Self-Study Financial Modeling Training – The Way of the Future

If you work in the finance industry, with:

• an unknown economic outlook;
• companies budgets stretched to the limits; and
• unemployment at all-time highs

it is important to stand out from the rest.

Learning and improving your financial modeling skills can help you to do this. At Video Financial Modelling we understand that not everyone can afford training sessions ranging from $500-$2,000 each.

To cater to this Video Financial Modelling has setup a number of self-study financial modeling training courses to cater for people who want the best possible training at a fraction of the cost.  We have training courses to suit all levels of financial modeling expertise.

What differentiates a self-study financial modeling training course from a seminar? Yes, the price, but there are also a number of other factors.

1. Flexibility – given that the training is pre-recorded you can learn at your own pace. If you don’t catch a concept you can easily just rewind the video and watch it again.
2. Quality – since we only do each training course once, we only pick the best instructors to deliver you content.  
3. Ongoing customer support – because we have lowered our cost base, we supply excellent ongoing customer support and can answer your training course questions promptly.
4. Limited risk – we are so confident in our products that we have “try before you buy options” (at a nominal cost) for many of our training courses. If you proceed to purchase the full version the nominal cost will be deducted from the full purchase price.

In addition to the above, the self-study courses are hands-on giving you the best possible practical experience.  

Check the self-study financial modeling training at Video Financial Modelling today. 

 

What are Financial Statements?

Financial statements commonly refer to formal records of the financial actions of businesses, entities and in some instances individuals. The financial statements are used by various stakeholders in making economic decisions.

Businesses which are listed are usually required to prepare and issue their financial statements to their shareholders. In most instances these financial statements are prepared in accordance with International Financial Reporting Standards (IFRS), US Generally Accepted Accounting Principles (GAAP) or UK GAAP. In recent times the accounting bodies have been working together to converge these reporting standards.

There are generally four major financial statements which are reported by businesses.

1)      Balance Sheet

2)      Income Statement

3)      Statement of Owner’s Equity

4)      Cash Flow Statement

The Balance Sheet shows an accurate representation of a business’s financial position at a certain fixed point in time. The Balance Sheet has three broad categories, assets, liabilities and owner’s equity. For example a bank loan would be shown as a liability on the Balance Sheet.

The Income Statement can be simply thought of as total revenues minus total expenses (including financing costs) over a period of time, usually a year. The Income Statement is usually based on an accrual basis – meaning that the revenues and expenses are recorded when incurred, not necessarily paid. In general an Income Statement is meant to show the performance of a company. i.e. higher Net Income generally means better performance (all else being equal).

The statement of owner’s equity shows movements in the Owner’s Equity component of the Balance Sheet. You can use a corkscrew account to calculate the movements from the start of the period to the end of the period. In general these movements are usually attributable to:  

• total comprehensive income;
• owners' investments;
• dividends;
• owners' withdrawals of capital; and
• treasury share transactions.

The Cash Flow Statement represents the flow of cash in and out of the business. The statement is usually divided into three categories:

1)      operating activities;

2)      investing activities; and

3)      financing activities.

If you liked this article, check out the financial modelling training or products at Video Financial Modelling. 

Working Capital - Debtors and Creditors

If you've been working or studying in finance you have probably heard of working capital before. If not then you might be wondering what the flip we are talking about. Well working capital is usually defined as current assets less current liabilities. If working capital is positive, the company has enough current assets to meet its current liabilities. If not then the company may have short term liquidity problems. 

In this blog tutorial we are going to look at two components of working capital, debtors or accounts receivable and creditors or accounts payable. 

What are Debtors and Creditors?

Ok, let's first start with Debtors. Debtors are current assets which arise when revenues are accrued but not paid. For example you book a sale of $100 on account, however you receive the cash 30 days from that date. The two entries you would make are:

1. when you book the sale on account - debit debtors/accounts receivable (Balance Sheet item) and credit revenue (P&L item)
2. when you receive the cash - debit cash (Balance Sheet item) and credit debtors/accounts receivable (Balance Sheet item reversing the account entry in (1))

Creditors are very similar to the above. 

Modelling Debtors and Creditors 

Ok, so you should have a good feeling of how this works now, so let's look modelling this. 

In 99% of the cases we can calculate debtor and creditor balances using the following formulae:

Debtor Balance = Revenue Accrual x Debtor Days/Days in Period

Creditor Balance = Expense Accrual x Creditor Days/Days in Period

For a yearly timescale the Days in Period would be equal to 365 days (we'll ignore leap years). 

From here you can find the total cash received or paid from revenue and expenses respectively. Let's look at this from a debtor perspective and utilising a corkscrew account (if you don't know what this is see our Corkscrew Account. What the? blog).

Debtor Account

Opening Balance          50

Add: Revenue Accrual  50 

Less: Cash Received    [x]

Closing Balance             [y]

Firstly let's find y. If we are looking at a year timescale and 30 day debtor days, then our closing balance (y) would be 50 x 30/365 = 4.1. 

Now we need to find x. Rearranging the formula we get: 

Cash Received (x) = Opening Balance + Revenue Accrual - Closing Balance (y)

 = 50 +50 - 4.1

 = 95.9

Ok, that might be a bit of brain dump.... so let's look at some examples. 

Debtor and Creditor Examples

You can follow along with the examples by downloading the Working Capital - Debtors and Creditors YouTube video and the Excel spreadsheet.  

Example 1

You forecast $2,000,000 of sales on credit each year from 2011-2015. Your credit terms are 30 days. What is the size of your debtor/accounts receivable in each of 2011-2015?

Ok, firstly and as always you need to put in a timescale as below:

Next let's put in the Revenue - Accrual. 

Now using the formula Revenue Accrual x 30/365 calculate the debtor balance.

Now you could calculate the cash received, but we will put in one more step. We will find the movements in debtors (i.e. debtor opening balance - debtor closing balance).

Now if we add the above debtor balance with the revenue - accruals we should get the cash received. 

Example 2 - Homework

Now we are not going to go through this example, but we run through the solution on YouTube and you can find the answers in the Excel spreadsheet. So why don't you give the problem a go?

Question: You buy services worth $1,000 every year from 2008 to 2011. You have credit terms of 90 days and you start with a credit balance of $250 at the start of 2008. What is your creditor/account payable balance at the end of 2011?

Take your Excel and financial modelling skills to the next level. Try our Excel and Financial Modelling training courses today.