Financial modeling is the process of creating a visual representation of the financial performance of a company. It helps stakeholders and investors gain insight into company performance, forecast financial reports, and make investment decisions. Excel workbook linking is a powerful tool used in financial modeling that allows users to connect multiple Excel workbooks in order to access and analyze data in them collectively.

Definition of Financial Modeling

Financial modeling involves using a variety of methods and techniques to construct a quantitative representation of a company’s performance, including historical operational and financial data, and projecting possible future outcomes. By combining financial data with assumptions, financial models can be used to test possible scenarios and compare them to actual results.

What is Excel Workbook Linking?

Excel workbook linking is a process by which data in multiple Excel workbooks can be connected. It is a powerful tool when used in financial modeling as it allows users to easily access and analyze data in one or more workbooks. With Excel workbook linking, users can quickly run different scenarios and make well-informed decisions.

Key Takeaways

  • Financial modeling is the process of creating a quantitative representation of a company’s performance.
  • Excel workbook linking is a powerful tool used in financial modeling that allows users to connect multiple Excel workbooks.
  • Excel workbook linking provides users with the ability to quickly run different scenarios and make well-informed decisions.

Benefits of Linking Excel Workbooks

The ability to link workbooks in Excel has been a helpful feature for financial modeling, allowing users to have greater accessibility, increased efficiency, and improved accuracy. Utilizing this feature allows users to link data and formulas from one workbook to another, cutting down on manual data entry or lack of accuracy due to formula adjustment or duplication. Here are the top three benefits of linking Excel workbooks.

Greater Accessibility

Having the ability to link workbooks in Excel allows for greater accessibility from one worksheet to another. Users can conveniently pull data from one workbook to another and utilize formulas to access information across their various worksheets. This improves the ability to reference requested items with ease and leads to a more efficient workflow.

Increased Efficiency

Without the ability to link workbooks, users would need to manually enter all data and update any changes when needed. Linking workbooks allows users to access data quickly and efficiently, which saves time and eliminates errors or delays due to manual entry. With a few clicks of the mouse, users can modify data that appears on multiple worksheets at once.

Improved Accuracy

When utilizing the feature of linking workbooks, users can benefit from improved accuracy as well. By accessing data across multiple worksheets, users are able to reduce the chances of manual entry errors, duplication of formulas, or missed updates. Automatically updating data across multiple worksheets improves accuracy and leads to more confidence in information that is being shared.

Linking Types

Connecting Worksheets In The Same File

Whenever you are dealing with financial modeling in Excel, you may want to work with multiple worksheets to carry out your calculations. Of course, having multiple worksheets can quickly become tiresome and confusing if you are juggling them to input and output different pieces of information. In order to minimize this confusion, you can easily link worksheets within the same file so that you can work on them simultaneously.

In Excel, linking worksheets is simple. All you need to do is select the cell in the worksheet where you want the result to show. Then, type the equal (=) sign to indicate the start of the formula and type the sheet name, then exclamation mark (!), and then the reference cell.

For example, if you have a Data sheet and a Result sheet, and you want cell A4 on the Result sheet to show the result of cell A4 on the Data sheet, you would type the following formula into cell A4 on the Result sheet: =Data!A4.

Connecting Worksheets In Separate Files

You can also link worksheets in different files. The process is very similar to that of linking worksheets within the same file, the only difference being that you must specify the external workbook that contains the worksheet. To do this, start the formula with the equal (=) sign, type the name of the external file and enclose it in brackets, followed by an exclamation mark (!), and then the cell reference from the external file.

For example, if you have a Data sheet in the file Data.xlsx and you want to bring the result of cell A4 into cell A4 on the Result sheet in the file Result.xlsx, you would type in the following formula into cell A4 on the Result sheet: = [Data.xlsx]Data!A4.

Process of Linking

Linking in Excel is a powerful tool that can be used to help create a financial model. The process of linking involves several steps that must be completed in order for the model to be accurately linked. Below are four steps that need to be completed in order to properly link two or more Excel files.

Select Data to Link

The first step in linking Excel workbooks is to select the data that needs to be linked. This data is usually a list of items such as financial metrics, budget data, or any other data that is pertinent to the model. Once all of the data is selected, it can be copied and pasted into the second workbook in order to link it.

Paste Formula with Linking Syntax

The next step in the linking process is to paste a formula into the second workbook that contains the linking syntax. The linking syntax is the code that will link the two workbooks and allow them to interact with each other. This code can be found online and is specific to the version of Excel that you are using. Additionally, it is important to ensure that the formula is entered correctly in order for the link to work properly.

Create Name Range Reference

Once the formula with the linking syntax has been added, the third step is to create a ‘name range reference’. This reference is what the workbooks will use to ‘communicate’ with each other. It is important that the name of the range is descriptive and easy to understand, as this will make it easier to understand how the two workbooks interact with each other.

Select Refresh Scenario

Finally, you will need to select the refresh scenario. The refresh scenario is the action that will happen when one of the workbooks is changed. This could be simple, such as the other workbook being updated immediately when the first workbook is changed, or it could be more complex, such as a scenario where the first workbook must be saved before the information is updated in the second workbook. The refresh scenario selected will depend on what type of data is being linked and what the user is trying to accomplish.

Linking Excel Workbooks for Financial Modeling - Best Practices For Data Linking

Utilize Relative Paths

When linking other files or documents to your main model, it is recommended to use relative path. Relative path is a way of linking files stored in another directory without specifying the entire file path. For example, if you store your main model and source files in a directory “Financial Modeling

Pitfalls of Linking Workbooks

When a modeler works with multiple workbooks and linking them, it could make the financial modeling more complex than anticipated. Linking workbooks requires careful attention to details, as any incorrect setup could affect the overall model. Furthermore, when dealing with an unfamiliar model, it could take a considerable amount of time to identify the source of any issues due to the complexity of the linked model.

Increased Complexity

In many cases, linking multiple workbooks to each other can be helpful and make task simpler. However, if not done properly, it could make the financial modeling significantly more complex. When linking workbooks, the task of monitoring, auditing, and tracking the entire model becomes more complicated. In addition, if the model changes substantially, it could become difficult to update multiple sheets and other dependent models.

Potential for Data Breaches

In many cases, when linking multiple workbooks, some of the data stored in the workbooks could be confidential and sensitive. Leaks of confidential information due to linking workbooks could result in potential data breach. Furthermore, when connected with external sources, such as databases, the data not only becomes hard to control but also can lead to unintended access by malicious agents.

In order to achieve the desired outcome, it is important to set up rules, protocols and procedures to mitigate the chance of any data breach resulting from linking workbooks. Additionally, adoption of approved best practices is also a must to help protect the data and avoid the pitfalls of linking workbooks.


Linking Excel workbooks is a powerful tool for creating financial models. Its flexibility allows us to quickly and accurately maintain large sets of data and formulas in each individual worksheet while providing flexibility and control that is not possible when all data and formulas are combined in the same worksheet. Linking Excel workbooks are beneficial because they:

  • Save time when making changes across multiple worksheets and models
  • Reduce human errors when inputting data and formulas
  • Provides flexibility in setting up a model
  • Makes large models easier to maintain

In order to maximize the benefits of linking Excel workbooks for financial modeling, it is important to follow some best practices. These include:

  • Be consistent with naming conventions
  • Ensure formulas are correctly written before linking
  • Set the correct properties for the linked cells
  • Regularly review linked cells for accuracy

In conclusion, linking Excel workbooks for financial modeling has numerous benefits. By following best practices for data linking, users can maximize their benefit from using this powerful tool.

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