September 1, 2009
Many people know the old rule of thumb that at a 10% annual return, money doubles every seven years. (Actually it takes 7.27 years, but I guess this wouldn’t be a great rule of thumb.)
People who work in private equity, venture capital, or any other area where investment time horizons are measured in years rather than days, weeks or months – are generally pretty interested in the IRR of their investments. You’ll often hear a VC say something like “… we need a 35% IRR to justify so and so investment.” There’s plenty of discussion and debate elsewhere about the relevance of IRR as an investment measure, and the benefits of using IRR versus NPV (net present value) – so I’ll avoid getting into this debate here. Read the rest of this entry »
1 Comment | 
Financial Modelling | Tagged: Spreadsheets, Excel, Algebra, Conditional formatting, IRR, Data tables | 
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Posted by Darren Miller
August 17, 2009
Most people who use spreadsheets for financial modelling will have encountered the dreaded problem of circular references. If you don’t know what a circular reference is, then this post is not for you – at least not yet. Perhaps bookmark this page and come back one day when Excel barfs at you for writing a formula which refers to itself.
Circular references are the financial modeling equivalent of the old philosophical causality dilemma, typically stated as “which came first, the chicken or the egg?”
Circular references in spreadsheets can be either a) intended, or b) unintended. If they are the latter, then there is a mistake in your model and the circular reference should be eliminated as soon as possible. Read the rest of this entry »
5 Comments | Financial Modelling | Tagged: Spreadsheets, Excel, Design, Circular references, Subscriber equation, Algebra, Errors | Permalink
Posted by Darren Miller
