Our first design choice is what to do with our assumptions. Do we block them together or do we put them throughout the model? In the top part of our table here, we've got them blocked, so Revenue growth assumptions, operating costs assumptions, and taxes assumptions are all together. Now the benefit of putting them all together is that it's more user-friendly. I can never forget where they all are because they're all in one place. Particularly in a big model you might have them all on one tab. Blocked assumptions thus are particularly important in bigger models.
We look at the bottom part of the table though. I can see Revenue growth assumptions here 3% and then I can see the outputs revenues 404.1 So I've got the driver the 3% and the output together. The benefit here is that your output and driver being visible together and so I can see what is actually driving my output.
So we've got a difference here between blocks assumptions and throughout all threaded assumptions. My next design choice is whether to have costs shown as positives or negatives. In the top half of this table, we can see two costs, operating costs and tax expense. Now they've both been shown as positives. Decide yourself. Do you find that user-friendly or not? We often find that negative presentation where those operating costs and tax expenses are shown as negatives makes it easier to sense check our work and makes more sense when it's printed out. Also, it's easier to have negative presentation if you're operating profits were a sum function. So the 20.8 in this table can just be a sum of the two items above the revenue 416.2 and the 395.4 operating costs if the operating costs was shown as a negative, but what if it's a positive? Well, you couldn't use the sum function you'd have to do Revenue minus operating costs. One thing to watch out for with negative presentation is that the sign might be flipped on some formulas? So going back to operating profits if you wanted to take your revenues and then subtract your negative shown operating costs. Well, you'd have to take revenues plus operating costs or sum them up. So do be careful you do often have to flip the sign on many formulas when showing costs as negatives.
Our last design choice is deciding whether our model is going to be a one Tab model or a multitab model. A one Tab model would have all of your major items income statement balance sheet cash rate statements all on the same tab and you could even have your assumptions your calculations everything all on that one tab. This is pretty useful for smaller models and it means when you're importing links to new files it's going to be easier. You just take one tab and put it in there. A DCF discounted cash flow is a good example of where we often see this.
A multitab model would have one tab for your income statement, another tab for your balance sheet, another tab for your cash flow statement. This is particularly good for bigger models. However, cross sheet links will exist between those two tabs. For instance your income statement links to your balance sheet which links to your cash flow statement and this can use up more memory. So do be aware it's going to be a larger file size and it's going to run that little bit slower. We often see this on Lev Fin i.e. leveraged Finance models.
