The development and use of financial models in Excel continues to proliferate, as does the variety of approaches and methodologies adopted. Without a universally accepted set of agreed principles, it can be difficult to know what good looks like in financial modelling terms.
Intro to Financial Modelling
The layout and structure of a model is arguably the most important piece of a model. It is the foundation on which the rest of the model is built: the model infrastructure.
In this instalment of the blog series, I will be talking about the principles covered in page 5 of the Financial Modelling Code, “Make Navigation Simple”.
Following from last month’s blog on Layout Structure – Laying Out a Model, we continue with this theme and examine some common ways to manage model inputs.
In this instalment of the blog series, I will be talking about the principles covered in page 6 of the Financial Modelling Code, “User interface and transparency”. User interface and transparency sit together as a section of the financial modelling code because they are two sides of the same coin, by striving to enhance either one of these you will go a long way towards achieving the other.
In this instalment of the series, we talk around the principles covered in page 8 of the Financial Modelling Code, "Use consistent formulas".
In this instalment of the series, we examine the “Use consistent placement” principles, as covered in page 9 of the Financial Modelling Code. The previous article explained the importance of consistency in formula blocks. Here we consider the need for consistent structure in models, specifically timelines.
The ICAEW’s Financial Modelling Code includes a sensible set of guidelines to help you prepare financial models that work for you and the model user. When preparing a model, one can use formatting to guide the user’s eye, to give context to the contents of cells, to make the model easy to read and provide the right level of detail.
This article focuses on the fundamental aspects of adding labelling and explanations to Excel models and examples of how this can be achieved to ensure model risks are managed.
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Continuing under the “clarity” chapter of the financial modelling code, we arrive at the guidance on units and sign convention. When building a model, if we aren’t clear about these, we are setting ourselves up for a world of confusion, and potential modelling catastrophe!