THE ULTIMATE

FINANCIAL
MODELLING
GUIDE FOR YOU
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TABLE OF CONTENTS
1. Why is Financial Modeling Important?

WC
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2. Types of Financial Models
3. Financial Statement Anatomy
4. Top 10 Excel Functions You Should Know in Financial Modeling
5. The Income Statement Guide
6. The Balance Sheet Guide
7. The Cash Flow Statement Guide
8. The Ultimate Budgeting Guide
9. Inventory Valuation Methods
10. Depreciation Methods
11. Financial Ratios
12. What is beta?
13. Options Pricing
14. Top Finance KPIs
15. Financial Comparisons
16. Financial Statements Explained
17. Company Valuation Methods
18. Top Finance Certifications
19. 17 Financial Modeling Tips & Tricks
20. Excel Shortcuts Cheatsheet
21. 12 Excel Mistakes to Avoid
22. 100 Excel Functions
23. 10 Common Excel Errors
24. Accounting Cheatsheet
25. 5 Excel Features You Should Know
26. FP&A Cheatsheet

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1.
WHY
FINANCIAL
MODELING
IS IMPORTANT?
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WHY
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FINANCIAL IS
MODELING IMPORTANT

What is Financial Modeling?

Financial modeling is a mathematical representation of a company's financial
performance, used to forecast future outcomes and make informed decisions.

Why is it important?

1. Strategic Planning
Financial modeling helps organizations plan future. It enables
the creation of detailed financial projections that consider
various scenarios, helping in long-term strategic planning.

2. Risk Assessment
Through financial modeling, businesses can assess potential
risks and uncertainties. By running sensitivity analyses and
stress tests, organizations can identify vulnerabilities and
develop strategies to mitigate risks.

3. Capital Budgeting
$ Financial models aid in capital budgeting decisions, helping
companies allocate resources efficiently to projects,
investments, or acquisitions. Models evaluate the potential
returns and risks associated with different choices.

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FINANCIAL IS
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4. Valuation
Financial modeling is integral to the valuation of companies
for mergers, acquisitions, and investment decisions. It
provides a framework for estimating the worth of a business
based on factors like earnings, assets, and market conditions.

5. Fundraising
When seeking funding from investors or lenders, financial
models serve as a means to communicate the financial
health and growth potential of a company. Investors rely
on these models to make informed investment decisions.

6. Performance Analysis
Businesses use financial models to analyze their histori-
cal financial performance and compare it to their pro-
jections. This helps in identifying areas for improvement
and optimizing financial strategies.

7. Resource Allocation
Financial models assist in optimizing resource allocation by
allocating budgets to different departments or projects based
on their financial impact and alignment with strategic goals.

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8. Cost Control
They help in monitoring and controlling costs by providing
insights into cost structures and cost drivers. This enables
organizations to identify areas where cost reductions are
feasible.

9. Scenario Planning
Financial models allow for scenario planning, which is
crucial in uncertain economic environments. Businesses
can create multiple scenarios (optimistic, pessimistic,
baseline) to prepare for different outcomes.

10. Cash Flow Management

Managing cash flow is critical for the survival of any
business. Financial models help in forecasting cash
flows, ensuring that a company has enough liquidity
to cover its obligations.

11. Investor Communication

Publicly traded companies often use financial models to
communicate their financial performance and growth
prospects to shareholders, analysts, and the public.

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12. Decision-Making
Financial models provide a structured framework for
making informed decisions. They help in evaluating the
financial implications of various choices and selecting
the best course of action.

13. Compliance and Reporting

Many industries and regulatory bodies require companies to
maintain accurate financial records and reports. Financial
models assist in ensuring compliance with these requirements.

14. Performance Metrics

Financial models help in calculating and tracking key
performance indicators (KPIs) such as return on investment
(ROI), profitability ratios, and break-even points.

15. Flexibility
Financial models can be adapted to various industries
and sectors, making them a versatile tool for businesses
of all types and sizes.

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2.
TYPES OF
FINANCIAL
MODELS
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TYPES OF FINANCIAL MODELS
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1.Financial Statement Models:

These models project a company's future financial
performance by forecasting income statements,
balance sheets, and cash flow statements. They are
fundamental for financial planning and analysis.

2.Valuation Models:
Valuation models are used to determine the intrinsic
value of an asset or a company. Common valuation models
include Discounted Cash Flow (DCF), Comparable Company
Analysis (CCA), and Precedent Transaction Analysis (PTA).

3.Merger and Acquisition (M&A) Models:

M&A models help in evaluating the financial impact
of potential mergers, acquisitions, or divestitures.
They often include sensitivity analysis and scenario
modeling.

4.Budgeting and Forecasting Models:

These models help in creating budgets and financial
forecasts for a company, allowing for better planning
and resource allocation.

5.Risk and Sensitivity Analysis Models:

These models assess the impact of various scenarios
and changes in key variables on a company's financial
performance. Monte Carlo simulations are often used
for risk analysis.

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6.Option Pricing Models:

These models, such as the Black-Scholes model,
are used to calculate the value of financial options
and derivatives.

7.Credit Risk Models:

These models assess the creditworthiness of individuals
or companies, often used by banks and financial
institutions for lending decisions.

8.Portfolio Management Models:

Portfolio models help investors optimize their investment
portfolios by considering risk and return, asset allocation,
and diversification.

9.Real Estate Models:

These models are used for real estate investment analysis,
including property valuation, cash flow projections, and
return on investment (ROI) calculations.

10.Economic and Industry Models:

These models analyze macroeconomic and industry-specific
factors to make informed financial decisions. For example,
econometric models and industry-specific supply and
demand models.

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11.Working Capital Models:

These models help in managing a company's working
capital efficiently by optimizing cash, accounts receivable,
and accounts payable.

12.Capital Structure Models:

These models determine the optimal mix of debt and
equity financing for a company to minimize the cost of
capital and maximize shareholder value.

13.Project Finance Models:

Used in infrastructure and large-scale projects, project
finance models evaluate the financial feasibility and
risks associated with a project.

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Income Statement
Revenue Total income from primary operations.

Cost of Goods Sold (COGS) Direct costs of production.

Gross Profit Revenue minus COGS.

Operating Expenses Selling, general, and administrative costs.

Operating Income Gross Profit minus Operating Expenses.

Other Income/Expenses Non-operating items (interest, taxes).

Net Income Final profit or loss.

Balance Sheet
Assets Liabilities Shareholders' Equity
Current Non-Current Current Lia- Non-Current Common Retained
Assets Assets bilities Liabilities Stock Earnings

Cash, accounts Long-term Long-term

Short-term Par value of Cumulative
receivable, in- investments, debt, deferred
obligations. shares. net income.
ventory. property. tax.

Cash Flow Statement

Operating Activities Cash transactions in core operations.

Investing Activities Cash transactions for long-term assets.

Financing Activities Cash transactions with owners and creditors.

Net Cash Flow Sum of operating, investing, and financing activities.

Beginning and Ending Cash Balance Initial and final cash position.
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4.
TOP10 EXCEL
FUNCTIONS
YOU SHOULD KNOW
IN FINANCIAL MODELING
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5.
THE INCOME
STATEMENT
GUIDE
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THE INCOME STATEMENT GUIDE
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What is an Income Statement?

An income statement, also known as a profit and loss statement (P&L), is a financial
report that shows a company's revenues, expenses, and profits (or losses) over a
specific period, typically a fiscal quarter or year.

Components of an Income Statement

Revenue (Sales):
The total income generated from selling goods or
providing services.

Cost of Goods Sold (COGS):

The direct costs associated with producing the goods or services.

Gross Profit:
Revenue minus COGS, representing the initial profit
before operating expenses.

Operating Expenses:
Costs related to the day-to-day operations of the business (e.g.,
salaries, rent, utilities).

Operating Income:
Gross profit minus operating expenses, indicating the profit
from core operations.

Non-Operating Income (Expenses):

Additional income or expenses not directly related to core
operations.

Net Income (Profit or Loss):

The final result, indicating the overall profit or loss after all
income and expenses.

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Analysis of an Income Statement

To evaluate a company's Income Statement, various margins and ratios are used:

Profit Margin:
Measures the percentage of revenue that remains as net $
profit after deducting all expenses, providing insights into
the overall profitability of the company.

(Net Income / Revenue) x 100

Gross Margin:
Represents the percentage of sales revenue remaining
after deducting the costs of goods sold.

(Gross Profit / Revenue) x 100

Operating Margin:
Shows the profitability of core business operations before
interest and taxes.

(Operating Income / Revenue) x 100

Earnings Before Interest, Taxes, Depreciation,

and Amortization (EBITDA) Margin
Evaluates a company’s profitability and operating effi-
ciency by measuring the percentage of revenue repre-
sented by EBITDA.

(EBITDA / Revenue) x 100

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Revenue Growth Rate:

Measures the percentage change in revenue over a
period of time to assess a company’s ability to generate
more sales.

((Current Period Revenue – Previous Period Revenue) /

Previous Period Revenue) x 100

Return on Equity (ROE):

Measure the profitability of shareholders’ investments
by assessing the net income generated per unity of
shareholders’ equity.

(Net Income / Shareholdersʼ Equity) x 100

Return on Assets (ROA):

Determines the profitability of a company’s assets by
measuring the net income generated per unit of total assets.

(Net Income / Total Assets) x 100

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Interpreting an Income Statement

Positive Net Income:

The company is profitable, and the amount
represents its earnings for the period.

Negative Net Income:

The company incurred losses for the period.

Trends:
Analyze trends over multiple periods to assess
the company's financial health.

$ Comparisons:
Compare the income statement with those of
competitors or industry standards for benchmarking.
$

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Importance of the Income Statement

Investor Insight:
Investors rely on income statements to gauge a
company's financial health and make informed
investment decisions.

Management Tool:
Within organizations, income statements guide
financial planning, resource allocation, and
decision-making.

Creditworthiness:
Lenders use income statements to assess a company's
ability to meet financial obligations when seeking
loans or credit.

Strategic Planning:
Income statements inform long-term strategies by
identifying financial trends and guiding growth plans.

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Legal Compliance:
Businesses must maintain accurate income statements
to comply with financial regulations and accounting
standards.

Transparency and Trust:

Transparent income statements build trust with
stakeholders, fostering a positive corporate
reputation.

Benchmarking:
Comparing income statements to industry standards
and competitors helps companies assess their
performance and make improvements.

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6.
THE BALANCE
SHEET GUIDE
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THE BALANCE SHEET GUIDE
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What is a Balance Sheet?

A balance sheet is a financial statement that provides a snapshot of a
company's financial position at a specific moment in time. It's a crucial
tool for understanding a company's assets, liabilities, and equity.

The balance sheet offers a point-in-time view of a company's financial

health, allowing investors and stakeholders to assess its liquidity,
solvency, and financial stability.

Balance Sheet Components

Assets = Liabilities + Equity
A balance sheet comprises three main components:
assets, liabilities, and equity. These components reflect the
basic accounting equation, which states that the total
assets of a company must equal the sum of its
liabilities and equity.

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Assets
Current Assets
These are assets expected to be converted into cash or used
up within one year, such as cash, accounts receivable, and
inventory.

Non-Current Assets
These are long-term assets like property, plant,
equipment, and investments.

Liabilities

Current Liabilities
These are obligations that must be settled within one
year, including accounts payable and short-term debt.

Non-Current Liabilities
These are long-term obligations like long-term loans or bonds.

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Equity $
Equity represents the owner's or shareholders' residual interest
in the company's assets after deducting liabilities. It includes
items like common stock, retained earnings, and additional
paid-in capital.

Analysis
Financial analysts and stakeholders use the balance sheet to perform a
comprehensive assessment of a company's financial health and stability.

a. Liquidity Assessment:
The balance sheet helps determine a company's liquidity, or
its ability to meet short-term obligations. Analysts often focus
on current assets and current liabilities to calculate ratios like
the current ratio and the quick ratio. These ratios gauge
whether the company has enough assets that can be quickly
converted to cash to cover its short-term debts.

b. Solvency Evaluation:
Solvency is an essential aspect of financial analysis.
Analysts use the balance sheet to assess a company's
long-term financial viability. They look at non-current
liabilities and equity to calculate ratios like the
debt-to-equity ratio. This ratio helps determine how
much of the company's assets are financed through
debt, which can be critical for making investment
decisions.

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c. Financial Stability:
A stable balance sheet is a sign of financial well-being. Analysts
examine the trend of a company's assets, liabilities, and equity
over time to identify any unusual fluctuations. A consistent and
well-structured balance sheet demonstrates financial stability and
responsible management.

d. Working Capital Management:

The balance sheet provides insights into how efficiently a company
manages its working capital. Effective working capital management
ensures that the company can maintain daily operations. Analysts
monitor the level of working capital and assess whether it is sufficient
to support business activities.

e. Growth Potential:
Investors and stakeholders also use the balance sheet to assess a
company's growth potential. A healthy balance sheet with adequate
equity can be a sign that the company is well-positioned to fund
future expansion and investments.

f. Benchmarking:
Analysts often compare a company's balance sheet to those of its
peers or industry standards. This benchmarking helps assess whether
a company is in line with its industry norms or if it has specific
strengths or weaknesses.

g. Red Flags:
Lastly, analysts scrutinize the balance sheet for any red flags,
such as excessive debt, declining equity, or irregularities in
asset valuation. These red flags can indicate financial distress
or potential accounting issues.

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7.
THE CASH FLOW
STATEMENT
GUIDE
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THE CASH FLOW STATEMENT GUIDE
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What is a Cash Flow Statement?

The cash flow statement is a financial statement that provides a summary of a company's
cash inflows and outflows over a specific period. It categorizes cash transactions into
operating, investing, and financing activities.
The primary purpose of the cash flow statement is to offer insights into a company's
liquidity, showing how changes in balance sheet accounts and income affect cash and
cash equivalents.

Components of Cash Flow:

1.Operating Cash Flow (OCF):
OCF represents the cash generated or used in a company's
core operating activities. It is calculated by adjusting net
income for non-cash items and changes in working capital.

Net Income Non ash Ex enses (Depreciation,

Amortization, etc.) + Changes in Working Capital

Positive OCF:
Indicates that the company is generating cash from its core business
operations. This is generally a positive sign as it suggests operational
efficiency and the ability to cover day-to-day expenses.
Negative OCF:
May signal challenges in generating cash from core operations.
It's important to investigate the reasons behind negative OCF, such
as changes in working capital or profitability issues.

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2.Investing Cash Flow (ICF):

ICF involves cash transactions related to the purchase
and sale of long-term assets (investments in property,
equipment, securities, etc.). Positive ICF indicates asset
purchases, while negative ICF indicates asset sales.

ICF = Cash Inflows from Asset Sales – Cash Outflows

for Asset Purchases

Positive ICF:
Can result from asset sales or strategic investments. Positive ICF from
selling assets may indicate a focus on optimizing the asset portfolio.
Strategic investments could signal long-term growth plans.

Negative ICF:
Indicates capital expenditures, such as purchasing property or equipment.
While necessary for growth, consistently negative ICF might warrant a
closer look at capital allocation decisions.

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3.Financing Cash Flow (FCF):

FCF represents cash transactions with a company's
owners and creditors, including equity and debt
financing. It reflects changes in the company's
capital structure.

FCF = Cash Inflows from Financing (e.g., Issuing Stock, Borrowing)

– Cash Outflows for Financing (e.g., Debt Repayment, Dividends)

Positive FCF:
Reflects funds raised through financing activities, such as issuing stock
or taking on debt. Positive FCF can provide resources for expansion or
debt repayment.

Negative FCF:
Results from paying down debt, buying back shares, or distributing divi-
dends. While these actions may be part of a sound financial strategy, con-
sistent negative FCF could impact liquidity.

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4.Net Change in Cash and Cash Equivalents

Net Change in Cash and Cash Equivalents: Reflects the
overall variation in a company's cash position over a
specific period. Serves as a key indicator of a company's
liquidity and its ability to generate and manage cash.

Net Change in Cash and Cash Equivalents =OCF+ICF+FCF

Positive Change:
Indicates a net increase in cash, providing financial flexibility. Positive
changes are generally favorable for a company's ability to invest,
repay debt, or weather economic uncertainties.

Negative Change:
Suggests a net decrease in cash. While occasional negative changes are
normal, consistent declines may indicate potential liquidity challenges.

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How the Cash Flow Statement Complements

Other Financial Statements:
(

•Income Statement Connection:

Bridges the gap between net income and cash gener-
ated from operating activities, offering a holistic view
of profitability and liquidity.

•Balance Sheet Connection:

Explains changes in balance sheet items, helping

users understand the impact of operational, investing,
and financing activities on the company's financial
position.

Importance of the Cash Flow Statement

1.Liquidity Assessment:
The Cash Flow Statement provides insights into a company's
ability to meet its short-term obligations. By detailing cash
inflows and outflows, it helps assess the company's
liquidity position.

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2.Operational Efficiency:
• Examining the Operating Cash Flow (OCF) component
(

reveals how well a company generates cash from its core

operations. This is crucial for evaluating operational
efficiency and sustainability.

3.Operational Efficiency:
Examining the Operating Cash Flow (OCF) component
reveals how well a company generates cash from its
core operations. This is crucial for evaluating
operational efficiency and sustainability.

4.Investment Decision-Making:
Investors use the Cash Flow Statement to evaluate a
company's financial health and potential for future
growth. It helps them make informed investment
decisions by providing a clear picture of cash
flow dynamics.

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4.Debt Repayment Capacity:

Lenders and creditors use the statement to assess a
company's ability to service debt. A positive cash flow
indicates the capacity to meet debt obligations,
enhancing the company's creditworthiness.

5.Identification of Trends and Patterns:

Analyzing trends and patterns in cash flow over
multiple periods helps in identifying potential financial
issues or areas of strength. This historical perspective
aids in forecasting future cash flows.

6.Strategic Decision-Making:
Management uses the Cash Flow Statement for strategic
decision-making. It helps in determining the impact of
different business activities on cash flow and guides
decisions related to investments, financing, and
operational changes.

7.Investor and Stakeholder Confidence:

Transparent and accurate cash flow reporting enhances
investor and stakeholder confidence. It provides a clear
understanding of how acompany manages its cash
resources, contributing to overall trust in financial
reporting.

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Common Cash Flow Statement Issues:

Common Cash Flow Statement issues can arise from various sources, affecting
the accuracy and reliability of the financial information presented. Here are
some of the common issues and ways to address them:

1.Neglecting Non-Cash Items:

Issue:
Failure to adjust for non-cash items like depreciation
or amortization can lead to an inaccurate
representation of actual cash flows.
Solution:

Ensure that non-cash items are appropriately

adjusted to reflect their impact on cash flow.

2.Overlooking Working Capital Changes:

Issue:
Changes in working capital, such as receivables and
payables, can significantly impact cash flow but are
sometimes overlooked.
Solution:
Pay attention to working capital changes and
include them in the cash flow calculations.

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3.Inconsistent Accounting Policies:

Issue:
Inconsistencies in accounting policies, especially
changes in the treatment of certain transactions, can
lead to misinterpretations.
Solution:
Maintain consistency in accounting policies to
ensure accurate and comparable reporting.

4.Timing Differences in Revenue Recognition:

Issue:
Timing differences between recognizing revenue and
actual cash receipt can distort the accuracy of cash
flow from operating activities.
Solution:
Align revenue recognition policies with cash
receipts to avoid discrepancies.

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5.Ignoring Financing Costs:

Issue:
Neglecting to include financing costs in the Financing
Cash Flow section can result in an incomplete
representation of cash flows.
Solution:
$
Ensure that all financing-related transactions,
including interest payments, are appropriately
accounted for.

6.Misinterpretation of Positive and

Negative Cash Flow:
Issue:
Misunderstanding the implications of positive and
negative cash flow can lead to inaccurate assess-
ments of a company's financial health.
Solution:
Provide clear explanations of the meaning and
significance of positive and negative cash
flows in the context of the business.

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7.Excludin Im ortant ash lo

Components:
Issue:
Omitting relevant cash flow components, such as
dividends paid or received, can result in an incomplete
Cash Flow Statement.

Solution:
Include all relevant cash flow items to ensure a
comprehensive representation of cash movements.

8.Not Considering Seasonal Variations:

Issue:
Failing to account for seasonal variations in cash
flows can lead to misleading conclusions about a
company's financial performance.

Solution:
Analyze cash flows over multiple periods to ac-
count for seasonal variations and make appro-
priate adjustments.

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8.
THE ULTIMATE
BUDGETING
GUIDE
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9.
INVENTORY
VALUATION
METHODS
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INVENTORY
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VALUATION
METHODS

LIFO (Last-In, First-Out)

LIFO is an inventory valuation method where the last items added
to inventory are the first ones to be used or sold. In other words,
the cost of the most recent purchases is matched against revenue,
resulting in the assumption that the newest items are sold first.

Usage Methods
LIFO is commonly used in industries It is suitable for companies that want to lower their
where inventory costs tend to rise over tax liability by reporting higher cost of goods sold
time, such as the automotive sector. (COGS) during inflationary periods.

Advantages
• Reduced tax liability during inflation.
• Matches current costs with current revenues.
• Reflects real-world scenarios in some industries.

Disadvantages
• May not represent the actual flow of goods.
• Can result in lower reported profits during inflation.
• Complex accounting and tracking of inventory.

Real-life Example
A car dealership may use LIFO during a period of rising car prices. This allows them to lower
their tax liability and maintain a more accurate representation of their cost of goods sold.

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VALUATION
METHODS

FIFO (First-In, First-Out)

FIFO is an inventory management method in which the first items
added to inventory are the first ones to be used or sold. It assumes
that the oldest items are sold first, and the cost of the oldest items
is matched against revenue.

Usage Methods
FIFO is commonly used in industries with It is suitable for companies looking to reflect the
perishable goods, such as food retail. actual flow of goods.

Advantages
• Matches the actual flow of goods.
• Provides a more accurate reflection of inventory costs.
• Simpler accounting and tracking.

Disadvantages
• Higher tax liability during inflation.
• May not represent real-world scenarios in some industries.

Real-life Example
A grocery store typically uses FIFO for items like fresh produce. This ensures that older, perishable
items are sold first, reducing waste.

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VALUATION
METHODS

WAC (Weighted Average Cost)

WAC is a method of calculating the value of inventory by taking
the average cost of all items in stock, regardless of when they were
purchased. It provides a more balanced approach by considering
the total value of inventory divided by the total quantity.

Usage Methods
WAC is commonly used in industries It is suitable for companies seeking a middle-ground
where inventory costs vary but need to be approach to inventory valuation.
averaged for simplicity and consistency.

Advantages
• Provides a simplified yet reasonably accurate valuation of inventory.
• Reduces the impact of cost fluctuations compared to LIFO or FIFO.

Disadvantages
• May not accurately represent the current market value of inventory.
• Does not align with specific purchase or sales transactions.

Real-life Example
A retail store with a diverse product range may use WAC to calculate the average cost of all
items on their shelves. This helps in determining an overall cost structure and pricing strategy.

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10.
DEPRECIATION
METHODS
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DEPRECIATION METHODS
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1 Straight-Line Depreciation
Straight-line depreciation allocates the cost of an asset evenly over its useful life. It's the simplest and
most commonly used method.

Pros Cons
• Easy to understand and calculate. • May not reflect the asset's
• Provides a consistent expense over time. actual wear and tear.

Real-life Example
A company purchases a delivery truck for $40,000 with an estimated useful life of 5 years. Using
straight-line depreciation, the company records $8,000 in depreciation expense each year.

2 Declining Balance Depreciation

Declining balance depreciation front-loads the depreciation expense, with higher amounts in the
earlier years and decreasing amounts over time.

Pros Cons
• Reflects the asset's higher wear and • Can result in lower book
tear in the early years. values in later years.

Real-life Example
A technology firm uses declining balance depreciation for its computers, acknowledging that they
become outdated more quickly. This method allows them to account for this obsolescence.

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3 Units of Production Depreciation

Units of production depreciation ties the depreciation expense to the actual usage or production
of the asset.

Pros Cons
• Matches depreciation to actual asset • Requires accurate tracking of
usage. usage.

Real-life Example
A manufacturing company uses units of production depreciation for its production machinery.
It calculates depreciation based on the number of units produced or machine hours used.

4 Sum-of-the-Years-Digits Depreciation
This method accelerates depreciation, with a larger expense in the earlier years and decreasing
amounts over time.

Pros Cons
• Reflects more realistic wear and tear • More complex to calculate
patterns. than straight-line depreciation.

Real-life Example
A manufacturing firm employs the sum-of-the-years-digits method for its machinery, front-loading de-
preciation in early years to reflect the equipment's greater wear and tear as repair and maintenance
costs will rise as the machinery gets old.

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DEPRECIATION METHODS
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5 Double Declining Balance Depreciation

Double declining balance depreciation doubles the straight-line depreciation rate, resulting in a
higher depreciation expense in the early years.

Pros Cons
• Reflects rapid asset obsolescence or • May lead to very low book
wear and tear. values in later years.

Real-life Example
An automobile company uses double declining balance depreciation for its vehicles,
allocating more depreciation expense to the earlier years of the asset's life to account
for its faster depreciation, which is typical for vehicles due to wear and tear.

6 MACRS (Modified Accelerated Cost Recovery System)

MACRS is a depreciation method used for tax purposes in the United States. It provides specific
depreciation rates for various asset categories.

Pros Cons
• Provides tax benefits and simplifies tax • May not align with a company's
compliance. internal accounting. (not accepted
by GAAP).

Real-life Example
An American manufacturing company uses MACRS for tax purposes to accelerate depreciation
on its factory equipment.

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11.
FINANCIAL
RATIOS
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12.
WHAT
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13.
OPTIONS
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14.
TOP
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15.
FINANCIAL
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16. FM
FINANCIAL STATEMENTS
EXPLAINED
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17.
COMPANY
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18.
TOP FINANCE
CERTIFICATIONS
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19.
17 FINANCIAL
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TIPS & TRICKS
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20. FM
EXCEL SHORTCUTS
CHEATSHEET
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21.
12 EXCEL MISTAKES
TO AVOID
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12 EXCEL MISTAKES TO AVOID
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1. Not using the correct data 2. Not using error-checking

3. Not using data validation
format functions

Data validation is a powerful tool that

It’s important to use the correct Excel has several built-in can help you ensure that data entered
data type for each column in error-checking functions, such into your spreadsheet meets certain
your spreadsheet, such as text, as IFERROR, that can help you criteria. For example, you can use
number, or date. Incorrect data avoid common errors and data validation to restrict the type of
types can result in unexpected provide more informative error data that can be entered into a cell, or
errors and formatting issues. messages. to limit the range of acceptable
values.

4. Not using conditional

5. Not using keyboard shortcuts 6. Not using named ranges
formatting

Keyboard shortcuts can save you a Named ranges make it easier to

Conditional formatting is a reference cells and ranges in your
great way to highlight cells that lot of time when working with
Excel. For example, you can use the formulas and macros. By using
meet certain criteria, such as named ranges, you can make your
cells that contain values that Shift+Spacebar shortcut to select
the row, Ctrl +- (plus minus) to formulas more readable and easier to
are above or below a certain understand. It also speeds up your
threshold. delete the row, and Ctrl+Shift+”+”
to add a row. work. Important when competing in
Excel Esports!

7. Not regularly saving your 8. Incorrect use of absolute and

9. Not keeping data clean
work relative cell references

Failing to save your work Misunderstanding the difference Failing to remove duplicates,
frequently can result in loss of between absolute ($A$1) and handle missing values, and
data if Excel crashes or if there is relative (A1) cell references can ensure consistency can result
a power outage. Use the lead to errors in your formulas, in inaccurate analysis and
autosave feature and frequently especially when copying them reporting. Regularly clean and
press Ctrl+S to save your across multiple cells. validate your data to maintain
progress. its integrity.

11. Not leveraging advanced 12. Relying too heavily on

10. Overcomplicating formulas
features manual data entry

Using overly complex formulas can Features like Power Query, Power Manual data entry is prone to errors
make your spreadsheet difficult to Pivot, and Macros can significantly and is time-consuming. Use data
understand and maintain. Break enhance your productivity and data import features, data connections,
down complex formulas into handling capabilities. Ignoring and automation to minimize manual
smaller, manageable parts or use these advanced features can limit entry and improve accuracy.
helper columns. your efficiency.
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100 EXCEL
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10 COMMON
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5 EXCEL FEATURES
YOU SHOULD KNOW
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FP&A
CHEATSHEET
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