Which practice is NOT a best practice for formatting financial models?

Which practice is NOT a best practice for formatting financial models?

• A. Always password protecting your model
• B. Use consistent fonts
• C. Separate inputs and outputs
• D. Include an audit trail

Answer: (A)

Formatting a financial model should prioritize clarity, consistency, and auditability. Using consistent fonts helps readability and reduces errors when scanning across sheets. Separating inputs and outputs makes it straightforward to adjust assumptions and see their impact without chasing down calculations. An audit trail records the model’s evolution and changes, which is essential for governance and review. Password protecting your model, while it can protect sensitive content, does not improve the formatting or the ability to review and verify calculations, and can hinder collaboration and auditing. For these reasons, password protection is not a best formatting practice.

Formatting a financial model should prioritize clarity, consistency, and auditability. Using consistent fonts helps readability and reduces errors when scanning across sheets. Separating inputs and outputs makes it straightforward to adjust assumptions and see their impact without chasing down calculations. An audit trail records the model’s evolution and changes, which is essential for governance and review. Password protecting your model, while it can protect sensitive content, does not improve the formatting or the ability to review and verify calculations, and can hinder collaboration and auditing. For these reasons, password protection is not a best formatting practice.