Lectures 7-9 Financial Modelling

Question 1

What is the most important factor in business planing?

Answer 1

Sales are used as a driver by most items

Question 2

Top down approach in assessing market share?

Answer 2

Estimate the whole industry size and then estimate the market share which the company has in it.

Question 3

Bottom up approach in assessing market share?

Answer 3

Break down sales into business units of the company/regions/sales channels

Question 4

How is OPEX approached usually?

Answer 4

It is approached usually indirectly through a variable such as percentage of sales. The estimates also can be historical or ones given by the management.

Question 5

How is effective tax rate caclulated?

Answer 5

Income Taxes/EBT

Question 6

Which item is the link between balance sheet and income statement?

Answer 6

Net income

Question 7

Methods for breaking circularity?

Answer 7

Turn on iterations in Excel - OK for simple models

Link interest to BOP cash only (over/under estimates interests)

Cancel interests on cash (lowers profit)

VBA Macro code (calculates raw values, harder but more managable)