Horizontal vs. Vertical Models
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There are two types of financial models – single and multi-sheet models. Single sheet or also known as vertical models contain the different areas of the model on a single sheet, while a multi-sheet model is composed of separate sheets for every single area of the model.
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In general, single sheet models are used when the model that has to be created is smaller- it will include fewer drivers and will not be very detailed. They are easy to use and simpler to understand, which is a very good thing. The problem is that at some point, the model might expand and include additional parameters that were not considered before. If a single page model expands too much, it becomes difficult to manage. Typically a one page model will include the following sections:
- Assumptions
- Calculations
- Income Statement
- Balance Sheet
- Cash Flow
- Summary
With multi-sheet models every sheet will represent a different section of the model. There will be a separate sheet for the Assumptions, Income Statement, Balance Sheet, Cash Flow, D&A schedule, Debt schedule, Historical Inputs, etc.
Naturally, multi-sheet models are better positioned for more complex structures and higher level of detail.