An important feature of constructing financial models is that you need to anticipate what may need to be changed.
Just because your boss says he doesn’t want to run a sensitivity on an input today, doesn’t mean it will never happen. Your models need to be as robust and flexible as possible to (easily) assess different scenarios.
Single Input Cells or a Row of Input cells?
With this is mind you should consider how you set up your inputs.
In the video we have a situation where there are 2 options for the input of a tax rate in a financial model.
Option 1: Single Cell Entry
The tax rate is entered into a single cell and all the tax formulas refer to this cell
Option 2: Row of input cells
Option 2 has a tax input cell for every period. Option 2 is no more difficult to set up as you create the 1st cell and just link all the subsequent cells to the prior cell. In this option, the formula using the tax rate just link to the matching cell instead of a single cell.
Which is better
So which option is better? Choose one or the other before watching the video clip.
Watch the video clip to see the answer.
To see the full course contents click here.