Financial Modeling Color Formatting

Color Formatting in Financial Models

Color Formatting in the financial model refers to the display of format or display of information that assist the reader or user in identifying certain pairs of information & in correlating the things easily. The most important parameters for color formatting are consistency, efficiency & clarity. Lack of any of these may not serve the purpose of providing the financial model.

Financial Modeling Color Formatting

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Source: Financial Modeling Color Formatting (wallstreetmojo.com)

Color formatting is done to the cells & data within each financial model. The most commonly used color formatting is as follow:

  1. Blue: For hardcoded (i.e. typed) inputs. It can be some historical information or something which you assume or the key driver (such as rate of interestRate Of InterestAn interest rate formula is used to calculate loan repayment amounts as well as interest earned on fixed deposits, mutual funds, and other investments. It is also used to calculate credit card interest.read more, rate of tax, output, etc.) used in the model.
  2. Black: For calculation & cell referencesCell ReferencesCell reference in excel is referring the other cells to a cell to use its values or properties. For instance, if we have data in cell A2 and want to use that in cell A1, use =A2 in cell A1, and this will copy the A2 value in A1.read more within the same sheet (i.e. all formulae are in black font)
  3. Green: For references made to other sheets. However, one may keep the color format here as black & may avoid this color.
  4. Red: For external linksExternal LinksExternal links are also known as external references in Excel. When we use a formula in Excel and refer to a new workbook, it is the external link to the formula. In other words, an external link is when we give a link or apply a formula from another workbook.read more outside the working file.

Thus, color the cell & contents within each cell helps the readers. This also helps in linking the flow of different pieces of data within different sheets & files.

Financial Modeling Color Formatting Template

You can download this Financial Modeling Color Formatting Excel Template here – Financial Modeling Color Formatting Excel Template

Let’s take a classic template for understanding:
Financial Modeling Color Formatting Template 0.1

Projected Financials:

Template 0.2
Financial Modeling Color Formatting Template 0.3
Template 0.4
Financial Modeling Color Formatting Template 0.5

Explanation:

  • We have used the color codes as defined in the topic.
  • The flow is maintained for assumption, calculations & summary.

Shading Color Formatting

Importance of Financial Modeling Color Formatting

  • Color formatting helps easy identification of cells.
  • A standard is set for readers for the identification of information.
  • It gets the reader involved in the working of the model.
  • The woking file becomes more attractive & appealing.
  • A consistent flow can be maintained for enhancing the understandability of the model.

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This has been a guide to Financial Modeling Color Formatting. Here we discuss the best color schemes for financial modeling along with its importance and downloadable excel template. You may find more about finance from the following articles –