Getting Started Module Information

Welcome to the Practical Skills Module in Financial Modeling

Welcome to the Practical Skills Module in Financial Modeling! Click on the sections in the left-hand menu below to learn more about the goals of the course, unit descriptions, the technology needed to use this course, our accessibility statement, and further useful information.

1. Module Goals and Outcomes

Module Goals

The following are the goals of CFA Institute in delivering this practical skills module:

Explore financial modeling best practices, optimal model design and flow, and financial statements.
Discover how to build key model schedules, such as revenues, costs, fixed assets, taxes, working capital, debt, and equity.
Practice advanced Excel techniques in tandem with the instructor.
Build a working, presentation-ready financial model in Excel.
Solve the most common financial modeling problems.

Module Learning Outcomes

You can download a printable version of the learning outcomes for this module here.

Unit 1: Getting Started

Explore the purpose and use of financial models.
Examine the assignment and the company that you will model.
Discover how to properly plan and design a financial model.
Explore the common approaches to tab structure.
Study the optimal flow of a financial model.

Unit 2: The Front End

Examine the importance of having a cover page in a financial model.
Discover the need for a well-designed, customized executive summary.
Define the optimal way to center titles in a financial model.
Identify how to properly add headers and footers to your model.
Explain the importance of having a well-designed assumptions tab in every model.
Explore powerful custom formatting skills to ensure all the values in your model are clear.
Discover how to design and build a scenarios page within a model.
Apply four different methods to create the live case that is used to run the model.
Examine how to build a combo box to control and change the scenario being used in the model.
Explore data validation, an alternative way to change the scenario.

Unit 3: Revenues

Examine the ideas and themes required to build the model’s engine.
Explain the importance of a scenario tag and acquire the skills to build it.
Discover the design, structure, and optimal flow of a revenue schedule.
Explore the reasons behind building a capacity constraint into a financial model and apply the techniques to do so.

Unit 4: Costs

Examine the importance of forecasting both variable and fixed costs in a financial model.
Practice the four steps to properly build up a cost schedule in any model.
Discover how to back into the variable and fixed costs if they were not provided.
Determine whether the company you are modeling is experiencing operating leverage.
Explore the third category of costs—semi-variable costs—and how to incorporate them into a model.
Examine the concept of “build it, then link it,” so that you can start building your financial statements.

Unit 5: Depreciation

Examine the concepts and skills that are required to build a depreciation schedule.
Discover the optimal design and structure of the depreciation schedule.
Practice using the HLOOKUP function to display the CAPEX vertically on the depreciation schedule.
Explore how to automate the HLOOKUP function so that it works when you add rows to your table.
Practice using the SUMIF function to display the CAPEX vertically on the depreciation schedule.
Study a few different ways to transpose data, which can be helpful on the depreciation schedule.
Discover how to create the waterfall in the middle of the depreciation schedule.
Examine how to fully depreciate CAPEX within the life of the financial model.
Calculate depreciation expense using the declining balance method.
Explore how to convert your depreciation schedule into a fixed assets (PP&E) schedule.

Unit 6: Income Tax

Examine why it is important to create an income tax schedule in a financial model.
Discover why companies don’t always pay their taxes as cash in the current period.
Study an example to understand how to calculate current and deferred taxes on the financial statements.
Practice building the income tax schedule within the financial model.

Unit 7: Working Capital

Examine the working capital concepts that are required in a financial model.
Explore the concept of working capital days and why this is so important in a financial model.
Discover the design of and the steps required to build an effective working capital schedule.
Practice how to automate the days per year on the working capital schedule.
Calculate the historical working capital days and learn how to forecast the days in the future.
Calculate the working capital balances in the forecast periods.

Unit 8: Capital Structure

Examine the structure and discipline required to build effective debt and equity schedules.
Explore the debt schedule and analyze the optimal order in which to build the schedule.
Practice building up the cash section at the top of the debt schedule.
Practice building up the long-term debt on the debt schedule.
Discover the purpose of a revolver and the rules to build up a revolver in a financial model.
Practice building up the revolving credit facility on the debt schedule.
Practice building up the equity schedule in a financial model.

Unit 9: Financial Statements

Discover how to build up the income statement within the financial model and practice the techniques demonstrated.
Explore how to build up the cash flow statement within the financial model and apply the strategies demonstrated.
Examine how to build up the balance sheet within the financial model and implement the methods demonstrated.

Unit 10: Outputs and Troubleshooting

Explore the top 10 reasons that balance sheets in models don’t balance.
Discover how to incorporate outputs into a model and how to create a powerful executive summary.
Examine key techniques to ensure your model looks like a professional communication tool when printed.

2. Unit Descriptions

Unit Descriptions

Unit 1: Getting Started

Financial modeling serves as a foundational tool for evaluating and projecting business performance. Unit 1 introduces the purpose and strategic use of financial models, providing essential guidance on planning and designing an effective model. From understanding the assignment requirements to selecting the appropriate company for analysis, this unit emphasizes the significance of preparation in financial modeling.

Key topics include the common approaches to organizing tab structures and establishing an optimal flow for the model, ensuring clarity and functionality. By the end of this unit, learners will have a solid framework for developing financial models with precision and purpose.

Unit 2: The Front End

The front end of a financial model is crucial for presenting data in a clear, professional, and user-friendly manner. Unit 2 delves into the importance of a well-designed cover page and a customized executive summary, both of which serve as the model's visual and functional anchors.

This unit covers techniques for formatting titles, headers, and footers, as well as designing an assumptions tab that captures critical variables. Learners will also explore advanced formatting skills, the creation of a scenarios page, and methods for building dynamic tools such as combo boxes and data validation to facilitate scenario analysis. By mastering these elements, participants will ensure their models are intuitive, flexible, and aesthetically polished.

Unit 3: Revenues

Revenue modeling forms the engine of any financial model, driving insights and forecasts. Unit 3 focuses on constructing a robust revenue schedule, with an emphasis on scenario tags, capacity constraints, and optimal design. Learners will examine the fundamental concepts and themes required to structure revenue projections effectively, as well as the strategic rationale for including capacity constraints.

By the end of this unit, participants will be equipped with the tools and techniques to accurately model revenue streams and address key variables influencing revenue generation.

Unit 4: Costs

Understanding and modeling costs is critical to building a comprehensive financial model. Unit 4 explores the distinction between variable, fixed, and semi-variable costs, guiding learners through the process of forecasting each category. Participants will practice a structured four-step approach to cost scheduling and learn how to identify operating leverage within a company.

The unit also introduces the “build it, then link it” methodology to transition seamlessly from cost schedules to financial statements. This practical knowledge ensures that all cost components are accurately captured and integrated.

Unit 5: Depreciation

Depreciation modeling is a key aspect of financial forecasting, particularly for capital-intensive businesses. Unit 5 provides an in-depth look at building depreciation schedules, including the design, structure, and techniques required for accuracy. Learners will practice using functions like HLOOKUP and SUMIF to automate data displays and create waterfalls for visual clarity.

Additional topics include the declining balance method, full asset depreciation, and converting depreciation schedules into fixed asset schedules (PP&E). By mastering these concepts, learners will ensure their models reflect realistic asset values and depreciation patterns.

Unit 6: Income Tax

Unit 6 emphasizes the importance of income tax schedules in financial modeling. Participants will explore the intricacies of calculating current and deferred taxes, as well as the timing differences that impact tax payments. Through hands-on examples, learners will build income tax schedules that integrate seamlessly into financial statements.

This unit provides valuable insights into tax forecasting, ensuring accurate and compliant models that reflect real-world scenarios.

Unit 7: Working Capital

Working capital management is essential for understanding a company’s operational efficiency and liquidity. Unit 7 introduces the core concepts of working capital and the significance of working capital days. Learners will design and build effective working capital schedules, calculate historical trends, and forecast future balances.

Automating days per year and integrating working capital calculations into financial models ensures precision and adaptability. This unit equips learners with the tools to analyze and optimize working capital dynamics.

Unit 8: Capital Structure

Unit 8 explores the structure and discipline required for modeling a company’s capital structure. Learners will develop debt and equity schedules, analyze cash and long-term debt components, and incorporate revolving credit facilities. The unit also highlights the purpose and rules for building a revolver, ensuring comprehensive debt management.

By the end of this unit, participants will have the skills to model capital structures effectively, supporting robust financial decision-making.

Unit 9: Financial Statements

The culmination of financial modeling lies in the integration of key financial statements. Unit 9 guides learners through the process of building income statements, cash flow statements, and balance sheets. Emphasis is placed on best practices, from structuring and linking schedules to ensuring data accuracy.

This unit ensures that learners can produce cohesive financial statements that serve as reliable tools for analysis and communication.

Unit 10: Outputs and Troubleshooting

The final unit focuses on presenting outputs and resolving common issues in financial models. Unit 10 covers the top reasons balance sheets fail to balance and introduces techniques for troubleshooting and refining models. Learners will also discover how to design professional outputs, including executive summaries, to enhance communication and usability.

This unit equips participants with the skills to deliver polished, functional, and error-free financial models that meet professional standards.

3. Tools and Technologies

Computer Hardware and Peripherals

The information provided below relates to most standard desktop and laptop computers. Many devices, including tablets and mobile phones, offer a high level of access to most of the functions in the courses. Access to all functions of the courses may be best experienced by using a computer (desktop or notebook) that meets the requirements described below.

A computer that supports the most recent versions of web browsers. It is recommended to use a computer five years old or newer with at least 1GB of RAM.
Speakers or ability to use headphones for audio playback.
(Optional) A printer is recommended as needed to download and print material. Not required.

Canvas

For best performance, Canvas can be accessed using Windows, Mac, Linux, iOS, Android, or any other device on the current or previous major releases of Chrome, Firefox, Edge, or Safari.

Canvas only requires an operating system that can run the latest compatible web browsers. Your computer operating system and chosen web browser should be kept up to date with the latest recommended security updates and upgrades.

Should you encounter technical problems within Canvas or have any questions regarding Canvas tools or features, please contact Canvas support via the Help menu in the navigation bar. We recommend using the Chat for the best service.

Canvas Mobile App

Candidates can access courses using a mobile device with the Canvas app that is available on both Android and iOS devices. The app also provides access to course calendars, To Do items, notifications, and Conversations messages as well as course materials.

To log in to the app, use the QR code found in your Account > QR for Mobile Login. For more information on this feature, please click here.

For the best course experience and ease of completing assignments, we recommend using the desktop version.

4. Accessibility

Our Commitment to Accessibility Standards

At CFA Institute, we are deeply committed to fostering an inclusive and accessible educational experience for all. We recognize the significance of providing equitable access to our curriculum materials and proactively seek ways to enhance and improve our accessibility features.

The World Wide Web Consortium (W3C) develops standards and guidelines to help everyone build a web based on the principles of accessibility, internationalization, privacy, and security. We strive to ensure that our curriculum materials comply with the Web Content Accessibility Guidelines (WCAG) 2.2 AA published by the W3C. We recognize the importance of accessible digital content, and we are fully committed to adhering to all applicable laws pertaining to accessibility.

Microsoft Immersive Reader

The Microsoft Immersive Reader enhances your reading experience by improving accessibility and boosting reading comprehension. You can use the Microsoft Immersive Reader when viewing Canvas pages and assignments. For information about the reader, visit the Microsoft Immersive Reader website.

For instructions on how to enable Microsoft Immersive Reader in Canvas, please click here.

We Welcome Your Feedback

Our pledge to accessibility extends beyond this statement, and we welcome your feedback and input, which are invaluable to us as we strive to construct a more robust and accessible learning environment.

For any issues or concerns related to accessibility, or if you require assistance, please do not hesitate to reach out to our dedicated support team. You can reach them via the Inbox and under Teachers in the address book, select ‘Course Staff’. They are here to provide support and assistance regarding any accessibility challenges.

5. Course Files

Course Files

To begin, download the zip files provided in the shaded box below so that you can build the financial model as you watch the videos. Please note that you will need Microsoft Excel in order to build the model.

Click here to download a ZIP file of all the files required to complete this PSM

The .zip file contains all of the following:

Blu Containers Model - Assignment.pdf
Blu Containers Worksheet - Beginner.xls
Blu Containers Worksheet - Intermediate.xls
Blu Containers Worksheet - Advanced.xls
Blu Containers Model - Vertical Complete.xls
Blu Containers Model - Complete.pdf
Excel Keyboard Shortcuts for a MAC.pdf
Excel Keyboard Shortcuts for a PC.pdf

You may also find the individual files using the 'Files' link in the menu on the left hand side.

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