Using Financial Models
CWCF Conference 2009
By
Peter Hough
Objective
To learn to develop and use basic financial
models to assist with budgeting and other
financial decisions.
Benefits
Assists in decision making:
– Shows relationship between financial
parameters
– Easy comparison of options
– Sensitivity analysis – easy to vary the
assumptions of multiple relationships
– Helps to make judgments on level of risk a
decision carries
Basic Skill & Knowledge
Required
Basic spreadsheet skills – formulas, linking
cells and worksheets etc.
Understanding of financial concepts
– E.g. – margins, expenses, revenue, assets, etc.
Building a Model
Determine the issue the model is to address
Identify the financial factors involved
Determine the relationships between the
financial factors
Set up spreadsheet based upon relationships
including determining which variables
(assumptions) you want to be able to change
for the analysis
Sample Models
Profit Sharing – Equity – Retirement
Setting wage rates and prices
Budgeting/forecasting
Cash flow
Let’s Build a Model
Suggest a relatively simple financial issue
that your co-op is facing.
What at the relevant financial concepts?
What are the key relationships?
How would you begin to structure the
model?