Advanced Financial Analysis with Copilot in Excel (Part 2: Financial Modeling)

Building on the basics, let's explore how Copilot can help with advanced financial modeling and analysis.

Financial Modeling Prompts

1. DCF Analysis

"Create a DCF model template with 5-year projections and terminal value"
"Calculate WACC using market cap from cell B2, debt from C2, and tax rate from D2"
"Add sensitivity analysis for growth rates (rows) vs discount rates (columns)"

2. Investment Analysis

"Calculate Sharpe ratio using returns in column B and risk-free rate in cell C1"
"Create a portfolio optimization model using returns in A2:A50 and covariance matrix in B2:AZ50"
"Generate a correlation matrix for the stock returns in range A1:E100"

3. Risk Assessment

"Run a Monte Carlo simulation with 1000 iterations using assumptions in range B2:B5"
"Calculate VaR at 95% confidence level using historical returns"
"Create a scenario analysis showing best, base, and worst case outcomes"

Advanced Formula Examples

Complex Financial Calculations

"Create a formula to calculate bond duration and convexity"
"Build a formula for Black-Scholes option pricing using inputs from range A1:A5"
"Generate a loan amortization schedule with extra payment options"

Statistical Analysis

"Perform multiple regression analysis using data in A1:E100"
"Calculate beta using stock returns in A2:A50 against market returns in B2:B50"
"Create a time series forecast using ARIMA model on monthly data"

Real-World Modeling Scenarios

Valuation Models

"Build a comparable company analysis using data in sheet 'CompsData'"
"Create an LBO model with 5-year exit assumptions"
"Generate a merger model showing accretion/dilution analysis"

Financial Planning

"Create a rolling forecast model with seasonal adjustments"
"Build a working capital projection model"
"Generate a cash flow waterfall calculation"

Advanced Visualization Prompts

Custom Charts

"Create a waterfall chart showing bridge between EBITDA and free cash flow"
"Generate a tornado chart for sensitivity analysis results"
"Build a dynamic dashboard showing key financial metrics with slicers"

Interactive Reports

"Create an interactive P&L with drilldown capabilities"
"Build a dynamic budget vs actual variance report"
"Generate a financial metrics scorecard with conditional formatting"

Professional Tips

1. Model Building

"Add error checks to flag circular references and inconsistent growth rates"
"Create a model map showing cell dependencies"
"Add an assumptions summary dashboard"

2. Documentation

"Add comments explaining key assumptions and calculations"
"Create a model change log tracker"
"Generate a data sources summary"

Best Practices for Complex Models

1. Structure Your Prompts

   • Start with model framework
   • Add calculations layer by layer
   • Include error checking at each stage

2. Documentation Requirements

   • Request inline documentation
   • Add assumption notes
   • Include calculation explanations

3. Quality Control

   • Ask for error checks
   • Request reality checks
   • Include cross-validation

Example Workflow

Starting a New Model

"Set up a new financial model with these sections:
1. Assumptions tab
2. Historical data
3. Projections
4. Calculations
5. Output dashboard"

Adding Complexity

"Add sensitivity toggles for:
- Revenue growth rates
- Margin assumptions
- Working capital days
- Capex as % of revenue"

Finalizing

"Create a summary dashboard showing:
1. Key metrics chart
2. Sensitivity tables
3. Scenario analysis
4. Key assumptions"

Advanced Security Tips

1. Data Protection

   • "Add password protection to model structure"
   • "Create input validation rules for key assumptions"
   • "Set up cell locking for formula cells"

2. Version Control

   • "Add automated timestamp for changes"
   • "Create change log tracker"
   • "Set up backup formulas"

Remember: Complex financial models require careful attention to detail. Use Copilot to build systematically, but always review the logic and outputs carefully.