Building Financial Models with Spreadsheets

When I was in business school, building financial models in spreadsheets was the simplest way to value any investment. If you’ve studied investing, you might have heard of the saying that, “Accounting is the language of business.” Well, it’s true.

You see, spreadsheets are the simplest way to ensure accuracy with your finances. You can add, subtract, multiply and divide from any cell. When you build financial models within spreadsheets, it’s easy to create checks and balances as well.

So if Accounting is the language of business, then spreadsheets are the building blocks of business. Each cell tells a story when you are building a financial model. This can either be for budgeting, forecasting, investing or more.

However, not everyone is an expert in finance or even knows how to build spreadsheets. In fact, learning how to use Excel is one of the most popular training videos in the workplace. Everyone wants a shortcut to increase productivity. Which is why I built this investment calculator.

Building Calculators for Investors

So when I was in college, I mastered financial modeling and spreadsheets. I also majored in finance, accounting and economics so I pretty much lived in Excel throughout the day. Even my time working with Bloomberg Terminals required me to download data into Excel all the time. Which isn’t a problem if you are comfortable using spreadsheets.

When I graduated from college, I didn’t have the same time to experiment with spreadsheets, let alone build multiple models. Even in the workplace, that is an inefficient way to get things done. So when online software became more popular, I was surprised to see how stagnant the development of new financial calculators were.

If you are managing your budget, a stock portfolio or any asset, you can build a simple spreadsheet model to calculate the returns. But creating multiple formulas can be tough for most individuals, especially if you don’t work in finance. Which is why I was surprised to see that even most financial advisors would only have boring financial calculators on their websites.

Chances are you have seen these financial calculators in the past. They only calculate compound interest, your retirement savings amount, and the time to pay down your mortgage. For the average person, these are financial calculators. Anything more sophisticated can be handled by a financial advisor. However, if you are a serious investor and want to generate higher returns to beat the market, then you need an investment calculator. You need a product that will help you understand how investments are valued, your cost of capital and the growth rate. That’s why I built this investment calculator.

Golden Door’ Investment Calculator

There are four main phases for this calculator so far. Over time, I will add more features.

To begin, investors can enter in a ticker like any typical stock app.

Right away, the app will provide you with relevant stock data for the company. For me, this is essential when doing quick analysis between multiple stocks. Since most stock websites are ad-based, they are slow to load and don’t often have all of the key metrics investors need. That’s why there are so many competitive investment products available online.

After looking at the company overview, I want to analyze the financials & valuations. This is a quick high-level overview of what’s happening at the company. Sometimes it is for a business I’m familiar with, other times it is something I’m seeking to better understand.

Key valuation metrics such as the earnings, revenue and return on equity are helpful to get started. In the future, I will build in some screening tools but for now this overview works.

The last element is most important for the investment calculator. It is where I crunch simple numbers like the initial investment and my cost of capital.

Since my initial release, I’ve already added four more calculators to the core product. This now includes calculating the Dividend, P/E Ratio, Capital Gains, and Debt/Equity. These are more investment oriented calculations for investors who get involved with the details.

It’s these simple calculations that take too long in a spreadsheet. Plus it can be cumbersome to look up relevant stock information, if you are analyzing multiple ideas at once.