iran Correspondence: Mohammad Reza Golkani, School of Management, University…

    • 5121 Words
    • 21 Pages
    Better Essays