FINANCIAL MODELING-CIA 3

NAME-ESHA BAFNA

CLASS-3 BBA C

REGISTER NUMBER-19SJCCB237

QUESTION 1- MEANING AND SYNTAX FOR BELOW FUNCTIONS:

1- ABSOULTE CELL REFERENCING:
• Absolute reference in excel is one of the types of cell reference in excel where
the cells being referred to doesn’t change as they did in the relative reference,
to make a formula for absolute referencing we use the $ symbol by pressing
f4, $ symbols means lock and it locks the cell reference for all of the formulas
so same cell is being referred to all the formulas.
• SYNTAX =SUM($A$1+$A$2). The absolute reference is now locked and will
not change when you move it to another Cell.
• The following is an example of when an Excel user might need to use absolute
references. The chart below shows that the number of cars sold by each
salesperson. Tim sold 18% of the cars in August.

The reason why we need an Absolute Reference for this worksheet is that
the total number of cars to be sold stays the same from month to month. If
we want to find out what percentage of total cars each salesperson has
sold, we need to use an absolute reference.
 To find out how what percentage of cars Tim sold in August, type the
following formula into Cell B11. =(B2*100%)/$G$2 Tim sold 17.7 % in
August.
• Note the dollar signs; they are what make this an absolute reference

2- RELATIVE CELL REFERENCING:

• Relative reference is a type of cell reference in Excel. This reference changes
when the formula is copied to any other cell or any other worksheet. Relative
cell references are used whenever calculations need to be repeated.
• For instance, in cell A1, we have “=B1+C1.” On copying this formula to cell B2,
the formula becomes “=C2+D2.” This is because the first formula refers to two
cells on the right of cell A1 while the second formula refers to two cells on the
right of cell B2. Cells B1 and C1 are to the right of cell A1 and cells C2 and D2
are to the right of cell B2.
• SYNTAX: =SUM(A1+A2)
• EXAMPLE:

1. Enter the values shown in the picture below

2. Type this formula into Cell B2: =SUM(A1+A2)

3. Click inside Cell B2 to highlight it and use Autofill

4. Using the Autofill tool, drag down the formula to Cell B3

5. Your spreadsheet should now look like the picture below. With Cell B3 still
highlighted, look at the formula bar. You should see this formula: =SUM(A2+A3)

• Why do we see 10 in Cell B3 instead of 20? After all, we were trying to add
10 + 10. The problem is caused by relative referencing. Excel didn't just
copy the formula, but also the location of the Cells. Excel looked at where
the Cells were, relative to the B2 Cell, and copied this as well. The first
reference in Cell B2 is to Cell A1, which is up one row, and left one column.
Cell A2 is one column to the left of Cell B2. When you used Autofill to move
the formula into Cell B3, Excel did not just copy the formula. Excel also
copied the location of the references: "up one, left one" and “one to the
left”
• The images below show how Excel will change a formula when it is a
relative reference. The arrows points to the Cells each formula is referring
to.

3-MIXED CELL REFERENCE:

• A mixed reference is made up of both an absolute reference and relative

reference. This means that part of the reference is fixed, either the row or the
column, and the other part is relative. 
• Since a mixed cell reference includes an absolute reference, a $ (dollar sign) is
present in the formula. There is only one dollar sign present to hold either the
 row or column constant, instead of two dollar signs in the usual absolute
reference set up. 
• SYNTAX: The mixed reference is designated by a dollar sign($) in front of the
row or column. For example:
• $F1: In this the column F is constant.
• F$1: In this the row 1 is constant

4-INDEX FUNCTION:

• The Excel INDEX function returns the value at a given location in a range or
array. You can use INDEX to retrieve individual values, or entire rows and
columns. The MATCH function is often used together with INDEX to provide
row and column numbers.
• SYNTAX=INDEX (array, row_num, [col_num], [area_num])
• The INDEX function returns a value or the reference to a value from within a
table or range

5- MATCH FUNCTION:

• the MATCH function searches for a specified item in a range of cells, and then
returns the relative position of that item in the range. For example, if the
range A1:A3 contains the values 5, 25, and 38, then the
formula =MATCH(25,A1:A3,0) returns the number 2, because 25 is the
second item in the range
• Syntax- MATCH(lookup_value, lookup_array, [match_type])
QUESTION 2- WRITE A NOTE ON:

1- DU PONT ANALYSIS:

• The DuPont Analysis is a financial performance framework that helps

investors and financial analysts decompose a company’s Return on Equity
(ROE) into its constituent parts. This template performs a
complete DuPont Analysis in Excel.
The analysis provides insights into the main drivers and shortcomings
relative to the Return on Equity metric by breaking it down into several
multiples. This methodology allows for differentiating between profitable
organizations and highly leveraged entities. An investor can use analysis
like this to compare the operational efficiency of two similar firms.
Managers can use DuPont analysis to identify strengths or weaknesses
that should be addressed.

• Formula and Calculation of DuPont Analysis

The DuPont analysis is an expanded return on equity formula, calculated
by multiplying the net profit margin by the asset turnover by the equity
multiplier.

• What DuPont Analysis Tells You:

A DuPont analysis is used to evaluate the component parts of a company's

return on equity (ROE). This allows an investor to determine what
financial activities are contributing the most to the changes in ROE. An
investor can use analysis like this to compare the operational efficiency of
two similar firms. Managers can use DuPont analysis to identify strengths
or weaknesses that should be addressed. There are three major financial
metrics that drive return on equity (ROE): operating efficiency, asset use
efficiency, and financial leverage. Operating efficiency is represented
by net profit margin or net income divided by total sales or revenue. Asset
use efficiency is measured by the asset turnover ratio. Leverage is
measured by the equity multiplier, which is equal to average assets
divided by average equity.

• Limitations of Using DuPont Analysis

The biggest drawback of the DuPont analysis is that, while expansive, it
still relies on accounting equations and data that can be manipulated. Plus,
 even with its comprehensiveness, the Dupont analysis lacks context as to
why the individual ratios are high or low, or even whether they should be
considered high or low at all.
• What Does DuPont Analysis Tell You?
DuPont analysis is a useful technique used to decompose the different
drivers of return on equity (ROE) for a business. This allows an investor to
determine what financial activities are contributing the most to the
changes in ROE. An investor can use analysis like this to compare the
operational efficiency of two similar firms.

2-TREND ANALYSIS:
• Trend analysis is a technique used in technical analysis that attempts to
predict future stock price movements based on recently observed trend
data. Trend analysis uses historical data, such as price movements and
trade volume, to forecast the long-term direction of market sentiment.
Trend analysis tries to predict a trend, such as a bull market run, and then
ride that trend until data suggests a trend reversal, such as a bull-to-bear
market. Trend analysis is based on the idea that what has happened in the
past gives traders an idea of what will happen in the future. Trend analysis
focuses on three typical time horizons: short-; intermediate-; and long-
term.

• What Are Some Criticisms of Trend Analysis?

Critics of trend analysis, and technical trading in general, argue that
markets are efficient, and already price in all available information. That
means that history does not necessarily need to repeat itself and that the
past does not predict the future. Adherents of fundamental analysis, for
example, analyze the financial condition of companies using financial
statements and economic models to predict future prices. For these types
of investors, day-to-day stock movements follow a random walk that
cannot be interpreted as patterns or trends.

3. DISCOUNTED PAYBACK PERIOD

The discounted payback period is a measure of how long it would take until the
cumulated discounted net cash flows return the initial investment in an asset or
a project. In other words, the discounted payback period is calculated by finding
the present value of the net cash flows from each year and cumulating the
discounted cash flows until the amount of the initial investment is met. This
 requires the use of a discount rate which can be either a market interest rate or
an expected return. Some organizations may also choose to apply an accounting
interest rate or their weighted average cost of capital.

The difference between Payback Period and Discounted Payback Period is that
the latter takes the time value of money into account, whilst the former does not.
The difference lies in the fact that Discounted Payback Period values money
received today more than money received in the future while Payback Period
gives equal weightage to all cash flows from different time periods.

Year Cash Flows Cumulative Discounting Discounted Cumulative

Cash Flows Factor (@ 10%) Cash Flows Discounted
Payback
Period
0 (1,00,000) (1,00,000) 1 (1,00,000) (1,00,000)
1 60,000 (40,000) 0.909 54,540 (45,460)
2 40,000 0 0.826 33,040 (12,420)
3 50,000 50,000 0.751 37,550 25,130
4 30,000 80,000 0.620 18,600 43,730

In the above table, the Payback Period can be calculated without discounting the
cash flows, giving us a value of 2 years, while the Discounted Payback Period is
between the second and third year, and is longer as it discounts the cash flows to
their present value. This serves as the indicator’s biggest advantage. The above
table would be required to be created to calculate DPP with the help of excel.

4. PIVOT AND MACROS

A pivot table is a powerful tool for exploring data which helps organise and
summarize the raw data in a data list, revealing patterns or relationships that might
not be obvious at first glance. To create a pivot table, click on any cell of a data list
and then click the PivotTable button on the ribbon’s Insert tab. This will display a
dialog where the range for the pivot table is selected (by default Excel select the
whole data list) and the author is required to choose between placing the pivot table
in a new workbook (default) or in the same workbook. Pivot tables can be
accompanied by pivot charts, which is an interactive chart where one can present
and summarize data grouped by some fields like a in a pivot table. To create a pivot
chart from a pivot table in the worksheet with the pivot table, click the PivotChart
button of the Tools panel on the ribbon’s PivotTable Tools - Options tab. This will
show a dialog with chart types. On selecting the desired chart type, Excel inserts a
chart in the same worksheet of the pivot table reflecting the same information of the
pivot table. Any change in the pivot table will be reflected in the pivot chart.

An Excel macro is an action or a set of actions that one can record, give a name, save
and run as many times as possible and whenever they like. Macros help save time
on repetitive tasks involved in data manipulation and data reports that are required
to be done frequently. When a macro is created, mouse clicks and keystrokes are
recorded. When a saved macro is run, the recorded mouse clicks and keystrokes
will be executed in the same sequence as they are recorded.To record a macro, do
the following −

• Click the VIEW tab on the Ribbon

• Click Macros in the Macros group
• Select Record Macro from the dropdown list
• Assign a name to the macro and mode of storage
• All actions will now be recorded under this macro
• When the action is completed, click on Stop Recording under the same tab

The Macro recording is now complete and can be run on different sheets by
clicking on ‘View Macros’ under the same tab on the ribbon.