Create a Folder Structure with VBA

In my current job in Mergers & Acquisitions, I have to prepare many complex folder structures for targets’ data rooms. It’s a tedious but straightforward process that can take up to an hour, as each Request For Information letter is almost the same but contains slight differences. For example, we may need detailed information of the shareholder structure and various related documents for a specific company we are looking to acquire. On the other hand, for a smaller, one-person organization, Read more…

What are Employee Stock Options (ESOs)?

More and more companies are offering stock options as part of the compensation package when recruiting new talent. Employee Stock Options are a type of equity compensation that companies can grant to their employees. Instead of giving the stock directly, the company awards derivative options on the stock. These are regular call options that give the employee the right to buy company stock at a set price for a specified period. The Employee Stock Options terms can either be a Read more…

Introduction to Game Theory in Finance

Game Theory is a method of modeling the interaction between two or more players in a situation with particular rules and expected outcomes. It is helpful in many fields, but mainly as a tool in economics. Game Theory helps with the fundamental analysis of industries and the interactions between two or more companies. Theoretically, games can have an infinite number of players, but we usually look at them in the context of two players. A simple example is a two-player Read more…

First In, First Out (FIFO) Inventory Costing

The First In First Out (FIFO) is a method for asset management that ensures assets we produce or acquire first are the ones we use or sell first. Under FIFO, we include the oldest assets’ cost in the Cost of Goods Sold (COGS) line item on the Income Statement. How does FIFO work? FIFO supports our assumptions for the cost flow within the company. When we use parts and raw materials in the production process and then sell the finished Read more…

Process Costing in Management Accounting

Costing is an essential aspect of operations for companies that want to understand how their production absorbs costs. Only by gaining a solid understanding of the company’s cost structure can we start to control and optimize it. We can often divide the production process into specific jobs and apply the job costing method to them. However, job costing is less appropriate when production is a continuous flow through processing departments, resulting in large quantities of homogenous products. It’s crucial to Read more…

What is Job Costing in Management Accounting?

Job Costing is a technique from management accounting. It is a part of the internal accounting process to facilitate strategic planning and data-driven decisions. Management accounting goes down to the business’s basic units to understand profitability and help evaluate how successful management is in running the company. One of the most critical decisions for businesses is how to set prices and quote prospective customers. Job Costing helps us track costs on a per-project basis to analyze our pricing and profitability Read more…

Add Rounding to Multiple Cells in Excel – VBA Tool Dev

Lately, I’ve been working on a side project, modeling some financial statements. When I do those, I like to work with full numbers, as I get a better feel of the material items. However, when it’s time to prepare the final deliverables, I always round in thousands. What I have been doing so far is going in and wrapping the formulas by hand. I like using Excel’s round formula with -3 decimal places. This means that it rounds it to Read more…

Forecasts with the Polynomial Regression Model in Excel

Regression analysis aims to model the expected values for a dependent variable (y) based on independent variables (x). The polynomial regression is a statistical technique to fit a non-linear equation to a data set by employing polynomial functions of the independent variable. We can use the model whenever we notice a non-linear relationship between the dependent and independent variables. The first publication on the polynomial regression originated in the early 19th century. The model played an essential role in the Read more…

Understanding the Cost of Debt Ratio

Research in the SME sector shows that around 40-50% of companies seek debt financing at least once in their life cycle. It’s essential to understand the actual cost of Debt to make informed decisions within the business. The Cost of Debt represents the effective interest rate the business pays on its debts. Generally, the ratio refers to pre-tax cost. However, interest expenses are deductible for tax purposes, so we apply a tax shield on the Cost of Debt when we Read more…

Cohort Analysis Explained with an Excel example

It’s relatively easy for most businesses to analyze the day-to-day operational marketing and sales metrics like conversion rates, cost of sale, and others. However, when it comes to customer retention, it proves to be a more challenging task. Many companies struggle to define customer retention within their business model, let alone calculate and analyze it. Cohort Analysis is a form of behavior analysis on groups of users with similar characteristics in a given time frame. We refer to these groups Read more…