How to Build a Basic Financial Model in Excel finance modelling

by autisticchiaNGMAI



Here is a quick lesson on how to build a basic financial model in Excel. In this financial modeling video, we focus on the P&L, or income statement.

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In this tutorial, we learn how to build a basic financial model, specifically an income statement for a simple furniture company.

I created this video as a financial modeling guide & template for beginners. All financial modeling follows the same process – whether the model is complex or simple, so if you can understand the construction of this model, you can learn to build more complex financial models as well.

STEP 1: DEVELOP ASSUMPTIONS
First, you establish assumptions. In this case, we develop the assumptions for our revenue model (price, units sold, etc), and then the assumptions around the costs & expenses.

STEP 2: BUILD THE MODEL & FORMULAS
Once we’ve built the assumptions, we need to calculate the results (the total revenues, expenses, etc). This requires us to create formulas that multiply the assumptions and add / subtract different pieces of the model so we can calculate metrics like gross profit, net income, etc.

DON’T FORGET: FORMATTING!
One important piece which we do throughout the process of financial modeling is formatting. Some formats are standard across business, and so are good practice to follow (things like color coding). Other formats just make the model easier to scan and review (like dollar signs, decimal places, etc).

By the end of this video, you should have a good understanding of the financial modeling process in Excel, whether it is a basic model or a more advanced one.

I hope this content is valuable – please take a look at my other videos / courses (above) if you want to keep learning about Excel and finance.

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25 comments

Eric Andrews 23/12/2021 - 5:59 Chiều

Looking to start a career in finance? Check out my new finance interview questions prep video for entry-level roles ► https://youtu.be/aVenjYqVses, with pdf study guide included!

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Yearly Man 23/12/2021 - 5:59 Chiều

Dude you move WAY TO FAST! URGHHHHH

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David Tulip 23/12/2021 - 5:59 Chiều

Great, clear video. I might actually get your Udemy course.

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Ridwan Islam 23/12/2021 - 5:59 Chiều

Best one. Easy and simple. Thanks bro

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Nsh G ahmed 23/12/2021 - 5:59 Chiều

You are great Eric. Love from Pakistan. I got so much from your videos

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free juice 23/12/2021 - 5:59 Chiều

no wonder why everything is made in china lol

Reply
Eric Andrews 23/12/2021 - 5:59 Chiều

🚨 Who's interested in being a part of my Finance for Startups program? There will be limited space. Join the early-bird waitlist to get access before the general public here: https://bit.ly/finance_for_startups

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Yusuf Pasha 23/12/2021 - 5:59 Chiều

very helpful, please make a video on buisness plan for any pvt ltd company

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Pandurangan Satish 23/12/2021 - 5:59 Chiều

Hi Eric ,
Very useful, I looking to make one for a new start up, is there any extra items to be considered . Thanks in advance

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Pandurangan Satish 23/12/2021 - 5:59 Chiều

Very nice , if startup what about machinery cost ?

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Lâm Thị Thảo 23/12/2021 - 5:59 Chiều

Thank you so much!!!!

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Andres Almonte 23/12/2021 - 5:59 Chiều

Great. Would love to see you build more. All the best

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Jaynee Tolle 23/12/2021 - 5:59 Chiều

This is a great example of financial modeling and very easy to understand.

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VanzyPub G? 23/12/2021 - 5:59 Chiều

This was pretty great. Pretty simple, but couldn't you have used an If statement for the tax expense? Bcz what if you're gonna go for more than 3 years? It's gonna at some point became kinda tedious having to manually check if your income is positive and then putting in a formula. Don't ya think .?

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Shaun Diz 23/12/2021 - 5:59 Chiều

Bro how are you so fast? You're like an Excel wizard knowing all the keyboard shortcuts. It's pretty cool. Idk why I'm even looking this up. I'm just importing my yearly spending into excel but then was like "wonder what a financial model looks like in excel"

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Raffy P 23/12/2021 - 5:59 Chiều

nice

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Maria Lemon 23/12/2021 - 5:59 Chiều

Thanks for the video! 🙂 I am currently preparing for an interview for an entry position as a project financial analyst and it's really helpful

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QTags 23/12/2021 - 5:59 Chiều

This video is still a banger in 2021!

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Atul Kumar 23/12/2021 - 5:59 Chiều

Thanks

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R Theos 23/12/2021 - 5:59 Chiều

U made a lawyer understand how these work!!!!!! Amazing!

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Nitya Chaudhary 23/12/2021 - 5:59 Chiều

Amazing !!! Just wanted to know that is the concept and way same in india ?

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suitcasedarling 23/12/2021 - 5:59 Chiều

I love this! Eric, what if there’s no inventory (dropshipping)? 🥴

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Soma Ansa 23/12/2021 - 5:59 Chiều

Excellent! Thanks for sharing.

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Dekass 23/12/2021 - 5:59 Chiều

You are the best!

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ZKBeatz07 23/12/2021 - 5:59 Chiều

This channel is a gold mine… please don't stop making these videos my man!! you're bringing out so much value to the community and I hope you're going to be as successful as possible in what you're doing. Just finished my bachelor's degree in business administration here in Germany with a major in marketing and entrepreneurship and I want to start working / build my own company + support our family business. I came to the realisation that I've learned a lot about the theoretical stuff on marketing and product development and so on, but have a lack in financial knowledge – which is the key for starting a successful business. Even though I was good at accounting, I've forgot almost everything and don't want anything too complex to learn, I just want to understand the fundamental KPI's and their relationship and you're providing this simplicity in your videos!! also watched you video on digital marketing KPI's, awesome stuff man. Keep going, you're doing a great job!

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