Introduction
Like many computer programmers, people who build financial models can get quite opinionated about the “right way” to do it.
In fact, there is surprisingly little consistency across Excel Ninja around the structure of financial models. One reason is that models can vary widely in purpose. For example, if your task was to build a discounted cash flow (DCF) model to be used in a preliminary pitch book as a valuation for one of 5 potential acquisition targets, it would likely be a waste of time to build a highly complex and feature-rich model. The time required to build a super complex DCF model isn’t justified given the model’s purpose.
On the other hand, a leveraged finance model used to make thousands of loan approval decisions for a variety of loan types under a variety of scenarios necessitates a great deal of complexity.