What To Do Before Editing
- 02:17
What to do before editing a model. The common safety checks we always do
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Editing a financial model is common practice, but it can go very wrong very quickly and all of a sudden your models exploded. There are hash value signs everywhere. We want to try and avoid that so there are a couple of things you can do before you start editing to make things a little bit safer. First of all save a copy of the file, give it a new file name and then anything goes wrong you've always got something to go back to. Something you could do in the final names here is to start including version numbers. So modeling company a version 1 and then save modeling company a version 2 and then save modeling company a version 3 Etc until you've put all of your edits through. Next up you should turn iterations off, so go to file options in Excel then go down to the formulas page and on tick that enable it sort of calculations box. If you accidentally create any circulars, you'll now get that warning to tell you that and that's where you can stop and try and work out what's going on. If you've got a circular switch also turn that off. So you shouldn't have any intentional circulars either. Thirdly try to plan your changes and predict the effects. For instance, let's say you're going to spend some money on capital expenditure. That would mean on your balance sheet your PP&E property plant equipment would go up and your cash would go down. We would expect to see those effects happen then on your cash flow statement, your capex would be a larger cash outflow. In the year after expenditure, you'd expect more depreciation on the income statement which would reduce your PP&E on the balance sheet and you'd see the depreciation in the cash flow statement. So there are lots of changes you can plan and predict the effects of. Lastly only make one edit at a time. If you're going to change capex do all of those capex changes first do the assumption, maybe do some calcs, maybe change each of the financial statements, maybe some outputs only once you've done cabex and you're feeling happy with that. Would you then move on to and edit of internships. And only when you finish intangibles would you then move on to and edit of equity. So one edit at a time keeps it safe keeps it manageable.