Financial modeling for first-year analysts

[@abhimanyusharma3374]

Kinda nuts how clearly you're able to think, create a logic and then translate that into Excel so fluently. Would appreciate it if you could make a video laying out your journey with excel and how you improved

[@DimEarly]

Thank you! It's not a video, but this post talks a bit about my #1 thought on getting better at modeling - deliberate practice, for which FMWC / ModelOff questions are a great tool: www.linkedin.com/pulse/good-reason-try-competitive-financial-modelling-bad-one-early/

[@FMAyman88]

Nice Video Dirmund, Try to use the "RRI" formula to get the CAGR, will be much easier

[@DimEarly]

Thanks for the tip! Stevenson showed me a bunch of other financial functions I could have used here too. I must admit, I won't be adding most of them to my arsenal - when the direct calculation from first principles is as easy as (fv/pv)^(1/nper)-1, I prefer to do it that way. I'd probably feel differently if I did calculations like this all the time (and maybe you do!) but I do them infrequently enough that some of them don't feel worth learning. I think the only one I'm going to try to get in the habit of using for now is RATE, because it would have let me solve the last question a lot more elegantly...

[@steve_yu]

I have to say, it's a pretty big handicap in financial modeling to not be too familiar with some financial terms (e.g. working capital), but holy cow, that doesn't apply to you at all! 👀 Incidentally, in lieu of memorizing the formulas, you can use dedicated functions for Q4 and Q5: Q4: =RATE(5,,1000000,-10000000) Q5: =FV(20%,5,,-100000000)

[@DimEarly]

Good tip! I guess it's a hangover from the way I learned Excel, but there's a whole set of financial functions that I never use, because I never 'needed' them - e.g. I only fairly recently found out about all the different depreciation functions, because I had always just done them from first principles. It looks like I could have used RATE for Q15 as well, which I thought I had to goal seek. Never too old to learn a new trick!

[@steve_yu]

@@DimEarly That's interesting. You didn't use the depreciation functions until recently? But you hit us with an in-depth problem on depreciation in ModelOff 2019 👀 But yes, here are the equations for Q10 and Q11: Q10 can be answered with: =DDB(10000000,,10,3) Q11 can be answered with: =10000000-VDB(10000000,,10,0,5) The 10 in this case is basically double the reciprocal of the depreciation rate (1/20%)*2. Incidentally, would it be possible to level the volume somehow? I find myself having to adjust my speakers because your video is quieter compared to other KZbin videos...

[@DimEarly]

@@steve_yu I did lots of depreciation before, just never with the built-in formulas! I must admit, I don't remember a big depreciation problem in 2019... I do remember a tough one with lending tiers...

[@steve_yu]

@@DimEarly Actually, upon looking at the problem, you are right. Depreciation is not a major part of the problem in terms of points, but to me it sure felt like it! I was referring to "Multiplying Divisions" in the MO19 Finals. 😅

[@DimEarly]

Ah, that was actually Joseph's problem rather than mine. I was thinking of the one I did for 2018 (which was interesting in its way, but probably also a bit too hard!).