Intro to Financial Modeling

  • Rev - COGS = Gross Profit
  • Gross Profit - SG&A = EBITDA
image

Blue: Inputs / Hardcodes (Universal Standard)

  • Meaning: These cells contain raw numbers typed manually (e.g., 100, 5.0%).
  • The Rule: "Change me." These are the only cells a user should interact with to run scenarios.
  • Why: If a cell is blue, you know it’s safe to overwrite it without breaking a formula elsewhere in the model.

2. Black: Formulas / Calculations (Universal Standard)

  • Meaning: These cells contain equations (e.g., =A1+B1 or SUM(A1:A10)).
  • The Rule: "Don't touch." Changing a black cell destroys the logic of the model.
  • Why: It signals that the number is a result, not an assumption.

3. Purple: The "Mixed" or "Special" Case (Common Variation)

  • Meaning: Your image defines this as a "Mix of Historical (inputs) and projected data." This is a sophisticated variation used when a single row acts as both.
  • Scenario: Imagine a row for "Revenue."
    • 2023 (Past): Hardcoded (Actual data).
    • 2024 (Future): Formula (Growth rate assumption).
    • Since the row contains both types, coloring the font purple signals: "Be careful; some of this is real data, some is calculated."
  • Note: In other conventions, Green is often used here instead to denote links to other worksheets, or Red to denote links to external files.

Using our 1st Financial Model

Intro to Financial Modeling