GURU GOBIND SINGH

INDRAPRASTHA UNIVERSITY
NEW DELHI

Practical Lab File on

FINANCIAL MODELLING USING SPREADSHEET
(BCOM – 312)
Submitted in partial fulfillment of the requirement for the award of degree of
B.com (H)
Session : 2021-2024

SUBMITTED AT:
DELHI SCHOOL OF PROFESSIONAL STUDIES & RESEARCH
ROHINI, NEW DELHI - 85
[AFFILIATED TO GGSIPU – NEW DELHI]

Submitted To: Submitted By:

Mrs. Ayushi Guglani Ms. Khushi Jain
(Assistant Professor) 01012588821
B.com(H) – 6A

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 Declaration
I take this opportunity to express my profound gratitude and deep regards to my guide Mrs. Ayushi Guglani
for her exemplary guidance, monitoring and constant encouragement throughout the course of this project.
The blessing, help and guidance given by her time to time shall carry me a long way in the journey of life
on which I am about to embark.

Last but not least, my sincere thanks to my parents and friends for their wholehearted support and
encouragement.
I also hereby declare that the project work entitled “Practical lab file on Financial Modelling using
spreadsheet” under the guidance of “Mrs. Ayushi Guglani” is my original work and it has not been submitted
earlier in any otheruniversity or institution.

KHUSHI JAIN BCOM(HONS) - A

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 Certificate
This is to certify that the project titled “PRACTICAL LAB FILE ON FINANCIAL MODELLING
USING SPREADSHEET” is an academic work done by MS. KHUSHI JAIN submitted in the partial
fulfillment of the requirements for the award of degree of Bachelor of Commerce (Hons.) at Delhi
School of Professional Studies and Research, New Delhi under my guidance and direction.

MS. KHUSHI JAIN has given an undertaking that the information presented in the project has not
been submitted earlier.

(Signature of Faculty)

Mrs. AYUSHI GUGLANI

Assistant Professor, DSPSR

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 TABLE OF CONTENT
TOPICS PAGE NO.
INTRODUCTION TO FINANCIAL MODELLING
UNIT -1 (INTRODUCTION)
• Combination of multiple function in a problem as Vlook up
match, index match
• Vlook up and if
• Offset function
• Sensitivity analysis using different ways
• Scenario manager and how to use that in a model
• Iterative calculation
• Correlation using spreadsheet
• Regression using spreadsheet
• Variance using spreadsheet
• Summarize data from different sheets into single sheet using
indirect function
UNIT – 2 (CHARTING)
• Rules of creating a bar chart
• Pictures as linked objects in spreadsheet
• Creating dynamic charts using name manage
• Display of multiple charts at the same time in same location
using filters
• Now and then analysis chart
• Waterfall charts
• Thermometer charts
• Change in charts using sensitivity analysis
• Interactivity using form control
• Creation of dashboards
• Conditional formatting
UNIT – 3 (FINANCIAL ANALYSIS)
• Calculate Net Present Value (NPV)
• Calculate Internal Rate of Return (IRR)
• Build dynamic models with multiple scenarios using XIRR,
MIRR
UNIT – 4 (OTHER MODELLING TECHNIQUES)
• Weighted average cost of capital (WACC)
• Capital asset pricing model (CAPM)
• Calculation of free cash flows to firm
• Calculation of free cash flows to equity
• Creation of data table
• Scenario manager and solver

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INTRODUCTION TO FINANCIAL MODELLING
Financial modeling is a crucial tool used by professionals in finance, investment banking, corporate
finance, and other related fields to make informed decisions about investments, business operations,
and strategic planning. Essentially, financial modeling involves building mathematical representations
of financial situations and scenarios to analyze and forecast outcomes.

Here's an introductory overview of financial modeling:

1. Purpose: Financial modeling helps in understanding the potential financial performance of a

business, project, or investment opportunity. It aids in decision-making by providing insights into the
potential risks and returns associated with various courses of action.

2. Components: A financial model typically includes various components such as historical financial
data, assumptions about future performance, formulas and calculations, and output metrics. These
components are integrated into a coherent framework to simulate different scenarios and outcomes.

3. Types of Models: Financial models can vary widely depending on their purpose and complexity.
Common types include:
- Valuation Models: Used to estimate the value of a business, asset, or investment.
- Forecasting Models: Predict future financial performance based on historical data and assumptions
about future conditions.
- Budgeting Models: Aid in planning and managing budgets for businesses or projects.
- Merger & Acquisition (M&A) Models: Assess the financial implications of mergers, acquisitions,
or divestitures.
- Risk Models: Evaluate the potential risks and their impact on financial outcomes.

4. Tools: Financial models are often created using spreadsheet software like Microsoft Excel, although
more advanced models may be built using specialized financial modeling software. Excel is widely
preferred due to its flexibility, familiarity, and accessibility.

5. Best Practices:
- Simplicity: Keep models as simple as possible while still capturing the essential aspects of the
situation.
- Transparency: Document assumptions, methodologies, and sources of data to ensure transparency
and reproducibility.
- Flexibility: Design models to accommodate changes in assumptions or inputs easily.
- Accuracy: Validate models using historical data or sensitivity analysis to ensure accuracy and
reliability.
- User-friendliness: Ensure that the model is user-friendly and understandable for stakeholders who
may not have expertise in financial modeling.

6. Applications: Financial modeling is used in various areas including:

- Corporate finance: Budgeting, strategic planning, and investment analysis.
- Investment banking: Valuation of companies, IPO analysis, and merger modeling.
- Real estate: Property valuation, feasibility analysis, and investment decision-making.
- Portfolio management: Risk assessment, asset allocation, and performance tracking.

In conclusion, financial modeling is a powerful tool for analyzing and predicting financial outcomes,

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enabling informed decision-making across various domains in finance and business. Mastering
financial modeling requires a combination of technical skills, financial knowledge, and critical thinking
abilities.

Features of Financial Modeling:

1. Flexibility: Models can be adjusted easily to incorporate changes in assumptions or scenarios.

2. Customization: Tailored to specific needs, whether it's valuation, forecasting, budgeting, or risk
analysis.

3. Integration: Combines data from various sources to provide a comprehensive view of financial
situations.

4. Accuracy: When appropriately constructed and validated, models can provide accurate predictions
and insights.

5. Scalability: Models can be scaled up or down in complexity depending on the requirements and
available resources.

Advantages of Financial Modeling:

1. Informed Decision Making: Helps decision-makers assess the potential outcomes of various
financial strategies, investments, or business decisions.

2. Risk Management: Enables the identification and quantification of financial risks, allowing for the
development of mitigation strategies.

3. Resource Allocation: Aids in the efficient allocation of resources by prioritizing investments or

projects based on their expected financial returns.

4. Communication Tool: Provides a structured framework for communicating financial information

and strategies to stakeholders, investors, and management.

5. Strategic Planning: Facilitates long-term strategic planning by forecasting financial performance

under different scenarios and assumptions.

Disadvantages of Financial Modeling:

1. Complexity: Developing and understanding complex financial models requires specialized skills
and knowledge, which may be challenging for some users.

2. Assumption Sensitivity: Results are highly dependent on the accuracy of assumptions, and small
changes in inputs can lead to significant variations in outcomes.

3. Data Limitations: Relies heavily on historical data and assumptions about future trends, which may
not always accurately reflect real-world conditions.

4. Over-reliance: Users may become overly reliant on models, leading to a false sense of certainty or
neglect of qualitative factors that can impact financial outcomes.

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5. Time and Resources: Constructing and maintaining sophisticated financial models can be time-
consuming and resource-intensive, especially for large or complex projects.

Uses of Financial Modeling:

1. Valuation: Estimating the value of companies, assets, or investment opportunities using various
valuation techniques such as discounted cash flow (DCF) analysis or comparable company analysis
(CCA).

2. Forecasting: Predicting future financial performance based on historical data, industry trends, and
economic factors.

3. Budgeting and Planning: Creating budgets, financial plans, and forecasts to guide resource
allocation and strategic decision-making.

4. Investment Analysis: Assessing the financial viability and potential returns of investment
opportunities, including stocks, bonds, real estate, and projects.

5. Risk Management: Identifying, quantifying, and managing financial risks through techniques such
as sensitivity analysis, scenario analysis, and Monte Carlo simulation.

6. Mergers and Acquisitions (M&A): Evaluating the financial implications of mergers, acquisitions,
or divestitures, including synergies, valuation, and financing options.

Financial modeling is a versatile tool with numerous applications across various domains in finance
and business. While it offers significant advantages in terms of informed decision-making and risk
management, it also comes with challenges such as complexity, reliance on assumptions, and resource
requirements. Understanding these features, advantages, disadvantages, and uses is essential for
effectively leveraging financial modeling in practice.

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 UNIT – 1 (INTRODUCTION)
❖ COMBINATION OF MULTIPLE FUNCTIONS IN A PROBLEM VLOOK UP
MATCH, INDEX MATCH
The Excel VLOOKUP function is really helpful when it comes to searching across a database for a
certain value. However, it lacks an important feature - its syntax allows for just one lookup value..
Formula 1. VLOOKUP with two criteria

To overcome this, you can add a helper column and concatenate the values from two lookup columns
(Customer and Product) there. It is important that the helper column should be the leftmost column in
the table array because it's where Excel VLOOKUP always searches for the lookup value.
So, add a column to the left of your table and copy the below formula across that column. This will
populate the helper column with the values from columns B and C (the space character is concatenated
in between for better readability):
=B2&" "&C2
=VLOOKUP("Jeremy Sweets", A2:D11, 4, FALSE)
=VLOOKUP(G1&" "&G2, A2:D11, 4, FALSE)
As we want to return a value from column D, which is fourth in the table array, we use 4
for col_index_num. The range_lookup argument is set to FALSE to Vlookup an exact match. The
screenshot below shows the result:

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 In case your lookup table is in another sheet, include the sheet's name in your VLOOKUP formula.

=VLOOKUP(G1&" "&G2, Orders!A2:D11, 4, FALSE)

Formula 2. Excel VLOOKUP with multiple conditions

Microsoft Excel often provides more than one way to do the same thing. To Vlookup multiple criteria,
you can use either an INDEX MATCH combination or the XLOOKUP function recently introduced in
Office 365.

=INDEX(D2:D11, MATCH(1, (G1=A2:A11) * (G2=B2:B11) * (G3=C2:C11), 0))

=XLOOKUP(1, (G1=A2:A11) * (G2=B2:B11) * (G3=C2:C11), D2:D11)

Where:

• G1 is criteria 1 (date)
• G2 is criteria 2 (customer name)
• G3 is criteria 3 (product)
• A2:A11 is lookup range 1 (dates)
• B2:B11 is lookup range 2 (customer names)
• C2:C11 is lookup range 3 (products)
• D2:D11 is the return range (quantity)

How to Vlookup in rows and columns (two-way lookup)

Two-way lookup (aka matrix lookup or 2-dimentional lookup) is a fancy word for looking up a value
at the intersection of a certain row and column. There are a few different ways to do two-dimensional
lookup in Excel, but since the focus of this tutorial is on the VLOOKUP function, we will naturally
use it.

=VLOOKUP(I1, A2:F9, MATCH(I2, A1:F1, 0), FALSE)

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The core of the formula is the standard VLOOKUP function that searches for an exact match to the
lookup value in I1. But since we do not know in which exactly column the sales for a specific month
are, we cannot supply the column number directly to the col_index_num argument. To find that
column, we use the following MATCH function:

MATCH(I2, A1:F1, 0)

Since Mar is in the 4th column in the lookup array, the MATCH function returns 4, which goes directly
to the col_index_num argument of VLOOKUP:

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❖ VLOOPUP AND IF

In most cases, the following generic formula would work nicely:

IF(VLOOKUP(…) = value, TRUE, FALSE)

Example 1.

=VLOOKUP(E1,$A$2:$B$10,2,FALSE)

=IF(VLOOKUP(E1,$A$2:$B$10,2,FALSE)=0,"No","Yes")

Instead of Yes/No, you can return TRUE/FALSE or In Stock/Sold out or any other two choices. For
example:

=IF(VLOOKUP(E1,$A$2:$B$10,2)=0,"Sold out","In stock")

You can also compare the value returned by Vlookup with sample text. In this case, be sure to enclose
a text string in quotation marks, like this:

=IF(VLOOKUP(E1,$A$2:$B$10,2)="sample text",TRUE,FALSE)

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❖ OFFSET FUNCTION

The syntax of the OFFSET function is as follows:

OFFSET(reference, rows, cols, [height], [width])

The first 3 arguments are required and the last 2 are optional. All of the arguments can be references
to other cells or results returned by other formulas.

Note. OFFSET is a volatile function and and may slow down your worksheet. The slowness is directly
proportional to the number of cells recalculated.

Excel OFFSET formula example

=OFFSET(A1,3,1)

However, if you embed the SUM function:

=SUM(OFFSET(A1,3,1,1,3))

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❖ SENSITIVITY ANALYSIS USING DIFFERENT WAYS
Step 1 Consider an Excel sheet.

First, enter the formula in the cells B9, B10, B11, and B12 as =B2*B3, =B4*B2, =B9−B8, and
=B11−B5−B6, respectively.

Step 2 Then Prepare the sensitivity analysis table

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Step 3 Then select the range of cells D2:I8, click on data, and select the data table under What−If
Analysis.
Select cells > Data > What−If Analysis > Data Table.

Step 4 Then in the pop−up, set the row input cell as cell B$2 and the column input cell as B$3,
and click OK to complete the task.

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❖ SCENARIO MANAGER AND HOW TO USE THAT IN A MODEL

Create First Excel Scenario

1. On the Ribbon's Data tab, click What If Analysis

2. Click Scenario Manager

3. In Excel's Scenario Manager, click the Add button

4. Type name for the Scenario. For this example, use Marketing.
5. Press the Tab key, to move to the Changing cells box
6. On the worksheet, select cells B1
7. Hold the Ctrl key, and select cells B3:B4
Note: There is a limit of 32 changing cells
8. Press the Tab key, to move to the Comment box
9. (optional) Enter a comment that describes the scenario.
10. Click the OK button

11. The Scenario Values dialog box opens, with a box for each changing cell.
12. You could modify these values, but in this example they contain the values currently on the worksheet,
and don't need to be changed.
13. Click the OK button, to return to the Scenario Manager.
14. Click the Close button, to return to the worksheet

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 Create Second Excel Scenario

1. To prepare for the Finance scenario, change the values in cells B1, B3 and B4,

2. On the Ribbon's Data tab, click What If Analysis, then click Scenario Manager.
3. In the Scenario Manager, click the Add button
4. Type name for the second Scenario. For this example, use Finance.
5. The Changing cells box should show the previous selection -- B1,B3:B4 -- so leave that as is.
6. Press the Tab key, to move to the Comment box
7. (optional) Enter a comment that describes the scenario.
8. Click the OK button
9. The Scenario Values dialog box opens, with a box for each changing cell.
10. Click the OK button, to return to the Scenario Manager.
11. Click the Close button, to return to the worksheet

Show an Excel Scenario

Once you have created Scenarios, you can show them. In this example, the Finance scenario is currently
visible. To change to a different scenario:

1. On the Ribbon's Data tab, click What If Analysis, then click Scenario Manager.
2. The Scenario Manager dialog box opens, showing a list of scenarios in the workbook
3. In the list of Scenarios, select Marketing
4. Click the Show button
5. Click the Close button.

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 Add Scenario to Excel Ribbon
An easier way to switch between Scenarios, is to add a command to the Ribbon. Follow these steps, to
add a Custom Group, and put the Scenario command in that group.

1. Right-click on the Ribbon, and click Customize the Ribbon

2. From the drop down list at the top left, select All Commands
3. In the list of commands that are currently on the Ribbon, click the plus sign for Data, then click Data
Tools. That group contains the Scenario Manager, so we'll add the new group beside it.

4. Below the list, click the New Group button.

5. Then, click the Rename button, type Scenario as the name for the group, and click OK

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6. At the left, in the list of All Commands, scroll down to find Scenarios
7. Make sure that the new Scenario group is still selected in the list at the right.
8. Click on Scenarios, then click Add, to put Scenarios in the Scenario group.

9. Click OK, to close the window, then click the Data tab, and select a Scenario to view.

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❖ ITERATIVE CALCULATIONS

"When an Excel formula refers back to its own cell, either directly or indirectly, it creates a circular
reference."

For instance, if you select cell A1 and type =A1 in it, this would create an Excel circular reference.
Entering any other formula or calculation referring to A1 would have the same affect,
e.g. =A1*5 or =IF(A1=1, "OK").

As soon as you hit Enter to complete such a formula, you'll get the following warning message:

Why does Microsoft Excel give you a heads-up? Because Excel circular references can iterate
indefinitely creating an endless loop, thus significantly slowing down the workbook calculations.

Once you got the above warning, you can click Help for more information, or close the message
window by clicking either OK or the cross button. When you close the message window, Excel displays
either a zero (0) or the last calculated value in the cell. Yep, in some cases, a formula with a circular
reference can complete successfully before it tries to calculate itself, and when that happens, Microsoft
Excel returns the value from the last successful calculation.

Note. In many cases, when you enter more than one formula with a circular reference, Excel doesn't
display the warning message repeatedly.

But why would anyone want to make such a stupid formula that does nothing but cause unnecessary
problems? Right, no sane user would ever want to intentionally input a circular formula like the above

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 one. However, you may create a circular reference in your Excel sheet accidentally, and here's a very
common scenario.

Supposing you want to add up values in column A with a usual SUM formula, and when doing this
you inadvertently include the total cell itself (B6 in this example).

If circular references are not allowed in your Excel (and they are turned off by default), you will see
an error message we've discussed a moment ago. If iterative calculations are turned on, then your
circular formula will return 0:

In some cases, one or more blue arrows can also appear in your spreadsheet all of a sudden, so you
might think your Excel has gone mad and is about to crash.

In fact, those arrows are nothing more than Trace Precedents or Trace Dependents, which indicate
which cells affect or are affected by the active cell. We will discuss how you can show and hide these
arrows a bit later.

By now, you might have an impression that Excel circular references are a worthless and dangerous
thing, and may wonder why Excel has not banned them altogether. As already mentioned, there are
some very rare cases when using a circular reference in Excel can be justified because it provides a
shorter and more elegant solution, if not the only possible one. The following example demonstrates
such a formula.

How to find circular references in Excel

To check your Excel workbook for circular references, perform the following steps:

1. Go to the Formulas tab, click the arrow next to Error Checking, and point to Circular
References The last entered circular reference is displayed there.

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2. Click on the cell listed under Circular References, and Excel will bring you exactly to that cell.

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❖ CORRELATION IN SPREADSHEET
Excel CORREL function

The CORREL function returns the Pearson correlation coefficient for two sets of values. Its syntax is
very easy and straightforward:

CORREL(array1, array2)

Where:

• Array1 is the first range of values.

• Array2 is the second range of values.

The two arrays should have equal length.

=CORREL(B2:B13, C2:C13)

Or,

=CORREL(C2:C13, B2:B13)

Excel PEARSON function

The PEARSON function in Excel does the same thing - calculates the Pearson Product Moment
Correlation coefficient.

PEARSON(array1, array2)

Where:

• Array1 is a range of independent values.

• Array2 is a range of dependent values.

On our sample data set, both functions exhibit the same results:

=CORREL(B2:B13, C2:C13)

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=PEARSON(B2:B13, C2:C13)

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❖ REGRESSION USING SPREADSHEET
How to make a linear regression graph in Excel
1. Select the two columns with your data, including headers.
2. On the Inset tab, in the Chats group, click the Scatter chart icon, and select the Scatter thumbnail (the
first one):

This will insert a scatter plot in your worksheet, which will resemble this one:

3. Now, we need to draw the least squares regression line. To have it done, right click on any point and
choose Add Trendline… from the context menu.

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4. On the right pane, select the Linear trendline shape and, optionally, check Display Equation on
Chart to get your regression formula:

As you may notice, the regression equation Excel has created

5. Switch to the Fill & Line tab and customize the line to your liking. For example, you can choose a
different line color and use a solid line instead of a dashed line (select Solid line in the Dash type box):

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 6.
At this point, your chart already looks like a decent regression graph:

How to do regression in Excel using formulas

Microsoft Excel has a few statistical functions that can help you to do linear regression analysis such
as LINEST, SLOPE, INTERCEPT, and CORREL.

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The LINEST function uses the least squares regression method to calculate a straight line that best
explains the relationship between your variables and returns an array describing that line.
=LINEST(C2:C25, B2:B25)
Because the LINEST function returns an array of values, you must enter it as an array formula. Select
two adjacent cells in the same row, E2:F2 in our case, type the formula, and press Ctrl + Shift + Enter to
complete it.
The formula returns the b coefficient (E1) and the a constant (F1) for the already familiar linear
regression equation:
y = bx + a

Get the Y-intercept (a):

=INTERCEPT(C2:C25, B2:B25)
Get the slope (b):
=SLOPE(C2:C25, B2:B25)
Additionally, you can find the correlation coefficient (Multiple R in the regression analysis summary
output) that indicates how strongly the two variables are related to each other:
=CORREL(B2:B25,C2:C25)

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❖ VARIANCE USING SPREADSHEET
There are 6 built-in functions to do variance in Excel: VAR, VAR.S, VARP, VAR.P, VARA, and
VARPA.
Excel variance functions

Name Excel version Data type Text and logicals

VAR 2000 - 2019 Sample Ignored

VAR.S 2010 - 2019 Sample Ignored

VARA 2000 - 2019 Sample Evaluated

VARP 2000 - 2019 Population Ignored

VAR.P 2010 - 2019 Population Ignored

VARPA 2000 - 2019 Population Evaluated

There are 3 functions to find sample variance in Excel: VAR, VAR.S and VARA.

VAR function in Excel

It is the oldest Excel function to estimate variance based on a sample. The VAR function is available
in all versions of Excel 2000 to 2019.

VAR(number1, [number2], …)

Note. In Excel 2010, the VAR function was replaced with VAR.S that provides improved accuracy.
Although VAR is still available for backward compatibility, it is recommended to use VAR.S in the
current versions of Excel.

VAR.S function in Excel

It is the modern counterpart of the Excel VAR function. Use the VAR.S function to find sample
variance in Excel 2010 and later.

VAR.S(number1, [number2], …)

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 VARA function in Excel

The Excel VARA function returns a sample variance based on a set of numbers, text, and logical values
as shown in this table.

VARA(value1, [value2], …)

Sample variance formula in Excel

When working with a numeric set of data you can use any of the above functions to calculate sample
variance in Excel.

=VAR(B2:B7)

=VAR.S(B2:B7)

=VARA(B2:B7)

As shown in the screenshot, all the formulas return the same result (rounded to 2 decimal places):

To check the result, let's do var calculation manually:

1. Find the mean by using the AVERAGE function:

=AVERAGE(B2:B7)

The average goes to any empty cell, say B8.

2. Subtract the average from each number in the sample:

=B2-$B$8

The differences go to column C, beginning in C2.

3. Square each difference and put the results to column D, beginning in D2:
=C2^2
4. Add up the squared differences and divide the result by the number of items in the sample minus 1:
=SUM(D2:D7)/(6-1)

As you can see, the result of our manual var calculation is exactly the same as the number returned
by Excel's built-in functions:

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How to calculate population variance in Excel

There are 3 functions to calculate population variance in Excel: VARP, VAR.P and VARPA.

VARP function in Excel

The Excel VARP function returns the variance of a population based on the entire set of numbers. It is
available in all versions of Excel 2000 to 2019.

VARP(number1, [number2], …)

VAR.P function in Excel

It is an improved version of the VARP function available in Excel 2010 and later.

VAR.P(number1, [number2], …)

VARPA function in Excel

The VARPA function calculates the variance of a population based on the entire set of numbers, text,
and logical values. It is available in all version of Excel 2000 through 2019.

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VARA(value1, [value2], …)

=VARP(B2:B11)

=VAR.P(B2:B11)

=VARPA(B2:B11)

And all the formulas will return the identical result:

To make sure Excel has done the variance right, you can check it with the manual var calculation
formula shown in the screenshot below:

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33
❖ SUMMARIZE DATA FROM DIFFERENT SHEETS INTO A SINGLE SHEET
USING INDIRECT FUNCTIONS
INDIRECT function syntax

The INDIRECT function in Excel returns a cell reference from a text string. It has two arguments, the
first is required and the second is optional:

INDIRECT(ref_text, [a1])

ref_text - is a cell reference, or a reference to a cell in the form of a text string, or a named range.

a1 - is a logical value that specifies what type of reference is contained in the ref_text argument:

• If TRUE or omitted, ref_text is interpreted as an A1-style cell reference.

• If FALSE, ref_text is treated as a R1C1 reference.

Suppose, you have number 3 in cell A1, and text A1 in cell C1. Now, put the
formula =INDIRECT(C1) in any other cell and see what happens:

• The INDIRECT function refers to the value in cell C1, which is A1.

• The function is routed to cell A1 where it picks the value to return, which is number 3.

So, what the INDIRECT function actually does in this example is converting a text string into a cell
reference.

How to use INDIRECT in Excel

• Formula in cell D1: =INDIRECT(C1)

• Formula in cell D3: =INDIRECT(C3,FALSE)

Creating indirect references from cell values and text

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 Using the INDIRECT function with named ranges

Apart from making references from cell and text values, you can get the Excel INDIRECT function to
refer to named ranges.

Suppose, you have the following named ranges in your sheet:

• Apples - B2:B6

• Bananas - C2:C6

• Lemons - D2:D6

• =SUM(INDIRECT(G1))

• =AVERAGE(INDIRECT(G1))

• =MAX(INDIRECT(G1))

• =MIN(INDIRECT(G1))

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 UNIT – 2 CHARTING
❖ BAR CHARTS
Step 1: Create a dataset

Step 2: Insert Bar graph

Step 3: Formatting graph

Changing the graph title
In order to change the graph title, we need to double-click on the title and edit it. In our case, we will
change it to Courses Sales.

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Adding or Removing the chart elements

Adding Axis titles and Legend

37
Changing the style of the graph

Changing the color of the graph

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❖ PICTURES AS LINKED IN SPREADSHEETS

1. copy a cell (or range of cells)

2. on the Excel ribbon select ‘Home’
3. under ‘Paste’ select tiny down arrow
4. select bottom right icon to paste as a picture link

Picture Link to Excel Table

You can’t directly paste a Table as a picture link. Alternative solution steps:

▪ Create name range using formula: =INDIRECT(“Table1″&”[#All]”)

▪ Copy & Paste the Table as a picture. Select it.
▪ In formula bar type “=” followed by your named range. Press enter.

Picture Link to Excel Chart

▪ Position your chart to fit within cell E15 (increase row height & col width)
▪ Add this formula in cell I13 =“PictureLinkToChart”&”!$E$15″
▪ Create named range using formula =INDIRECT(PictureLinkToChart!$I$13)
▪ Copy & Paste the chart as a picture. Select it.
▪ In formula bar type “=” followed by the named range.
▪ Press enter.

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❖ CREATING DYNAMIC CHARTS

How to create a dynamic chart

Step 1: Creating the data entry area

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Step 2: Setting up a mini data table

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Step three: set up the charts

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❖ USING NAME MANAGER

1. First, we must go to the “Formulas” tab > “Defined Names” group, then click the “Name Manager.”
Alternatively, we can press “Ctrl + F3” (the shortcut for Name Manager).

2. For a new named range, click on the “New” button.

3. You may see the window below by clicking the “New” button.

Type in the name we want to give to the range and the cells it will refer to in the “Refers to” section.

Example #1 – Creating, Editing & Deleting Named Range in Excel

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 Let us suppose we want to refer to the cells in the range B2:E2 by the name “Near.” To do that, follow
the below steps.

• Go to the “Formulas” tab > “Defined Names” group, then click the “Name Manager.” Alternatively,
we can press “Ctrl + F3” (the excel shortcut for Name Manager).

• For a new named range, click on the “New” button.

• Then in “Name,” write “Near,” and in “Refer to,” select B2: E2 and click “OK.”

• After this, we can see the name “Near” created when we click on the Excel “Name Manager.”

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• We can see the other options like “Edit” and “Delete.” Let us suppose we want to edit the cell reference.
Then select the relevant named range (here “near”), click on “Edit,” and change the configuration.

• Similarly, select the relevant named range for deleting and click on “Delete.”

If we want to delete multiple named ranges at once, we only need to select the relevant ones by pressing
the “Ctrl” button. After that, it will select all the relevant ones, and we need to click on “Delete.” To
delete all the names, choose the first one, press the “Shift” button, and then click on the last “named
range.” This way, it will select all, then click “Delete.”

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❖ DISPLAY OF MULTIPLE CHARTS AT THE SAME TIME IN SAME
LOCATION USING FILTERS
Slicers in Excel are graphic filters for tables, pivot tables and pivot charts. Due to their visual qualities,
slicers fit especially well with dashboards and summary reports, but you can use them anywhere to
make filtering data faster and easier.

To get started with slicers, please follow the below guidelines that show how to add a slicer for your
Excel table, PivotTable, or PivotChart.
How to add a slicer for Excel pivot table
1. Click anywhere in the pivot table.
2. In Excel 2013 and later, go to the Analyze tab > Filter group, and click the Insert Slicer button. In
Excel 2010, switch to the Options tab, and click Insert Slicer.
3. The Insert Slicers dialog box will pop up and show the checkboxes for each of your pivot table fields.
Select one or more fields for which you want to create a slicer.
4. Click OK.
As an example, let's add two slicers to filter our pivot table by Product and Reseller

Two pivot table slicers are created immediately:

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 How to create a slicer for Excel table
In addition to pivot tables, the modern versions of Excel also let you insert a slicer for a regular Excel
table. Here's how:
1. Click anywhere in your table.
2. On the Insert tab, in the Filters group, click Slicer.
3. In the Insert Slicers dialog box, tick off the check boxes for one or more columns that you want to
filter.
4. Click OK.

How to insert a slicer for pivot chart

To be able to filter a pivot chart with a slicer, you can actually make a slicer for your pivot table like
explained above, and it will control both the pivot table and the pivot chart.

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 To integrate a slicer with your pivot chart more closely like shown in the screenshot above, carry out
these steps:
1. Click anywhere in your pivot chart.
2. On the Analyze tab, in the Filter group, click Insert Slicer.
3. Select the checkboxes for the slicer(s) you want to create, and click OK.
This will insert the already familiar slicer box in your worksheet:

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❖ NOW AND THEN ANALYSIS CHART
1. Arrange data

2. Insert a combo box control to select a region

3. Fetch selected region’s data

4. Create a chart showing then to now movement

In your workbook, set up a table like this:

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5. Formatting the chart

6. Adding “Break-up” of now values chart

7. Put everything together

8. Your Then vs. Now chart is ready

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❖ WATERFALL CHARTS

Waterfall charts are also called bridge charts.

Create a waterfall chart

1. Select your data.

2. Click Insert > Insert Waterfall or Stock chart > Waterfall.

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❖ THERMOMETER CHARTS

After preparing the data, please do with the following steps to create a thermometer chart:

1. Select the data range which contains the actual and target percentage values, and then
click Insert > Insert column or bar chart > Clustered Column,

2. And a column chart has been inserted into the sheet, then, click to select this chart, and
choose Switch Row / column option under the Design tab, see screenshot:

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3. And you will get a new chart as below screenshot shown:

4. Then, right click the second column which is the target series, and choose Format Data
Series option from the context menu, see screenshot:

5. In the Format Data Series pane, select Secondary Axis under the Series Options icon, and you
will see both the bars are aligned each other, see screenshot:

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6. There are two vertical axes in the chart with different values, so, right click the left vertical axis, and
choose Format Axis option, see screenshot:

7. In the Format Axis pane, under the Axis Options icon, change the Maximum bound value
to 1 and Minimum value to 0, see screenshot:

8. Repeat this step to change the bound values to 0 and 1 for the secondary axis, now, you can see both
the primary axis and secondary axis have been set to 0% - 100%. See screenshot:

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9. Then, go on right clicking the visible column series, choose Format Data Series option, see
screenshot:

10. In the Format Data Series pane, under the Fill & Line icon, select No fill from the Fill section,
select Solid line from the Border section, and then choose blue color that is as same as the column,
see screenshot:

11. In this step, you should hide other unneeded elements, such as chart title, gridlines. Click the Chart
Elements icon to expand the box, and then uncheck the following operations:

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• Axis > Primary Horizontal, Secondary Horizontal
• Chart Title
• Gridlines

12. And then, right click the primary vertical axis, and select Format Axis, in the Format Axis pane,
under the Axis Options icon, click Tick Marks option, and choose Inside from the Major type drop
down list, see screenshot:

13. Then, you should remove the border from the chart, right click the chart area, and choose Format
Chart Area option, see screenshot:

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14. In the Format Chart Area pane, click the Fill & Line icon, and then select No fill and No
line from the Fill and Border sections separately, see screenshot:

15. Then, drag and resize the chart to make it look like a thermometer, see screenshot:

16. At last, you can insert a circle at the bottom of the column, please click Insert > Shapes > Oval,
and draw a circle, give it the same color as thermometer chart, put it at the bottom of the column series,
and then format it’s outline as no outline, and you will get a thermometer chart as below screenshot
shown:

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❖ CHANGE IN CHARTS USING SENSITIVITY ANALYSIS
An X-Y function chart is a type of sensitivity analysis that provides a graphical representation of the
degree to which the Result is sensitive to the specified Independent Variables.

1. While holding all other Independent Variables at their Central Value and all other Stochastics (not
identified as Independent Variables) at their deterministic values, GoldSim runs n deterministic
simulations, where n is the number specified by #Points. For each simulation, the first Independent
Variable is varied from its Lower Bound to its Upper Bound.

2. The process is repeated for each Independent Variable.

The y-axis of an X-Y function chart represents the values of the Result for different values of the
independent variables.
There is one line for each variable. Each line illustrates how the Result changes when that independent
variable is varied from its Lower Bound to its Upper Bound (with the other variables being held
constant). The number of points used to create each line is determined by the #Points field.

If you would like to plot a single independent variable (on the x-axis) against the result (on the y-axis),
using the actual value of the independent variable rather than the normalized value, you can do so by
pressing the appropriate button in the column labeled Plot in the Independent Variable table. A chart
like this will be displayed:

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In some cases, you may simply want to view the raw data used to produce the X-Y function chart. You
can do so by pressing the Result Data… button in the Sensitivity Analysis dialog. When you do so, a
table like this is displayed:

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❖ INTERACTIVITY USING FORM CONTROLS
Form Controls are located on the Developer Tab under Insert Form Control.

What Are The Different Form Controls?

There are several types of Form Controls offering a range of interactivity from a simple display through
to interactive controls which allow multiple selection or interactive selection of values.
Control Name Description Function
Button Push Button Executes a macro
Check Box Allow selection of non- Multiple On/Off options
exclusive options
Combo Box Drop Down selection Box Select items from a Drop down list
Group Box Layout element which groups Nil
common elements
Label A Text label Can be static or linked to a cell
List Box Fixed selection box Select items from a list
Option Button Allow selection of exclusive Exclusive Single On/Off option
options
Scroll bar Allow Horizontal or Vertical Increases or decreases a cells value by a
scrolling fixed amount
Spin Button Increment/decrement a value Increases or decreases a cells in steps by a
by a fixed amount fixed amount

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❖ CONDITIONAL FORMATTING

Excel Conditional Formatting is used to apply certain formatting to data that meets one or more
conditions. Just like usual cell formatting, it lets you highlight and differentiate your data in various
ways by changing cells' fill color, font color, border styles, etc. The difference is that it is more flexible
and dynamic - when the data changes, conditional formats get updated automatically to reflect the
changes.

Where is conditional formatting in Excel?

Home tab > Styles group > Conditional formatting.

How to use conditional formatting in Excel

In your spreadsheet, select the cells you want to format.

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1. On the Home tab, in the Styles group, click Conditional Formatting.
2. From a set of inbuilt rules, choose the one that suits your purpose.

As an example, we are going to highlight values less than 0, so we click Highlight Cells Rules > Less
Than…

3. In the dialog window that appears, enter the value in the box on the left and choose the desired format
from the drop-down list on the right (default is Light Red Fill with Dark Red Text).

When done, Excel will show you a preview of formatted data. If you are happy with the preview,
click OK.

In a similar manner, you can use any other rule type that is more appropriate for your data, such as:

• Greater than or equal to

• Between two values
• Text that contains specific words or characters
• Date occurring in a certain range
• Duplicate values

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• Top/bottom N numbers

How to use a preset rule with custom formatting

If none of the predefined formats suits you, you can choose any other colors for cells' background, font
or borders. Here's how:

1. In the preset rule dialog box, from the drop-down list on the right, pick Custom Format…

2. In the Format Cells dialog window, switch between the Font, Border and Fill tabs to choose the
desired font style, border style and background color, respectively. As you do this, you will
immediately see a preview of the selected format. When done, click OK.

3. Click OK one more time to close the previous dialog window and apply the custom formatting of your
choice.

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 UNIT – 3 FINANCIAL ANALYSIS
❖ CALCULATION OF NET PRESENT VALUE (NPV)

=NPV(discount rate, series of cash flow)

Example of how to use the NPV function:

1. Set a discount rate in a cell.

2. Establish a series of cash flows (must be in consecutive cells).
3. Type “=NPV(“ and select the discount rate “,” then select the cash flow cells and “)”. (See screenshots
below).

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❖ CALCULATION OF INTERNAL RATE OF RETURN (IRR)

The syntax of the Excel IRR function is as follows:

IRR(values, [guess])

Where:

• Values (required) – an array or a reference to a range of cells representing the series of cash flows for
which you want to find the internal rate of return.
• Guess (optional) – your guess at what the internal rate of return might be. It should be provided as a
percentage or corresponding decimal number. If omitted, the default value of 0.1 (10%) is used.

For example, to calculate IRR for cash flows in B2:B5, you'd use this formula:

=IRR(B2:B5)

For the result to display correctly, please make sure the Percentage format is set for the formula cell
(usually Excel does this automatically).

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❖ BUILD DYNAMIC MODELS WITH MULTIPLE SCENARIOS USING XIRR

The Excel XIRR function returns the internal rate of return for a series of cash flows that may or may
not be periodic.

The syntax of the XIRR function is as follows:

XIRR(values, dates, [guess])

Where:

• Values (required) – an array or a range of cells that represent a series of inflows and outflows.
• Dates (required) – dates corresponding to cash flows. Dates may occur in any order, but the date of the
initial investment must be first in the array.
• Guess (optional) – an expected IRR supplied as a percentage or decimal number. If omitted, Excel uses
the default rate of 0.1 (10%).

For example, to calculate IRR for the series of cash flows in A2:A5 and dates in B2:B5, you'd use this
formula:

=XIRR(A2:A5, B2:B5)

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❖ BUILD DYNAMIC MODELS WITH MULTIPLE SCENARIOS USING MIRR

The modified internal rate of return (MIRR) is a financial metric to estimate the profitability of a
project and rank equally sized investments. As its name suggests, MIRR is a modified version of the
traditional internal rate of return that aims to overcome some deficiencies of IRR.

Technically, MIRR is the rate of return at which the net present value (NPV) of terminal inflows is
equal to the investment (i.e. outflow); whereas IRR is the rate that makes the NPV zero.

The syntax of the MIRR function is as follows:

MIRR(values, finance_rate, reinvest_rate)

Where:

• Values (required) – an array or a range of cells that contains cash flows.

• Finance_rate (required) – the interest rate that is paid to finance the investment. In other words, it's
the cost of borrowing in case of negative cash flows. Should be supplied as percentage or a
corresponding decimal number.
• Reinvest_rate (required) – the compounding rate of return at which positive cash flows are reinvested.
It is supplied as percentage or a decimal number.

=MIRR(A2:A8,D1,D2)

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 UNIT–4 OTHER MODELLING
TECHNIQUES
❖ WEIGHTED AVERAGE COST OF CAPITAL (WACC)

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❖ CALCULATION OF CAPITAL ASSET PRICING MODEL (CAPM)

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❖ CALCULATION OF FREE CASH FLOWS TO FIRM

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❖ CALCULATION OF FREE CASH FLOWS TO EQUITY

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❖ CREATION OF DATA TABLES

One variable data table in Excel allows testing a series of values for a single input cell and shows
how those values influence the result of a related formula.

To help you better understand this feature, we are going to follow a specific example rather than
describing generic steps.

Suppose you are considering depositing your savings in a bank, which pays 5% interest that compounds
monthly. To check different options, you've built the following compound interest calculator where:

• B8 contains the FV formula that calculates the closing balance.

• B2 is the variable you want to test (initial investment).

And now, let's do a simple What-If analysis to see what your savings will be in 5 years depending on
the amount of your initial investment, ranging from $1,000 to $6,000.

Here are the steps to make a one-variable data table:

1. Enter the variable values either in one column or across one row. In this example, we are going to
create a column-oriented data table, so we type our variable values in a column (D3:D8) and leave at
least one blank column to the right for the outcomes.
2. Type your formula in the cell one row above and one cell to the right of the variable values (E2 in our
case). Or, link this cell to the formula in your original dataset (if you decide to change the formula in
the future, you would need to update only one cell). We choose the latter option, and enter this simple
formula in E2: =B8

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3. Select the data table range, including your formula, variable values cells, and empty cells for the results
(D2:E8).
4. Go to the Data tab > Data Tools group, click the What-If Analysis button, and then click Data
Table…

5. In the Data Table dialog window, click in the Column Input cell box (because our Investment values
are in a column), and select the variable cell referenced in your formula. In this example, we select B3
that contains the initial investment value.

6. Click OK, and Excel will immediately populate the empty cells with outcomes corresponding to the
variable value in the same row.
7. Apply the desired number format to the results (Currency in our case), and you are good to go!

Now, you can take a quick look at your one-variable data table, examine the possible balances and
choose the optimal deposit size:

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 Row-oriented data table

The above example shows how to set up a vertical, or column-oriented, data table in Excel. If you
prefer a horizontal layout, here's what you need to do:

1. Type the variable values in a row, leaving at least one empty column to the left (for the formula) and
one empty row below (for the results). For this example, we enter the variable values in cells F3:J3.
2. Enter the formula in the cell that is one column to the left of your first variable value and one cell below
(E4 in our case).
3. Make a data table as discussed above, but enter the input value (B3) in the Row input cell box:

4. Click OK, and you will have the following result:

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❖ SCENARIO MANAGER AND SOLVER
1. Select the cells that contain values that could change.

2. Click the Data tab on the ribbon.

3. Click the What-If Analysis button.
4. Select Scenario Manager.

The Scenario Manager dialog box appears with the message “No Scenarios defined. Choose
Add to add scenarios.

5. Click the Add button to add a new scenario.

6. Type a name for the new scenario.

If you already have cells selected, the Changing cells field will already be populated with your
selection. If you didn’t select cells up front, you’ll have to specify the cells here.

7. Click OK.

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 The Scenario Values dialog box appears, showing each of the variable cells you selected.

If you name the worksheet cells you're changing, the cell names appear here, making it easy to
tell what value you're working with.

8. Update any values you want to see for the given scenario.

To make sure you don’t lose the original values for the changing cells, use the original cell
values in the first scenario you create.

9. Click OK.

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 The scenario is added and is listed in the Scenario Manager. If you click Add, the Add Scenario
dialog box appears again so you can add another scenario.

Repeat steps 5-9 to add all the desired scenarios.

10. Select the scenario you want to view.

11. Click the Show button.

The worksheet’s values are changed to the values you specified in the scenario. You can select
any scenario here to update the values in your spreadsheet.

View a Scenario Summary

A scenario summary report is a single compiled report that summarizes the results from several
scenarios. It’s easier to read than switching between different scenarios. Once you’ve created
at least two scenarios, you can create a summary report.

1. Click the Data tab.

2. Click the What-If Analysis button.
3. Select Scenario Manager.

The Scenario Manager dialog box appears, displaying all the scenarios you’ve created.

4. Click Summary.

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 The Scenario Summary dialog box appears. Ensure the Scenario summary option is selected.

5. Click OK.

A summary report for each scenario is generated on a separate sheet so you can compare each
one side by side.

How to add Solver to Excel

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 The Solver add-in is included with all versions of Microsoft Excel beginning with 2003, but it is not
enabled by default.

To add Solver to your Excel, perform the following steps:

1. In Excel 2010 - Excel 365, click File > Options.

In Excel 2007, click the Microsoft Office button, and then click Excel Options.
2. In the Excel Options dialog, click Add-Ins on the left sidebar, make sure Excel Add-ins is selected in
the Manage box at the bottom of the window, and click Go.

3. In the Add-Ins dialog box, check the Solver Add-in box, and click OK:

To get Solver on Excel 2003, go to the Tools menu, and click Add-Ins. In the Add-Ins available list,
check the Solver Add-in box, and click OK.

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Where is Solver in Excel?

In the modern versions of Excel, the Solver button appears on the Data tab, in the Analysis group:

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