Businesses extensively use financial modelling and analysis to drive strategic growth and make informed decisions. In this context, Microsoft Excel is one of the most valuable tools to model and analyse complex financial data.
The spreadsheet application offers many features, including formulas and functions, which help create dynamic models, analyse complex datasets, and make visually appealing and easy-to-understand presentations. Because of its extensive features, MS Excel has become a favourite tool for financial modelling among finance professionals and business owners.
Read on to explore the benefits of financial modelling in Excel.
Introduction to Financial Modelling in Excel
Financial modelling involves creating and building mathematical models and representations of various financial situations. MS Excel is an unparalleled tool for financial modelling; it helps make projections, analyse and predict financial data, and make outcome evaluations of financial decisions.
Apart from being an excellent financial modelling tool, MS Excel is also a handy analysis and financial planning tool. Excel has extensive data visualisation capabilities, the ability to handle large datasets, various customisation options, an extensive library of functions, and many other features that help professionals make informed financial decisions.
Why Professionals and Businesses Prefer Financial Modelling in Excel
Let us delve deeper and understand why financial modelling in Excel is a favourite for businesses and professionals alike.
Data organisation
MS Excel comes with robust features like data analysis and data organisation. The spreadsheet application lets you create meaningful visualisations, perform calculations, manipulate voluminous datasets, and sort and filter data. With Excel’s immaculate data organisation capabilities, businesses can make data-driven decisions and gain valuable insights.
Documentation and collaboration
Many team members can collaborate on a single model in Excel financial modelling. This is possible as Excel offers the collaboration feature. Many people can work on the same model while tracking and reviewing changes. Excel also facilitates documentation of methodologies, formulas and assumptions for future updates.
Ease of integration with other tools
One of the most significant benefits of financial modelling in Excel is the spreadsheet application’s ability to integrate with various databases and software applications. Excel allows data export/import to/from different sources and converts them to relevant formats. Excel facilitates linking models to PowerPoint presentations and connecting to various accounting systems.
Customisation
Flexibility is a significant attribute of financial modelling, and Excel provides this flexible platform. Excel allows customising equations, formulas and layouts as per requirements. These customisations make financial modelling highly convenient as per the needs of the company or industry.
Forecasting and planning
One of the best tools for creating accurate financial forecasts and performing complex calculations is MS Excel. Excel has an extensive range of built-in formulas and functions for creating comprehensive financial models. Businesses can make informed financial projections using Excel’s analytical capabilities.
User-friendly interface
User-friendliness is possibly the most prominent advantage of financial modelling in Excel. Most finance professionals are familiar with the spreadsheet format and user-friendly interface of MS Excel. Financial modelling tasks are made easy with pre-built functions and templates. Even newbies can use Excel for financial modelling, thanks to the intuitive features that help create formulas, organise data and generate graphs and charts.
Visualisations and animations
MS Excel simplifies creating graphs and animations for presentations. Data visualisation makes financial model presentations more effective and impactful for stakeholders. The tool also offers customisation benefits for the charts and graphs with one’s choice of styles and patterns.
Accounting functions
Excel has comprehensive accounting functions for depreciation calculations, cash flow analysis, value of money, etc. Excel users can generate reports to identify projections and trends with the report generator feature. These accounting functions make Excel indispensable for professionals dealing with complex financial data.
Conclusion
Although several financial modelling software are available in the market, MS Excel remains the coveted choice among finance professionals, and for valid reasons! Excel is extensively used globally across organisations and industries. Thanks to its familiar features, user-friendly interface, and shallow learning curve, financial modelling using MS Excel becomes a breeze.
A financial modelling course can help you grasp Excel’s basic and advanced concepts for application across real-life scenarios. Enrol in the Financial Modelling and Valuations classroom bootcamp or the online course offered by The WallStreet School, India. The program includes basic, intermediate, and advanced Excel alongside a comprehensive financial modelling and valuations curriculum. Both the online and classroom bootcamp programs include placement assistance for enrolled candidates.
Sign up today!
For further queries and detailed information, visit The WallStreet School or contact us over email or phone (+91-9953729651).
FAQs
- Name some essential functions of Excel for financial modelling.
Some essential functions and formulas of Excel for financial modelling include ‘If & And’, ‘VLookUp and Index/Match’, ‘data formatting’, ‘Sum and Count’, etc.
- What are some of the common examples of financial models in Excel?
Some of the common examples of financial models in Excel are:
- Financial Statement Models
- Mergers and Acquisitions Models
- Forecasting Models
- Discounted Cash Flow Models
- Budget Models, etc.
- What are the best formulas used for financial modelling in Excel?
The best formulas used for financial modelling in Excel include
- PMT
- SUMIF
- VLOOKUP
- IRR
- NPV
