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Four Types of Inputs
Understand the four types of inputs.
When to use
When constructing a basic financial model.
There are only four ways to enter data into a financial model. The actual method may incorporate combinations of the following:
- Amounts: Data is entered in as numerical (absolute) values. It may be in units, thousands, millions, GWh and so on, but ultimately it is a number. This is an ideal entry method where data is copied from elsewhere or may eventually be linked to another model (say).
- Percentages: Data is typed in as a percentage or ratio of another value, be it input or calculated. This is often the approach employed for variable costs, for example.
- Amount and growth rates: Data is entered in two forms, an amount in at least the first period and then a percentage thereafter. This is often the method used for sky blue forecasting and sometimes leads to what the modelling connoisseur may describe as “hockey stick projections”.
- Combination: Usually perceived as a more sophisticated version of the amount and growth rates approach, this method combines two or more input methodologies. The combination may be selected by use of a switch (manual input) or a trigger (calculation). This is often used for reforecasting or replacing forecast with actuals, etc. IF and CHOOSE are functions often associated with this methodology.
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