Spreadsheets Tutorial : Financial Modeling in Spreadsheets

Want to learn more? Take the full course at https://learn.datacamp.com/courses/financial-modeling-in-spreadsheets at your own pace. More than a video, you'll learn hands-on coding & quickly apply skills to your daily work. --- Welcome to the course! You will learn about financial modeling with spreadsheets and to get us started, let's dive into simple models of business income. Financial modeling has many definitions, but the basic task is to build a model. This model should be a representation of the real world, and this means that we might create documents with financial information from each year of business. With that information, we can use numbers, like stock prices, to examine trends across time or predict future values. In this first lesson, we will focus on income statements and cash flows Income statements allow a business to track their income and expenses across years. They can be modeled in a lot of ways but traditionally include the following information. First are sales made to customers, either in goods or services, and the associated costs of those goods. EBIT or earnings before interest and taxes account for administrative costs and depreciation, which is the cost of the people in the business, and the decreasing value of assets over time. Taxes are imposed on the money made, and net income is calculated by subtracting expenses, including taxes, from profits made. Finally, dividends are money that is paid to shareholders on the net income. Here's an example of an income sheet. You can see the key components mentioned previously, like EBIT sales, and cost of sales. The layout here is a suggestion, as business needs may dictate different information. You will often see financial models formatted so that the expenses or negative numbers are in parentheses. You can easily convert your sheet into that format by highlighting the number cells, clicking format, number, and then selecting the financial option. Because we formatted our expenses as ne