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Practical Financial Modelling - 3rd Edition - ISBN: 9780081005873, 9780081005880

Practical Financial Modelling

3rd Edition

The Development and Audit of Cash Flow Models

Author: Jonathan Swan
Paperback ISBN: 9780081005873
eBook ISBN: 9780081005880
Imprint: Butterworth-Heinemann
Published Date: 21st August 2015
Page Count: 336
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Practical Financial Modelling, 3e is a book on model development and model assurance. It enhances the modelling process by emphasizing controls and checks for accuracy and reliability. New content on validation and verification, model use and sensitivity analysis is presented alongside a modelling methodology that underpins the various proprietary standards used in financial modelling today. It provides more details than other books and yet is general enough for applying its methodology to many applications. This book isn’t just about the details of building cash flow models, it’s about building better cash flow models.

Key Features

  • This new edition increases the number of worked examples and introduces new material on the audit sheet and audit workbook methodologies, and the delta sheet approach to sensitivity analysis
  • It provides the developer with a toolkit of modelling techniques and a framework of error controls to reduce the risk of spreadsheet error
  • The methodology and structure conforms with the modelling principles defined by the Institute of Chartered Accountants of England and Wales; and the model assurance processes ensure compliance with the UK public sector Macpherson Report and regulatory requirements such as Sarbanes-Oxley


Upper-division undergraduates, graduate students, and professionals working in investment banking, project finance, the public/private partnership sector

Table of Contents

  • Dedication
  • About the Author
  • Preface to the Third Edition
  • Preface to the Second Edition
  • Preface to the First Edition
  • Acknowledgements
  • About Operis Group
  • Introduction
  • Part I. The Modelling Environment
    • Chapter 1. Quality Assurance
      • The Modelling Environment
      • Risk Assessment
      • Risk Controls
      • Quality Assurance and the Modelling Methodology
    • Chapter 2. Quality Control
      • Introduction
      • Understanding Error
      • Error Recognition
      • Audit Tools and Techniques
      • Error Values
      • The Model Reviewer and the Review Plan
      • The Audit Sheet
      • Environmental Checks
      • Structural Checks
      • Arithmetical Checks
      • Financial Checks
      • Change Checks
      • Model Map
      • Using the Audit Sheet
      • The Audit Workbook
      • Third Party Model Audit Tools
    • Chapter 3. Model Structure
      • Introduction
      • Choosing the Right Tool
      • The Three Principles
      • Two Approaches
      • Workbook Structure
      • The Inputs or Assumptions Sheet
      • The Workings or Calculations Sheet
      • Outputs
      • Audit or Control Sheet
      • Variations
      • Documentation
      • Key Information
      • Microsoft Backstage
      • File Properties
      • Printing and Reporting
      • Model Development
      • Navigation
  • Part II. The Modelling Process
    • Chapter 4. Referencing and Range Names
      • Relative and Absolute References
      • R1C1 Referencing
      • Range Names
      • Creating Names
      • Defining Names
      • Name Manager
      • Using Names
      • Additional Name Functionality
    • Chapter 5. Mainly Formulas
      • Introduction
      • Bodmas or Pemdas
      • Timing
      • Technical Formulas
      • Changing Periodicity
      • Circularities and Iteration
      • Advanced Formulas
    • Chapter 6. Mainly Functions
      • Introduction
      • Late Binding Functions
      • Error Handling
      • Good Old IF
      • Starting Again
      • Revolving Credit
      • Lookup
      • Lookup Without Using LOOKUPs
      • The Concept of the Pool
      • Dates
      • Financial
      • Other Useful Functions
    • Chapter 7. Model Use
      • Introduction
      • Risk Controls
      • Protection
      • Grouping and Outlining
      • Data Inputs
      • Conditional Formatting
      • Custom Formatting
      • Charting
    • Chapter 8. Sensitivity Analysis and Scenarios
      • Introduction
      • Model Interrogation
      • Sensitivities
      • Scenarios
      • Delta Sheets
      • Solver
      • Risk
    • Chapter 9. Automation
      • Introduction
      • Recorded Macros
      • Assigning Macros
      • Written Macros
      • Quarterly/Annual Macro
      • Error Handling
      • Debt Sculpting
      • Debugging
      • User-Defined Functions
  • Appendix 1. Good Modelling Practice
  • Appendix 2. Keyboard Shortcuts
  • Index


No. of pages:
© Butterworth-Heinemann 2016
21st August 2015
Paperback ISBN:
eBook ISBN:

About the Author

Jonathan Swan

Jonathan Swan's work has encompassed a range of consultancy and development assignments with investment banks and others in the City and throughout Europe. He is currently Director of Training at Operis Group plc, the UK's leading independent financial modelling consultancy.

Affiliations and Expertise

Operis TRG Limited, London, UK


"The 3rd edition of Practical Financial Modelling by Jonathan Swan is a must-read for any organization engaged in corporate modelling in the Excel environment. This well-forged edition offers practitioners important insights and methods to develop models that are useful to the key decision-makers, free of errors, and maintainable for the future by implementing industry standards in model development. Few books in financial modelling even touch on the importance of technique. This book offers a compelling guide to ensure model competence." --John C. Banko, University of Florida

"Jonathan Swan has provided an excellent financial modelling resource, written in a practical way that will appeal to practitioners and academics alike. The book very effectively addresses the essential topic of quality assurance and is bursting with invaluable advice on avoiding errors and improving controls." --Rob Powell, Edith Cowan University

"Practical Financial Modelling provides a great coverage of topics for a book on process modelling. It successfully guides the reader in an innovative practical approach through model use, validation and sensitive analysis. This is a very valuable material to any practitioner, student, or researcher in the modelling process framework." --Leandro Maciel, University of Campinas

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