Hands-On Excel: Waterfall Calculations

In this on-demand course, Excel expert David Ringstrom, CPA, brings his prior commercial real estate experience to the forefront by walking you through assembling a waterfall calculation from scratch. He begins with a blank worksheet and details every input and formula. Waterfall calculations are used to allocate cash flow among two or more partners based on their agreed-upon return parameters. David covers such concepts as range names, although he provides cell-address references you can use in lieu of range names if you so desire. He contrasts using the IRR worksheet function versus the XIRR worksheet function for computing investment returns. Additional worksheet functions—MIN, ROUND, DATE, SUMIF, and others—are included in the discussion. Check figures are used extensively throughout the model to ensure data integrity. Check figures also empower users to easily follow the calculations through the tiers. 

David demonstrates every technique at least twice: first, on a PowerPoint slide with numbered steps, and second, in the subscription-based Office 365 version of Excel. David draws your attention to any differences in the older versions of Excel (2019, 2016, 2013, and earlier) during the presentation as well as in his detailed handouts. David also provides an Excel workbook that includes most of the examples used in the course.

Office 365 is a subscription-based product that provides new-feature updates as often as monthly. Conversely, the perpetual licensed versions of Excel have feature sets that don’t change. Perpetual licensed versions have year numbers, such as Excel 2019, Excel 2016, and so on.

Topics Covered:

• Summarizing the investment parameters to be incorporated into a waterfall calculation.
• Building a waterfall calculation from scratch, starting with a blank worksheet.
• Using range names to streamline formulas and bookmark key inputs within a workbook.
• Utilizing Excel’s Name Manager feature to review and manage named ranges within a workbook.
• Building a series of dates with the Fill Series command.
• Improving the integrity of spreadsheets by using SUMIF to look up values in a more flexible fashion than VLOOKUP.
• Building a series of self-updating dates with Excel’s DATE function.
• Writing formulas by choosing named ranges with the Use In Formula command, thereby saving you time.
• Incorporating decisions into calculations with Excel’s IF function.
• Saving time by using the AutoSum formula to sum multiple columns at once with a mouse click or a keyboard shortcut.
• Computing the internal rate of return for a series of cash flows with the IRR function.
• Understanding how XIRR provides more accurate return calculations than IRR.
• Computing returns on irregular cash flow distributions when needed.
• Maximizing worksheet cells by using custom number formats to display text within cells that contain numeric values.
• Returning the smallest value from two or more amounts by way of the MIN function.
• Applying formatting to multiple locations within a worksheet by way of the Format Painter feature.
• Using Excel’s ROUND function to round numbers to the nearest 10, 100, 1000, or beyond.