How to Build a Basic Financial Model in Excel
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- Опубліковано 30 чер 2024
- Here is a quick lesson on how to build a basic financial model in Excel. In this financial modeling video, we focus on the P&L, or income statement.
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In this tutorial, we learn how to build a basic financial model, specifically an income statement for a simple furniture company.
I created this video as a financial modeling guide & template for beginners. All financial modeling follows the same process - whether the model is complex or simple, so if you can understand the construction of this model, you can learn to build more complex financial models as well.
STEP 1: DEVELOP ASSUMPTIONS
First, you establish assumptions. In this case, we develop the assumptions for our revenue model (price, units sold, etc), and then the assumptions around the costs & expenses.
STEP 2: BUILD THE MODEL & FORMULAS
Once we've built the assumptions, we need to calculate the results (the total revenues, expenses, etc). This requires us to create formulas that multiply the assumptions and add / subtract different pieces of the model so we can calculate metrics like gross profit, net income, etc.
DON'T FORGET: FORMATTING!
One important piece which we do throughout the process of financial modeling is formatting. Some formats are standard across business, and so are good practice to follow (things like color coding). Other formats just make the model easier to scan and review (like dollar signs, decimal places, etc).
By the end of this video, you should have a good understanding of the financial modeling process in Excel, whether it is a basic model or a more advanced one.
I hope this content is valuable - please take a look at my other videos / courses (above) if you want to keep learning about Excel and finance.
► Subscribe for more finance videos: bit.ly/EricAndrewsSubscribe
#financialmodel #excel #financialmodelbeginners
One of the best tutorials on UA-cam! He gets straight to the point. No long intros about himself. Thank you! 😊 Great example too!
Control + C, Alt+E+S+T if you want to copy formats without having to retype your numbers
Also, Alt+I+R to insert row above, Alt+I+C to insert Column to the Left
Seriously thank you for putting in the effort to help and teach others
Thank you Eric, you are a real life saver. I was building a model for the first time and yours was the video which I really understood.
So glad to hear that. Thanks for letting me know Vikram!
Thank you. Very straightforward and easy to understand. Not that common here on UTube.
Hey - my pleasure. I'm glad it was straightforward. Will be releasing some more videos going forward!
Thank you so much.. I work in finance , and even I am blown away by the simplicity of how u explain the concept of a basic financial model.. ppl get wrapped in the complexity of a model around formulaes and fancy graphs
End of the day this is what a model should do ..
Chinth Madhu - thanks for the comment. Totally agree that people often overcomplicate things and get distracted from the core concepts! Glad it was helpful!!!
thank you for sharing your knowledge... very grateful
Thank you so much for posting this simple and easy to understand guide. I have 12 hours to go for a case interview that suddenly needs financial modeling so this was a life saver.
Makes me very happy to hear that. Good luck on it 👍👍
Really helpful.. Nice way of teaching, looking for more valuable tutorials. Thanks alot
Hi Rabia - I've released something more advanced if you're interested, this is more of a real income statement that an actual company would use => ua-cam.com/video/bsmyakxOPLY/v-deo.html
Cheers!
Bro how are you so fast? You're like an Excel wizard knowing all the keyboard shortcuts. It's pretty cool. Idk why I'm even looking this up. I'm just importing my yearly spending into excel but then was like "wonder what a financial model looks like in excel"
I am cost accountant shifting towards finance analysis, this is super easy to understand. Core concepts indeed! Will watch all the videos.
That's awesome. Glad it was helpful! Just released a new video on how to build a more realistic (advanced) financial model for a startup. Would probably be helpful if you're going in this direction with your career => ua-cam.com/video/bsmyakxOPLY/v-deo.html
Thank you Andrew. Very precise and to the point.
This channel is a gold mine... please don't stop making these videos my man!! you're bringing out so much value to the community and I hope you're going to be as successful as possible in what you're doing. Just finished my bachelor's degree in business administration here in Germany with a major in marketing and entrepreneurship and I want to start working / build my own company + support our family business. I came to the realisation that I've learned a lot about the theoretical stuff on marketing and product development and so on, but have a lack in financial knowledge - which is the key for starting a successful business. Even though I was good at accounting, I've forgot almost everything and don't want anything too complex to learn, I just want to understand the fundamental KPI's and their relationship and you're providing this simplicity in your videos!! also watched you video on digital marketing KPI's, awesome stuff man. Keep going, you're doing a great job!
Really appreciate that message and you sharing that...keeps me motivated to create more videos when I hear stories like this!! Working on more as we speak! Will try to keep expanding as well around marketing as well, glad you liked the KPIs. Cheers
Thank you! Still informative 3 years later. Will consider he course after looking
Glad to hear it. In the meantime, take a look at some of my other youtube videos (like more advanced financial modeling: ua-cam.com/video/bsmyakxOPLY/v-deo.html), as there are plenty of great things to learn for free as well 🙂
Thank you so much, i love the simplicity
This is really great! Thank you so much.
I'm actually very young and this was very understandable even for me! Thank you very much good sir.
That's awesome! Thanks for letting me know, you're way ahead of the game 👍
Very simple and fast tutorial on building basic financial model in excel. Thanks.
Dude You Rock this !!!!
Thank you for the easy to follow but empowering presentation!!!
Karlton - thanks man! I'm glad that it was helpful for you!
Thank you so much! I have to prepare a case study for an interview and this was so helpful.
Hey awesome to hear it was helpful for the interview!
Hey, I have a case study take home assessment interview too, do you have other video recommendations?
interesting points ,if anyone else wants to uncover alternative medicine carpal tunnel syndrome try Pycanta Tunnel Syndrome Protocol (Have a quick look on google cant remember the place now ) ? Ive heard some unbelievable things about it and my work buddy got amazing success with it.
I got help from thechinahacks financially .They got me a transfer of $36,000 just yesterday .
OMG I paid for online financial modeling courses and this easy and free tutorial was here all this time?! Thank you
I'm so happy that this made it easy to learn. I appreciate the comment. Cheers!
@@eric_andrews ur welcome
Thanks for the video! :) I am currently preparing for an interview for an entry position as a project financial analyst and it's really helpful
Really glad to hear that Maria! Once you've mastered the basics of the income statement I would suggest you try something a little more advanced that covers all three financial statements, take a look at this as I think it would help you a lot in your role and any interviews: ua-cam.com/video/xlXDZyZ9azk/v-deo.html
Brilliant. I love your presentation, simple and easy to understand. Thank you so much. Eric.
Happy to help Yau, cheers!
Thanks for sharing, very helpful and easy to understand .
Appreciate the knowledge. You are with it, best wishes on your future endeavors.
You too Ryan thanks for the well wishes!
Thank You so much, it was very helpful.
This man is a God with hotkeys! Great tutorial as well
Haha - thanks Matthew! I love the hotkeys. If you're interested in learning some keyboard shortcuts take a look at these two videos! They are the first two videos of my "master keyboard shortcuts course":
ua-cam.com/video/vll6oca55Us/v-deo.html
ua-cam.com/video/uGJLUNyBvi0/v-deo.html
Cheers!
thank you for great presentation
Great effort for smart learning 😍
Thank you very much!
I really like this fast way to create an income statement.
The lesson was to the point.
Thank you
Hi Khurshid - I'm glad you found video to the point! Thanks for watching!
Thank you very much Eric.
This was great one!
TAHNK YOU SO MUCH ERIC!
thank you so much for this. helped immensely!
Glad it helped!
Super helpful thanks for sharing!
THANK YOU! It took me forever to find a direct-to-the-point basic lesson on financial modeling
Glad it was helpful Patricia!! Appreciate the comment
Thank you for simple explanation!
It's my pleasure Shrinivas thanks for watching
This is great ! Thanks :)
Excellent! Thanks for sharing.
Hi Eric
Fantastic presentation..
Simple and easy way to understand
Thanks
A million thanks aromal m!
thank - very easy to follow you :)
Thanks Sledge!!
the video helps me a lot. thank you
Best one. Easy and simple. Thanks bro
Thank you so much, this was very helpful.
Happy that you learned something!
Thank you so much sir plese share some more vedio on financial modeling
Sure thing! Here is my newest video on how to build a full financial model for a startup from A-Z ua-cam.com/video/bsmyakxOPLY/v-deo.html
Thank you. This was excellent!
My pleasure Zoltan! Happy to help
This is a great example of financial modeling and very easy to understand.
Glad to hear it. Thanks Jaynee!
VERY GOOD VIDEO ...HELPED ALOT..THANKYOU SIR.............
Hey my pleasure Anil! Thanks for the comment!
Very helpful and simple to understand
Glad it was helpful Javier. Thanks!
Very simple and easy to understand. You don't see that often here. Subscribed!!!
Thanks for the sub! Will be releasing more financial modeling and analysis videos every week!
You are great Eric. Love from Pakistan. I got so much from your videos
Really glad to hear it, appreciate the comment 🙏🙏🙏
THANK YOU SO SO MUCH.
excellent teaching and detailed
ua-cam.com/video/1abjBrSqTnk/v-deo.html check my video too. please lke and subscribe
Beautiful simple explanation.
Glad it was helpful!
This was really good. thankyou
Awesome to hear!!
Thanks much Eric!
Great. Would love to see you build more. All the best
100%, lots more coming!! Any particular interest? Maybe I'll make a video around it
Very helpful, thank you
Happy to help! Thanks for the comment!
Ooh thanks Mr Eric
because sometimes i normally see people teaching that FIS things i see in financial modelling like 3 financial statements model, investment appraisals, capital budgeting, loan amortization and others so i was wondering if FIS&financial modeling are the same
Thanks once again bro
Sure. Yes these concepts are all connected to each other. You need to create historical financial statements with the financial information system, and then with those you can make future forecasts, and with your forecasts you can calculate net present value and do valuations, etc. So yes all of these subjects are related!
thank you Eric
such a helpful video! thanks a million
My pleasure!
Great video!
Excellent explanation! Please make more such videos on valuation and related topics
Hey Neerja - sure thing, here's my model on the DCF valuation method ua-cam.com/video/Gm0Xn_MidZ8/v-deo.html
Thank you so much!!!!
Nice video, make the complicated financial easier and friendly for the beginners
That's the plan!
I kept thinking my dryer was on while watching this video. Finally realized your dryer was on lol
Guilty. Never actually expected anyone to watch this video when I recorded it. I've since improved my production quality, ha!
i have been acca student. have attempted and done my cbe the same way. but only without knowing this is how financial modeling irl too. lol
Thank you
Fab vid, thank you so much
Happy to help Karolina. Cheers!
very easy to understand. Please Make video how to make Cash Flow Statement and Balance Sheet in Excel
Hi Shweta, I was thinking of doing this sometime soon, as it seems like a lot of people are interested. Thanks for the encouragement 😀
This video is still a banger in 2021!
Thanks sir im too grateful to you.
Most welcome!
thank you teacher.
My pleasure!
Very good video... pretty easy to follow 🙏🙏🙏
Thanks so much for the comment!! I'm glad it was valuable for you.
Helpful. Thanks!
Happy to help. Cheers!
Great video. Thank you very much
very welcome!
omgg, ur gonna save me, im having a test tmr ab thiss 😭😭😭😭
Lol amazing, hope it went well
Fanatstic video brother!
🙏 thanks so much!
Thank you Sir
You are the best!
Thanks Dekass!
Interesting tutorials. very helpful
Glad you like them Benson! Cheers!
This is exactly what I needed as I am learning financial modeling. I hope you will expand on this video and another basic financial model for a service company.
Also, at 4:54, isnt' gross revenue units times price and not net revenue especially since you did not deduct any expenses?
net revenue is revenue net of discounts and returns
net revenue is revenue net of discounts and returns
Net revenue is units times price minus discounts & refunds. Given that we had no discounts or refunds, net and gross revenue are the same number here. Make sense?
it was very very good
It was Useful. thanks.
Glad it was helpful Audrey!
Audreey Cat ugh???(8$’bb. B.
Thank you so much for this.. As a co-founder rasing funds, this was helpful DIY tutorial
You're so welcome!
thank you
Erick, you have no idea how thankful im. I always aspired to build a sound financial model with standard accounting principles observed. A watching this at-least 10 times i was able to secure full time contracts at up-work. I'm very very grateful. be proud im your loyal student.
It's an honor to be able to contribute to your success, Stanley. I'm very excited for you and this great news. Best of luck and let me know if you have any other subjects you'd like me to create videos around. 🙏
@@eric_andrews thank you Eric, your tutorials are super learner friendly. About Sensitivity analysis: I'm not sure what to do where we have a number of services or products in a business. Kindly guide us/me on this as a comment or new tutorial.
@@stanleymwangi9050 hey - thanks for that question. No single analysis will help you understand everything. It's very common with sensitivity analysis that you just analyze one revenue line or service at a time. I've often built 4 or 5 just to understand profitability of a company and which inputs give me the most information. Lots of times you just need to be curious and start asking questions and searching for answers - sensitivity analysis is just a tool for searching. Cheers !
@@eric_andrews okay. I find this response helpful 10/10. Thank you very much .
Amazing
Thank you
Great work on these! Do you plan on covering compound annual growth rate?
Ah, I would actually really enjoy making a video about that, and maybe mixing it with IRR. Thanks for the idea Alex.
Thx a lot
Thank you very much. This 10min is very helpfull. Can you do anothder video about these keyboard shortcuts like you did.
Hi Alok! Here is another video I made about the keyboard shortcuts I use
ua-cam.com/video/KTvoUVcmQlc/v-deo.html
@@eric_andrews Much appreciated 😊
@@dailyrandomlife4351 happy to help!
Thank u so much.... 😇
Don't you just love the keyboard typing sound
Hahaha I love it!
Can you show how to Budget forecasting in Food and beverage Dept..?
Great!.
Hi Eric, thank you so much for breaking down the key concepts of an income statement. Do you have a particular recommendation for financial modeling courses on Udemy? Thank you in advance!
Hey Sakib, thanks for the comment, as a starting point you can check out some of my longer youtube videos that teach how to build a more real life financial model from A-Z, honestly those are some of the most realistic lessons you'll find. Invest some time in these and let me know what you think. A lot of subscribers are passing interviews / starting businesses with these models, so these should probably be enough for you!
=> Building a 3 statement financial model ua-cam.com/video/xlXDZyZ9azk/v-deo.html
=> Monthly budgeting and forecasting model ua-cam.com/video/yJcL4et-ClY/v-deo.html
=> E-commerce financial model
ua-cam.com/video/bsmyakxOPLY/v-deo.html
Thanks
I'm a lawyer, but found this extremely interesting for some reason
Haha, I love to hear it!
Great, clear video. I might actually get your Udemy course.
Awesome, thank you!
Important excel learning and practice important