John Tjia’s presentation of “Integrated Financial Statement Modeling” yesterday was well attended. Approximately 15 Master of Science students who learned about his presentation at 4:30 on Friday were joined by students from four of my courses. This makes me think that announcing our guest speakers via Blogs@Baruch is an efficient yet effective means of enlarging our class community.
John is now Executive Director of Valuation and Business Modeling at Ernst and Young, but earlier in his career he did some forecast planning for Microsoft and met Steve Ballmer. John chuckled and told us, “The Microsoft people invented Excel but when they needed to know how to use it….they came to us.”
John provided a 39 page handout that he referred to as he explained how the underlying task of the financial statements is to track cash. We learned from him that the Income Statement, Balance Sheet and Cash Flow Statement are connected by the flow of cash. If you would like to go over the material that John covered again please refer to his book, Building Financial Models, Second Edition.
John is a director who knows what characteristics make a person successful in his organization. He stated that it is better to build Excel skills after mastering accounting and finance instead of having a strong Excel background before acquiring accounting and finance proficiency. This may not be what some of us want to hear but for those who hope to follow in John’s footsteps it may turn out to be prophetic wisdom.
According to this pioneer in the financial modeling field, the models he has built for each of his customers are distinctly different. He always examines their old model first because this helps him understand how they like to look at their business and the framework they have been using. Even within the same industry modeling assignments can be very different, there will be some common key points but there is no “one approach.” John’s models inform the C Suite, operations people, people who are endeavoring to determine a realistic and profitable pricing structure for new products and services, investors who are interested in the potential profits and security of their prospective investments, start-ups who are soliciting investor funding and other groups internally within Ernst and Young. He uses Excel, Access, SQL and PowerPivot.
I was intrigued when John mentioned that sampling data, the purview of statistics, is no longer necessary because we can grab all of the data and analyze it with new really powerful tools. John’s story about how he and his colleagues created a macro that helped them translate a very lengthy financial model into Japanese and Chinese was also fascinating.
I think that people in attendance yesterday are all hoping that John will capture a few of his financial modeling stories in the next edition of his book. Who knows, perhaps you will someday play out your own story by becoming a Modeloff finalist. When this happens please tell John Tjia that hearing him sparked your interest in the contest.