Choosing Python over Excel for Financial Modelling (2024)

While #Excel is a powerful tool for data analysis and #modelling, #Python offers more advanced capabilities and greater flexibility for financial modelling and analysis.

Python offers several advantages over Excel for financial modelling and analysis:

1. Scalability: Python can handle large datasets and complex calculations more efficiently than Excel, which can become slow and cumbersome with large datasets.
2. Customization: Python allows for more customization and flexibility in terms of data manipulation and analysis. With Python, you can write custom functions and scripts to automate repetitive tasks and perform complex analyses.
3. Integration: Python can be easily integrated with other tools and systems, such as databases, web applications, and other programming languages. This makes it easier to work with data from different sources and perform more advanced analyses.
4. Reproducibility: Python scripts and functions are reproducible, meaning that the same code can be run on different datasets to produce consistent results. This is especially important in financial modelling, where accuracy and consistency are key.
5. Version control: Python code can be version-controlled using tools like Git, which allows for better collaboration and tracking of changes over time.

Some commonly used Excel functions in financial modelling and their corresponding execution in Python's #NumPy(np) & #numpy_financials(npf) libraries

Excel Function & its Python Equivalent

NPV - np.npv()

Calculates the net present value of an investment based on a series of future cash flows

IRR - np.irr()

Calculates the internal rate of return for a series of cash flows

XNPV - npf.npv()

Calculates the net present value of an investment based on a series of future cash flows that are not necessarily spaced equally in time

XIRR - npf.irr()

Calculates the internal rate of return for a series of cash flows that are not necessarily spaced equally in time

PMT - np.pmt()

Calculates the payment required to pay off a loan over a specified period of time

FV - np.fv()

Calculates the future value of an investment based on a series of periodic payments and a fixed interest rate

PV - np.pv()

Calculates the present value of an investment based on a series of future payments and a fixed interest rate

RATE - np.rate()

Calculates the interest rate per period for an investment

NPER - np.nper()

Calculates the number of periods required to pay off a loan

CUMIPMT - npf.ipmt()

Calculates the cumulative interest paid on a loan between two specified periods

CUMPRINC - npf.ppmt()

Calculates the cumulative principal paid on a loan between two specified periods

DB - npf.db()

Calculates the #depreciation of an asset based on the declining balance method

SLN - npf.sln()

Calculates the #depreciation of an asset based on the straight-line method

Write your most used financial formula in the comment and I will try to provide its python alternative.

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