Model from scratch?
IB
Tags:
(Chimp, 14
Points)
on 12/27/10 at 3:31am
What does building a model from scratch mean? does it mean opening up a blank piece of excel sheet and inputting everything, including account titles and formatting? I'm taking a course on financial modleling, and feel like the latter is extremely hard without any preexisting templates.





Yes -- it means producing a
Yes -- it means producing a fully functioning model starting from a blank piece of paper.
CompBanker
My personal preference is
My personal preference is building model from scratch.
I prefer building operating
I prefer building operating models from scratch, but I generally layer in LBO/DCF tabs so I don't have to waste too much time building them from the ground up (once you build one, it's the same time after time).
Yes, I agree that building a
Yes, I agree that building a model from scratch is a much better way to really understand what is going on. It really doesn't take all that long unless you are building in LBO, DCF, depreciation schedules, automatic revolver draw, complicated debt instruments, etc. If you are just looking to put together a simple CF, IS, BS model with some revenue assumptions its not too bad.
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once you get to my level, the
once you get to my level, the model builds itself. seriously, i just look at the excel screen and the model starts populating. High IRRs, robust EBITDA multiples, sexy sexy sexy football fields...
i am sooo going to be the most ballin'-gest MD.
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I'm making it up as I go along.
so operating model is just
so operating model is just building out projected IS/BS/CF?
Bill Ray- Don't you need the autoamtic revolver draw/debt schedule to calculate interest expense in the IS (circ reference)? you just forecast depreciation as % of sales? (no PP&E sched)
You can take short cuts if
You can take short cuts if you know your model is just a high level forecast. For example: You don't need to set up an "automatic revolver" draw if you know that your forecast will never cause your cash position to go negative. Or -- if you know that your cash position will go negative for just 1 year in a 5-year forecast, you can do a quick and dirty model that permits a negative cash position and just treats that as net debt.
CompBanker
CompBanker wrote: You can
You can take short cuts if you know your model is just a high level forecast. For example: You don't need to set up an "automatic revolver" draw if you know that your forecast will never cause your cash position to go negative. Or -- if you know that your cash position will go negative for just 1 year in a 5-year forecast, you can do a quick and dirty model that permits a negative cash position and just treats that as net debt.
Ahh, the old do as I say and not as I do approach.