Enhance Excel Financial Models and Dashboards using ChatGPT

Name: Enhance Excel Financial Models and Dashboards using ChatGPT
Uploaded: 2026-02-04T15:00:24.000Z
Duration: 1 h 38 min 30 s

Understanding Financial Modeling

Introduction to Financial Statements

This module introduces the foundational elements of financial modeling, focusing on three primary financial statements: the income statement, balance sheet, and cash flow statement.

Emphasis is placed on the importance of accurately building and projecting these statements, with a mention of how leveraging Chat GPT can enhance this process.

The Income Statement

The income statement summarizes a company's revenues, expenses, and profits over a specific time period. It includes key components such as:

Revenue: Total money earned from sales or services.

Cost of Goods Sold (COGS): Direct costs attributable to production.

Gross Profit: Calculated as revenue minus COGS.

Operating Expenses: Costs required to run the business excluding COGS.

Operating Profit: Gross profit minus operating expenses.

Net Profit: Final profit after all expenses including taxes and interest are deducted.

The Balance Sheet

The balance sheet provides a snapshot of a company's financial position at a specific point in time, divided into three main sections:

Assets: Resources owned by the company classified as current (short-term) or non-current (long-term).

Liabilities: Obligations or debts owed by the company classified similarly into current and non-current categories.

Equity: Residual interest in assets after deducting liabilities, including common stock and retained earnings.

The Cash Flow Statement

This statement outlines cash inflows and outflows over a specific period, categorized into three sections:

Operating Activities: Cash flows related to core business operations.

Investing Activities: Cash flows from acquiring or disposing of long-term assets and investments.

Financing Activities: Cash flows from transactions with owners and creditors like issuing shares or borrowing funds.

Importance of Financial Statements

Financial statements are crucial for several reasons:

They provide essential information for strategic business decisions.

Help assess financial health and performance over time.

Used by investors and analysts to evaluate profitability and risk.

Required for legal compliance.

Projecting Financial Statements

Projecting financial statements is vital for preparing businesses for future revenues, expenses, cash flows, budgeting effectively, identifying potential risks, and developing mitigation strategies.

Leveraging Chat GPT in Financial Modeling

Enhancements through Automation

Chat GPT enhances building and projecting financial statements through capabilities in data handling:

Data Collection & Organization: Assists in gathering historical data ensuring accuracy for input into models.

Automation of Calculations: Automates complex calculations needed for creating various financial statements minimizing errors.

Scenario Analysis Support: Models different scenarios based on varying assumptions aiding forecasting efforts.

Summary of Benefits

By automating tasks with Chat GPT:

Saves time needed for manual calculations while ensuring consistency across documents.

Facilitates insightful analysis that empowers organizations to make informed decisions based on reliable insights.

Practical Application Using Chat GPT

Upcoming Modules Overview

Future modules will focus on practical aspects such as creating income statements using sample data with Chat GPT demonstrating automation benefits.

Stay tuned for hands-on experiences aimed at transforming approaches to financial modeling through AI integration.

Case Study Introduction

A practical example will be provided using hypothetical company XYZ Corp., showcasing revenue figures alongside cost structures across multiple years while maintaining consistent tax rates.

Income Statement Creation Using Chat GPT

Overview of Income Statement Construction

The process begins with using historical data for XYZ Corp to create income statements for the years 2021, 2022, and 2023.

Chad GPT outlines a systematic method focusing on essential financial elements such as revenue, cost of goods sold (COGS), gross profit, operating expenses, other income and expenses, and income taxes.

Key Financial Calculations

Gross profit is calculated by subtracting COGS from revenue, establishing a foundational profitability metric.

Operating income is derived by deducting operating expenses from gross profit, showcasing operational efficiency.

Chad GPT integrates other income and expenses with operating income to derive income before taxes, accounting for non-operational activities affecting taxable income.

Finalizing the Income Statement

A consistent tax rate of 25% is applied to compute the income tax; this reflects an understanding of tax regulations on corporate profits.

Net income is calculated by subtracting the computed tax from income before taxes, representing XYZ Corp's earnings after all obligations.

Benefits of Using AI in Financial Reporting

Chad GPT demonstrates its capability in managing complex calculations while presenting them logically and clearly.

Utilizing AI tools like Chat GPT enhances efficiency and accuracy in financial statement creation, benefiting finance professionals seeking streamlined reporting processes.

Projecting Future Income Statements

Transition to Forecasting

The upcoming module will focus on projecting future financial performance through AI-assisted forecasting of income statements for XYZ Corp from 2024 to 2026.

Historical Data Utilization

Historical data will be used to project future revenues considering growth rates in various financial categories including revenue and COGS.

Revenue Growth Rate Calculation

Chad GPT evaluates historical revenue growth rates by comparing annual figures from 2021 to 2023; a consistent growth rate of 20% is established.

Projected Revenue Analysis

Future revenues are projected using the established growth rate by multiplying preceding year revenues by 1.2 for each subsequent year (2024–2026).

Comprehensive Financial Projections

The projections also include calculating historical growth rates for COGS and operating expenses based on previous years' data.

Financial Forecasting and Common Size Income Statements

Growth Rate Calculation

The AI calculates a consistent growth rate of 20% for consecutive years by analyzing the difference between yearly values, dividing by earlier years' values, and converting results into percentages.

For other income and expenses, a modified growth rate of 18% is calculated to accommodate a slight decrease observed in the second year's growth rate of 16.67%.

Chad GPT projects financial figures for the next three years using these growth rates, applying 20% for COGS and operating expenses while using 18% for other income and expenses.

Projected Income Statements

With projected figures established, Chad GPT is prompted to create projected income statements for the next three years following previous methodologies.

The statements are arranged in a table format to facilitate comparison with historical financial statements in an Excel file.

Historical years are formatted distinctly from forecasted years by labeling them as 'A' for actual and 'P' for projected to ensure clarity.

Introduction to Common Size Income Statements

This module introduces common size income statements, which express each line item as a percentage of total revenue, enhancing comparability across periods.

A practical example will be worked through using an Excel file containing detailed income statements from ABC Corporation over multiple years.

Automating Common Size Income Statement Creation

To automate creation with Chad GPT, users copy existing income statements into the chat along with a prompt requesting computation of percentages based on total revenue.

Upon processing this request, Chad GPT generates a table where each financial figure is expressed as a percentage of total revenue for each year.

Insights from Generated Data

For instance, sales revenue constituted approximately 81.82% in 2021 but decreased slightly to 80% by 2023; operating income increased from 32.73% to 40%, indicating improved operational efficiency.

This automation transforms what was traditionally manual work into an efficient process that allows quick generation of insightful financial documents essential for strategic decision-making.

The Transformative Potential of AI in Financial Analysis

Introduction to AI in Financial Modeling

The presentation emphasizes how AI enhances the accuracy and reliability of financial models, leading to more informed strategic decisions.

Participants are encouraged to explore advanced tools for optimizing financial planning and strategy development.

Utilizing Chat GPT for Financial Analysis

The module focuses on using artificial intelligence, particularly Chat GPT, to analyze trends from common financial statements, improving efficiency in financial analysis.

ABC Corporation is used as a case study, with previously created common size income statements being referenced.

Analyzing Common Size Financial Statements

A prompt is provided for Chat GPT: analyzing ABC Corporation's common size financial statements over three years (2021-2023), identifying significant trends in key metrics like revenue and net income.

The analysis includes implications for the company's financial health and market position based on identified trends.

Key Financial Metrics Observed

Sales revenue decreased from 81.82% to 80%, indicating potential shifts in sales strategy or market demand.

Service revenue increased from 18.18% to 20%, reflecting a strategic focus on expanding service offerings.

Operating expenses decreased from 21.82% to 20%, signaling better operational control across various expense categories.

Implications of Financial Trends

Gross profit improved from 54.55% to 60%, showcasing enhanced operational efficiency; operating income rose from 32.73% to 40%.

Net income grew from 24% to 29.5%, highlighting overall profitability improvements attributed to operational efficiencies and strategic diversification.

Conclusion of Initial Analysis

The response links quantitative data with qualitative insights, providing a nuanced understanding of how changes reflect in the company’s outcomes.

Chat GPT's ability to quickly identify and interpret trends significantly improves the speed and accuracy of financial analysis.

Automating Ratio Analysis with AI

Importance of Ratio Analysis

Ratio analysis is crucial for assessing business health by providing insights into profitability, efficiency, liquidity, and leverage.

Automating the Process with Chat GPT

Automation through Chat GPT allows higher accuracy and efficiency in ratio analysis, enabling analysts to concentrate on strategic decision-making.

Overview of Provided Data Sheets

An Excel file contains two sheets: one with detailed financial statements over five years (including income statement details), and another designated for pasting ratio analysis tables generated by Chat GPT.

Financial Ratio Analysis with Chat GPT

Overview of Financial Ratios

Chad GBT calculates various financial ratios, including liquidity ratios (current ratio and quick ratio), which provide insights into a company's ability to meet short-term obligations.

Profitability ratios such as gross profit margin, operating profit margin, and net profit margin assess the company's efficiency in generating profits.

Leverage ratios like debt to equity and interest coverage indicate the level of financial leverage and the ability to cover interest expenses.

Efficiency ratios, including inventory turnover and accounts receivable turnover, show how effectively a company manages its assets.

Cash flow ratios reflect the company's ability to generate cash from operations.

Automation of Ratio Analysis

Chad GPT presents calculated ratios in a structured tabular format for easy year-over-year comparisons and trend analysis.

The automation process requires minimal formatting adjustments, streamlining the ratio analysis significantly.

Users can customize prompts to add or omit specific ratios based on unique needs.

The module will demonstrate how Chat GPT can analyze and interpret financial ratios using a consistent dataset from previous modules.

Detailed Analysis of ABC Corporation's Financial Ratios

A prompt is used to analyze ABC Corporation's financial ratios over five years, focusing on significant trends and their implications for financial health.

Liquidity ratios show an increase in current ratio (from 2.36 to 2.56), indicating improved short-term obligation coverage; quick ratio also improved (from 1.64 to 1.76).

Profitability Insights

Gross profit margin increased from 33.3% to 36.7%, suggesting better cost management or pricing power without losing sales.

Operating profit margin peaked before declining slightly in the fifth year, indicating potential operational challenges; net profit margin followed a similar trend.

Leverage and Efficiency Ratios

Debt-to-equity ratio increased, signaling growing reliance on debt which raises concerns about financial risk; interest coverage ratio dipped last year despite overall improvement.

Inventory turnover showed slight decreases possibly due to slower sales; accounts receivable turnover improved indicating more efficient collection practices.

Cash Flow Management

CFO-to-sales consistently improved reflecting stronger cash management relative to sales; improvements noted in cash flow operations related to total assets and total debt highlight robust cash flow management strategies.

Summary of Findings

ABC Corporation demonstrates strong financial health with notable improvements in profitability and liquidity but must monitor rising debt levels and inventory management closely for long-term stability.

The session emphasizes how quantitative data ties into qualitative insights for understanding operational impacts on financial outcomes.

Innovative Use of Chat GPT in Financial Dashboards

Importance of Financial Dashboards

Financial dashboards are essential tools that visually represent an organization's financial health, enhancing decision-making processes through quick data analysis.

Creating Financial Dashboards with Chat GPT

Introduction to Financial Data Visualization

The session focuses on enabling stakeholders to quickly understand complex financial information using a specific dataset from a previous module.

A financial ratios table created earlier with Chat GPT will be utilized to demonstrate the automation of charts and dashboards.

Prompting Chat GPT for Dashboard Creation

The prompt provided to Chat GPT requests a comprehensive dashboard representing ABC Corporation's financial health, including various visualizations for different types of financial ratios over five years.

Specific requirements include clear labeling, appropriate titles, legends, and data points for each visualization.

Data Extraction and Visualization Process

Chat GPT begins by extracting necessary financial ratios from the provided table before utilizing Python's Matplotlib library for creating detailed visualizations.

Visualizations for liquidity ratios show an upward trend in the current ratio and quick ratio over five years, indicating improved short-term obligation coverage.

Analysis of Profitability and Leverage Ratios

Profitability metrics such as gross profit margin and net profit margin are included in the charts, illustrating trends in earnings performance.

Leverage ratios like debt-to-equity and interest coverage reflect slight increases, suggesting rising leverage while maintaining interest sustainability.

Efficiency and Cash Flow Ratios Insights

Efficiency ratios visualize inventory turnover and accounts receivable turnover, showcasing effective asset management in generating sales.

Cash flow ratio graphs provide insights into cash flow efficiency relative to sales, assets, and debt through CFO comparisons.

Comprehensive Dashboard Assembly

By compiling individual graphs into one dashboard, Chat GPT demonstrates advanced data processing capabilities that enhance financial analytics.

Although formatting may not be perfect compared to manual Excel creation, this method offers a rapid way to gain insights into financial trends. Automating dashboard creation saves time while minimizing errors.