What is the North American Free Trade Agreement (NAFTA)? The North American Free Trade Agreement (NAFTA) is an agreement that brought together three North American countries, i.e., the United States, Canada, and Mexico, to form a trading bloc in North America. The agreement aimed to reduce trading costs and make North America a competitive trading…
What is the North American Securities Administrators Association (NASAA)? The North American Securities Administrators Association (NASAA) is the oldest investor protection organization in the US, coming into existence more than a century ago in 1919. NASAA’s membership comprises 67 administrators from all states of the United States, territories, and districts. The administrators are tasked…
What is XIRR vs IRR in Excel? In financial modeling and valuation, it’s critical to understand why to use XIRR vs IRR. Using the simple =IRR function in Excel can be misleading, as it assumes all the time periods in a series of cash flows are equal. This is frequently not the case, especially if you…
Projecting Balance Sheet Line Items Projecting balance sheet line items is typically done in conjunction with projecting income statement line items. Both of these skills are necessary when mastering the art of financial modeling. This guide breaks down, step-by-step, how to calculate and then forecast each of the line items necessary to forecast a complete balance…
What is Sensitivity Analysis? Sensitivity Analysis is a tool used in financial modeling to analyze how the different values of a set of independent variables affect a specific dependent variable under certain specific conditions. In general, sensitivity analysis is used in a wide range of fields, ranging from biology and geography to economics and engineering….
What is the Working Capital Formula? The working capital formula is: Working Capital = Current Assets – Current Liabilities The working capital formula tells us the short-term liquid assets available after short-term liabilities have been paid off. It is a measure of a company’s short-term liquidity and is important for performing financial analysis, financial modeling,…
What are Business Drivers? Business drivers are the key inputs and activities that drive the operational and financial results of a business. Common examples of business drivers are salespeople, number of stores, website traffic, number and price of products sold, units of production, etc. In order to make internal choices about business strategy or build…
How to Link the Three Financial Statements: Webinar In this webinar, we will perform a live demonstration of how to build a simple three-statement model in Excel, which will form the basis for all other levels of financial modeling. To learn more, launch our financial modeling courses. Download the Three Statement Model Template Click the…
What is Valuation Modeling in Excel? Valuation modeling in Excel may refer to several different types of analysis, including discounted cash flow (DCF) analysis, comparable trading multiples, precedent transactions, and ratios such as vertical and horizontal analysis. The various types of analyses may be built from scratch in Excel or may use an existing template/model. This…
What is a Discount Factor? In financial modeling, a discount factor is a decimal number multiplied by a cash flow value to discount it back to its present value. The factor increases over time (meaning the decimal value gets smaller) as the effect of compounding the discount rate builds over time. Practically speaking, it is…
