Financial Modeling Development Course

Lesson 1 • What Financial Models Actually Do

Define financial models, their business purposes, and key use cases. Establishes the mental model students apply throughout the course.

Lesson 2 • Model Documentation and Audit Trails

Apply documentation techniques that make models transparent and reviewable. Supports professional handoff and error detection in later chapters.

Lesson 3 • Building a Blank Model Template

Construct a reusable, standards-compliant blank template incorporating all prior conventions. This template serves as the starting point for every model in the course.

Lesson 4 • Spreadsheet Architecture Best Practices

Establish rules for layout, color-coding, and formula discipline. These conventions underpin every model built in later chapters.

Lesson 1 • Tax Provision and Net Income

Apply effective tax rates and deferred tax concepts to arrive at net income. Completes the income statement and feeds the retained earnings rollforward.

Lesson 2 • Interest Expense and Financing Costs

Estimate interest expense using debt schedules and average balance methods. Introduces the circular reference challenge addressed in the debt chapter.

Lesson 3 • Depreciation and Amortization Schedules

Build D&A schedules tied to asset bases and link them to the income statement. Prepares students for the balance sheet and cash flow integration ahead.

Lesson 4 • Cost Structure and Operating Expenses

Separate fixed from variable costs and model each category with appropriate drivers. Correct cost structure directly affects margin accuracy.

Lesson 1 • Debt and Equity Schedules

Construct debt rollforwards and equity reconciliations that keep the balance sheet balanced. Lays the groundwork for the debt chapter's circular reference resolution.

Lesson 2 • Working Capital Mechanics

Model receivables, inventory, and payables using days-based drivers. Working capital accuracy is critical for cash flow conversion in the next chapter.

Lesson 3 • Balancing the Model

Implement a balance check and diagnose common imbalance sources. A balanced model is a prerequisite for the cash flow statement chapter.

Lesson 4 • Fixed Assets and Capital Expenditures

Build a PP&E rollforward that ties capital expenditures to asset balances and D&A. Connects directly to the income statement D&A schedule built earlier.

Lesson 1 • Investing Activities Section

Capture capital expenditures, asset sales, and acquisition payments in the investing section. Ties directly to the PP&E rollforward built in the balance sheet chapter.

Lesson 2 • Cash Flow Validation and Stress Testing

Verify cash flow accuracy with cross-checks and test model behavior under stressed assumptions. Builds confidence before integrating the revolver and debt schedule.

Lesson 3 • Free Cash Flow Derivation

Calculate unlevered and levered free cash flow from the completed cash flow statement. Free cash flow is the primary input for valuation models in later chapters.

Lesson 4 • Indirect Method Logic

Reconstruct operating cash flow by adjusting net income for non-cash items and working capital changes. Reinforces the linkage between all three financial statements.

Lesson 1 • Debt Instrument Types and Terms

Catalog term loans, revolvers, bonds, and subordinated debt with their key contractual terms. Accurate term modeling prevents errors in the rollforward schedules.

Lesson 2 • Resolving Circularity with a Toggle Switch

Implement a hardcoded-prior-period toggle to break the circular reference safely. This technique is the industry standard for integrated financial models.

Lesson 3 • Revolver as the Balancing Mechanism

Program the revolver to automatically draw or repay based on the model's cash surplus or deficit. Completes the fully integrated three-statement model.

Lesson 4 • Building the Debt Rollforward

Construct period-by-period debt balance schedules for each instrument. These schedules feed interest expense and the balance sheet debt lines simultaneously.

Lesson 1 • Tornado Charts and Key Driver Analysis

Rank assumptions by their impact on a target output using tornado chart methodology. Focuses management attention on the highest-leverage model variables.

Lesson 2 • Scenario Analysis Framework

Design base, upside, and downside scenarios by varying key assumption sets. Scenario analysis is the primary tool for communicating model risk to stakeholders.

Lesson 3 • Monte Carlo Simulation Basics

Apply probability distributions to key inputs and run simulations to generate output distributions. Extends deterministic sensitivity analysis into probabilistic forecasting.

Lesson 4 • Two-Variable Sensitivity Tables

Construct two-way data tables to map output sensitivity across two simultaneous inputs. Reveals interaction effects invisible in one-way analysis.

Lesson 1 • Weighted Average Cost of Capital

Calculate WACC by estimating cost of equity, cost of debt, and capital structure weights. WACC is the discount rate applied to all DCF cash flows.

Lesson 2 • Terminal Value Calculation

Estimate terminal value using the perpetuity growth and exit multiple methods. Terminal value typically represents the majority of total DCF value.

Lesson 3 • Explicit Forecast Period Setup

Define the projection horizon and link FCF from the integrated model to the DCF. Proper horizon selection balances forecast precision against speculative error.

Lesson 4 • Enterprise to Equity Value Bridge

Convert enterprise value to equity value per share by adjusting for net debt and dilution. Produces the final per-share intrinsic value output.

Lesson 1 • Selecting and Screening Comparable Companies

Define selection criteria for peer companies based on business and financial similarity. Peer selection quality directly determines the reliability of multiple benchmarks.

Lesson 2 • Applying Multiples to the Subject Company

Apply peer median and mean multiples to the subject company's metrics to derive implied value. Produces the trading comps valuation range for the football field.

Lesson 3 • Precedent Transaction Analysis

Identify and spread acquisition transaction multiples to capture control premiums. Transaction comps typically yield higher multiples than trading comps.

Lesson 4 • Spreading Trading Multiples

Calculate EV/EBITDA, EV/EBIT, P/E, and other trading multiples for each peer. Standardized spreading ensures apples-to-apples comparison across the peer set.