Business and Financial Models Marsh, Clive

Enhanced descriptions from Syndetics:

A good business model should describe how an organization creates and delivers value, meaning that financial modelling is a vital tool for business strategy, allowing hypotheses and scenarios to be translated into numbers. It enables a company to experiment with different ideas and scenarios in a safe, low-risk environment, to consider what it is aiming to achieve, and to prioritize accordingly. Business and Financial Models provides an accessible introduction to these essential strategic practices, with guidance on using Microsoft Excel for projection and analysis. The book takes you through the process of building your model from the initial phase of formulating questions through modelling cash flow, budgets, investment appraisal and 'dashboard' tools for monitoring performance. Ideal for both small and large companies, Business and Financial Models also includes coverage of new visual thinking techniques, like Structured Visual Thinking, and how these can be incorporated into conventional business modelling.Online supporting resources for this book include downloadable figures from the book.

Table of contents provided by Syndetics

• Acknowledgement (p. xi)
• Introduction (p. 1)
• 1 Stages in the development of a business and financial model (p. 4)
• Scope (p. 4)
• The fundamental question (p. 5)
• A step-by-step approach (p. 8)
• Skills required (p. 10)
• Planning the model (p. 11)
• Data quality (p. 14)
• Tools (p. 15)
• Summary (p. 15)
• 2 Developing the research question and output definition (p. 17)
• The basic question (p. 17)
• Output definitions, examples, financial outputs (p. 19)
• Summary (p. 26)
• 3 Visual thinking to develop fundamental questions (p. 27)
• Challenging the traditional business model (p. 28)
• New methods and approaches - a business model reflecting the world as it is today (p. 28)
• Structured Visual Thinking (a trademark of Group Partners): principles for a dynamic world (p. 29)
• An architectural approach to building a future (p. 34)
• 4D™ approach (p. 37)
• Summary (p. 41)
• 4 Input definition (p. 43)
• Basics of input definition (p. 43)
• Important variables (p. 46)
• Summary (p. 47)
• 5 Scenario identification (p. 48)
• Determining scenarios (p. 48)
• Populating the spreadsheet with input values and formulae (p. 50)
• Running different scenarios (p. 51)
• Using Excel Scenario Manager for what-if analysis (p. 52)
• Scenarios versus projections (p. 53)
• Summary (p. 53)
• 6 Building a simple model (p. 55)
• Process (p. 55)
• Example (p. 56)
• Data extraction using Excel pivot tables (p. 62)
• Some reminders of best practice (p. 63)
• Reasons for failure of a model and how to avoid them (p. 64)
• Summary (p. 66)
• 7 Using charts (p. 67)
• Excel charts (p. 67)
• Using charts to help concentrate on the most important variables in an organization (p. 71)
• Charts for break-even analysis (p. 73)
• Chart tools (p. 76)
• Presenting data and charts to communicate clearly (p. 76)
• Using Excel pivot charts to show extracted data (p. 78)
• Summary (p. 79)
• 8 Modelling budgets (p. 80)
• Planning and budgeting (p. 80)
• Departmental budgets and variance analysis (p. 82)
• Some key departmental budgets (p. 87)
• Capital budgets (p. 97)
• Summary (p. 104)
• 9 Sales budgets (p. 105)
• Sales budgets and forecasts are key to other budgets (p. 105)
• Elements of a sales budget (p. 106)
• Volume assumptions (p. 107)
• Summary (p. 122)
• 10 Production - material, labour and direct overhead budgets (p. 123)
• Production budget (p. 123)
• Direct materials budget (p. 125)
• Direct labour budget (p. 126)
• Direct overhead budget (p. 127)
• Gross margin and profit budget (p. 128)
• Margin and profit sensitivity (p. 129)
• Departmental budget spreadsheet (p. 130)
• Summary (p. 132)
• 11 Fixed assets and depreciation (p. 133)
• Accounting depreciation, straight line and reducing balance (p. 134)
• Additions and disposals of assets (p. 137)
• Tax depreciation (capital allowances in the UK) (p. 138)
• Summary (p. 139)
• 12 Managing and modelling cash flow and working capital (p. 140)
• The cash flow cycle (p. 140)
• Working capital ratio (p. 142)
• Optimal stock levels (p. 143)
• Debtors (p. 150)
• Cash models (p. 151)
• Cash budget (p. 153)
• Summary (p. 155)
• 13 Investment appraisal models (p. 156)
• Relevant cash flow (p. 156)
• Pay-back period (p. 158)
• Return on capital (p. 160)
• Accounting rate of return (ARR) (p. 162)
• Discounted cash flow and net present value/internal rate of return (p. 163)
• Capital rationing (p. 170)
• Summary (p. 172)
• 14 The cost of capital (p. 173)
• The average and the marginal costs of capital (p. 174)
• Balancing equity and external borrowing (p. 176)
• Risk and the cost of capital (p. 177)
• Methods of determining the cost of equity (p. 178)
• Significance of the cost of capital (p. 179)
• Summary (p. 180)
• 15 Business valuation models (p. 181)
• The value of a business and building value (p. 181)
• Methods of valuing a business (p. 183)
• Who can value a business and what information do they require? (p. 186)
• Examples of valuation methods and their appropriateness to valuation reasons (p. 187)
• Earnings-based valuations (p. 190)
• Cash flow valuation models (p. 191)
• Discounted cash flow (DCF) method of valuation (p. 192)
• Summary (p. 193)
• 16 Performance indicators (p. 195)
• Dashboards (p. 195)
• Key performance indicators (p. 197)
• The integrated standard costing system (p. 200)
• Activity-based costing (ABC) (p. 208)
• Summary (p. 209)
• 17 Modelling the company balance sheet, P&L and ratio analysis (p. 210)
• Prepare an Excel model (p. 210)
• Analysis and financial ratios (p. 214)
• Ratio analysis (p. 216)
• Summary (p. 225)
• 18 Financial functions (p. 227)
• Financial formulae and using Excel fx functions (p. 227)
• Excel financial functions (p. 230)
• Summary (p. 232)
• 19 Building a business model (p. 233)
• Modelling a start-up business (p. 233)
• Opening balance sheet (p. 237)
• Expected returns for risk - proprietors' pay, bank interest (p. 237)
• Forecast profit and loss statement and sales requirement (p. 238)
• Required marketing and selling activity (p. 239)
• Direct costs required (p. 240)
• Building a model (p. 240)
• Key indicators (p. 242)
• Business plan (p. 245)
• Summary (p. 248)
• 20 Modelling projects (p. 249)
• What is a project? (p. 249)
• Critical path analysis (CPA) (p. 250)
• CPA example (p. 250)
• Risk and uncertainty (p. 253)
• Gantt charts and resource planning (p. 254)
• Modelling projects using Excel (p. 255)
• Summary (p. 256)
• 21 Integration, complexity and business models (p. 257)
• The level of integration required (p. 257)
• Data and systems integration (p. 259)
• Cloud computing (p. 259)
• Summary (p. 260)
• 22 Business models for the green economy (p. 261)
• Future challenges and opportunities (p. 261)
• Production processes (p. 261)
• Demand for greener products and services (p. 262)
• Investor expectations (p. 262)
• Resourcing (p. 263)
• Effects of climate change and other factors (p. 263)
• Supply chains (p. 264)
• Social responsibility (p. 264)
• Changing models (p. 264)
• Modelling green issues (p. 265)
• Summary (p. 266)
• Appendix 1 Excel shortcut commands (p. 267)
• Appendix 2 Chart for business model build project (p. 274)
• Appendix 3 Discounted cash flow tables (p. 276)
• Index (p. 278)