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Using Financial Models

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

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Using Financial Models

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  1. Using Financial Models CWCF Conference 2009 By Peter Hough

  2. Objective • To learn to develop and use basic financial models to assist with budgeting and other financial decisions.

  3. 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

  4. Basic Skill & Knowledge Required • Basic spreadsheet skills – formulas, linking cells and worksheets etc. • Understanding of financial concepts • E.g. – margins, expenses, revenue, assets, etc.

  5. 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

  6. Sample Models • Profit Sharing – Equity – Retirement • Setting wage rates and prices • Budgeting/forecasting • Cash flow

  7. 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?

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