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Financial Modelling
Financial Modelling
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What is Financial Modeling

  1. 1. Financial Modeling WHY YOU MUST BECOME A FINANCIAL MODELING EXPERT? www.fgate.com.vn
  2. 2. Logically translate investment ideas in numbers to
  3. 3. Communicate professionally investors& colleagues
  4. 4. Measure RISKs @Investment
  5. 5. Avoid subjectivity in investment decision www.fgate.com.vn
  6. 6. Make you differentiate from your colleagues www.fgate.com.vn
  7. 7. Financial Modeling A LIFE CYCLE OF A FINANCIAL MODEL www.fgate.com.vn
  8. 8. Scope Specify DesignBuild Test Use A life cycle of a financial model
  9. 9. Scope Specify DesignBuild Test Use What to include (exclude) in the model? What is the complexity of the model? What is the outline (process) of the model? How much time / resources needed?
  10. 10. Scope Specify DesignBuild Test Use Define the logic of the model Define the method to calculate the results
  11. 11. Scope Specify DesignBuild Test Use Choose the effective structure of the model Set key guidelines to make the model become scientific & easy to use & check
  12. 12. Scope Specify DesignBuild Test Use To build a financial models means to code the model. Problems arises during this stage:
  13. 13. Scope Specify DesignBuild Test Use Root out errors & inconsistencies Increase confidence in the reliable results the model produces
  14. 14. Scope Specify DesignBuild Test Use Present useful information to help make decisions, not just print out numbers;
  15. 15. Scope Specify DesignBuild Test Use Present sensitivities and scenarios to understand the important drivers in the business; Control the evolution of the model when further changes are required.
  16. 16. Financial Modeling PRACTICAL MODEL Apple Inc. - Net Present Value Sensitivity - Terminal Growth Rates Discount Rate $ 204.96 10.0% 11.0% 12.0% 13.0% 14.0% 15.0% 16.0% TerminalGrowthRate 0.0% $ 220.90 $ 214.27 $ 207.97 $ 201.98 $ 196.28 $ 190.85 $ 185.68 1.0% $ 220.90 $ 214.27 $ 207.97 $ 201.98 $ 196.28 $ 190.85 $ 185.68 2.0% $ 220.90 $ 214.27 $ 207.97 $ 201.98 $ 196.28 $ 190.85 $ 185.68 3.0% $ 220.90 $ 214.27 $ 207.97 $ 201.98 $ 196.28 $ 190.85 $ 185.68 4.0% $ 220.90 $ 214.27 $ 207.97 $ 201.98 $ 196.28 $ 190.85 $ 185.68 5.0% $ 220.90 $ 214.27 $ 207.97 $ 201.98 $ 196.28 $ 190.85 $ 185.68
  17. 17. Financial Modeling DISADVANTAGES
  18. 18. Financial Modeling WHAT YOU WILL LEARN @
  19. 19. WHAT YOU WILL LEARN @ • Know how to make financial spreadsheet modeling scientific, reliable, easy to use & make decisions regarding investment & business
  20. 20. WHAT YOU WILL LEARN @ • Build up a logical investment sense when it comes to revenue, cost & profit forecast
  21. 21. WHAT YOU WILL LEARN @ • Know how to build and practice stock valuation model
  22. 22. WHAT YOU WILL LEARN @ • Know how to collect industry & corporate data as well as hints & tricks in excel to work smarter when constructing a financial model
  23. 23. Thank you! www.fgate.com.vn /FGateCFA /user/FGateFinance /company/FGate

Editor's Notes

  • (You want to buy/sell a stock? How to valuate it? Which offer price is suitable?A company wants to expand its business and win market share. It decides to build another factory. Which capacity is appropriate, based on its capability? Based on potential of the market? Which way to finance the new project? => Refer to the reality)
  • (A workday of a financial analysts starts and ends with financial model. Grab news, if it’s materially impacted, update it to the model. What an investor wants to see is the logical & scientific investments results. All can only do by financial models.Financial models also play as a communication tool in investment environment)
  • (Risks come from everywhere:+ Risk from expansion?+ Risk from investment?+ Risk from operation?How models help you limit and control risks?)
  • (Behavioral biases? Models help you figure the problems out)
  • (If you are confident in your logic arguments, but you don’t know how the result is built up, you may be lag behind your colleagues who know how to make models serve for himself.As students, if you want to follow your desired career in investment field, start today as a financial model learner. It helps you more advance in your career path, from entry-level to senior positions As a student, think of the fierce competition in the investment & finance industry. Each year thousands of excellent students graduate but cannot afford their career dreams. How you can be stand outstanding, espcially in the investment field? By learning and practicing financial modeling as much as you can, a necessary condition to open the brilliant future, that’s what I recommend for you to consider)
  • (A financial model’s life cycle often has 6 stages, though sometimes some may be ignored but anytime we think to build a financial model, we used to get through them. They are: )
  • (This stage is where we assess the nature, scale and complexity of the model required. You should answer some questions below to know your model’s scope:)(It decides the level of input and logical assumptions needed)
  • Problems arises during this stage:Assumptions does not workSimplicity becomes complex, how to fix it?Time is spent more than expectedEtc.
  • (A financial model’s life cycle often has 6 stages, though sometimes some may be ignored but anytime we think to build a financial model, we used to get through them. They are: )
  • A best practice spreadsheet model is a powerful tool, but to realize its usefulness you need to understand how to:
  • (For example, you are a financial analyst in a boutique investment firm specializing in investing in consumer product industry. You are assigned to be in charge technology sector, and your mission now is to screen potential stocks in that field. After stock picking stage, you think of Apple is an attractive stock meeting almost criterion you firm requests.How you can persuade your firm’s investors invest in Apple? The answer is by building valuation model for Apple.Apply a typical financial model’s 6 stages, you may think:1. Scope: How long does it take you to finish your valuation model?, Do you own enough information regarding tech industry, competitors, suppliers or financial data to build your model? It decide the complexity of the model you are building up.2. Specification: This stage may be revisted many times because some events or data are occuring during your model construction and they may be out of mind you initially think.3. Design: What is the signals for assumptions, for the working data you’re working on, as well as the results?, How to recheck if assumptions change? You will be used Excel or other program to code your model? That names a few need to be answered during this stage.4. Build: You may think of collecting financial data, industry data (competitors, tech trend, consumer behaviors, suppliers, consumers etc). From the data, you build up the assumptions as the input for your model.To valuate a stock, you may have many options such as DCF, FCF method or comparables valuation. From above 3 stages, you may rescreening data as input for you model.You may think another method to code Apple valuation model. Which Excel technique you may choose to reflect the results you want to target?Examples may be sensitivity analysis, football field, macros etc., and the more complex your valuation model is, the more advanced technique you may use5. Test: For example, in the DCF valuation method for Apple, you choose the terminal growth rate is 3%. But is it consistent with the Apple’s growth trend?You may test how valuation results is by slightly changing the terminal growth rate like below: Moreover, you may test other factors like terminal EBITDA multiplier and many before you are confident enough to present the results to the stakeholders.6. UseAfter presenting the valuation results built on valuation model, you keep on updating the model with any material news to make it reflect all the business and financial data of the firm.
  • (To name just a few, you can list more arising in the practice
  • (We want to equip you with Excel techniques and spreadsheet modeling on Excel, all hints and tricks make you work smarter in this field. After the course, you can: )
  • (We want to equip you with Excel techniques and spreadsheet modeling on Excel, all hints and tricks make you work smarter in this field. After the course, you can: )
  • (We want to equip you with Excel techniques and spreadsheet modeling on Excel, all hints and tricks make you work smarter in this field. After the course, you can: )
  • (We want to equip you with Excel techniques and spreadsheet modeling on Excel, all hints and tricks make you work smarter in this field. After the course, you can: )
  • (We want to equip you with Excel techniques and spreadsheet modeling on Excel, all hints and tricks make you work smarter in this field. After the course, you can: )
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