Scope of Financial modeling

For a minute, let’s imagine the finance industry doesn’t have access to financial modelling. What would happen?

Companies would lack the proper understanding of their own finances. The inflow and outflow of cash wouldn’t be recorded accurately. There would be an inability to make predictions about the company’s future. The data for expansion, mergers and acquisitions will also be lacking. The industry will find itself in turmoil and rife with indecision.

Luckily, financial modelling is very much prevalent in the field of finance to ensure none of the above conditions occurs. There are innumerable benefits of financial modelling. It is a practical and essential method of financial planning that records data, analyses company performance and even helps make intelligent business decisions.

Numerous companies, MNCs, global banks and start-ups recognise the value and scope of financial modelling. Many even insist on hiring candidates who possess the required qualification. CFA holders, MBAs, investment bankers, financial planners, equity analysts and other professionals get an edge when they list financial modelling on their resumes.

So let’s find out more about the scope of financial modelling.

The scope of financial modelling

1. Enhances your existing career

Financial modelling can be a very successful standalone career. A certification can get you employment in several places, such as banks, financial institutes and businesses. However, there are also many professions, like risk analysis, corporate finance, equity research analyst and investment banking, where your knowledge of financial modelling can give you a considerable advantage. You can create financial statements, M&A models, evaluations, predictive models and other essential finance reports. The many benefits of financial modelling enhance your profile in the industry.

2. Financial modellers are hired by many companies

Financial modelling professionals work with large amounts of numerical data. They can use these numbers to help businesses make smarter decisions and operate efficiently. Companies are able to make forecasts, analyse data and minimise risks when using accurate financial models. In India, financial modellers are actively hired by the big financial giants. The big 4 firms, Goldman Sachs, Crisil, Standard Chartered and Deutsche Bank are some of the prominent players who understand the scope of financial modelling and how it can have a giant impact on their business.

3. Wide range of applications for financial modelling

There are different financial models for various purposes. A valuation model helps companies create authentic financial calculations based on projected results. The mergers and acquisition model allows you to carry out the computations needed. A risk model helps you to understand the risks associated with a project. Whereas, a strategic model enables you to analyse different strategies and initiatives for the company. As you can see, the scope of financial modelling is immense.

Want to know more about the financial modelling course?

4. Helps finance professionals carry out a variety of tasks

One of the many benefits of financial modelling is how versatile it is. You can use it to create budgets for different departments within a company. It is helpful when you want to ascertain the potential impact of a business decision. You can use it to cast projections and gauge future performance. Or, you use it to summarise the financial status of an organisation. It is a multi-faceted spreadsheet system that is an invaluable asset for many finance professionals.

5. Boosts your profile in the industry

Every time your resume lands on the desk or inbox of the HR manager, it could lead to one of two possibilities. Either you get shortlisted for an interview, or your document meets the recycle bin. Qualifications and experience are the two vital features of any CV. But special skills can help you get an edge over your peers. Companies are getting more bang for their buck when they hire you. And that is one of the key benefits of financial modelling. 

6. Is an essential requirement for entrepreneurs and start-ups

Launching a new business can be a daunting task. You have to keep careful track of your numbers, progress and goals. Financial modelling is a helpful financial tool that enables new companies to make smart decisions for their developing business. A start-up financial model can help to numerically measure the vision and objectives of the organisation. It will also represent and forecast revenue, cash flow, number of employees and potential as well as acquired customers. Without financial modelling, start-ups will find it difficult to navigate through the early years and make careless mistakes.

7. Can help investors make informed decisions

The investment industry can be quite volatile and unpredictable. As an investor, you need to ensure you are buying the right shares at the right time. Financial modelling can help you in a number of ways. It is a useful tool to forecast a company’s financial performance. It can help you figure out which company’s shares are more likely to rise in value.

Models can also help to determine how a change in interest rates or growth rates can affect an asset or stock. Financial modelling allows you to access all the important data required to make a successful investment.

Read – Average salaries after completing the financial modelling course

 Top 5 lucrative job profiles with financial modelling

1. Equity research analyst

This is the perfect role for you if you have good research skills and an analytical mind. An equity researcher is someone who intensively studies the market, examines publicly listed companies and offers insightful strategies to help businesses.

Benefits of financial modelling:

• Analysts can use the discount cash flow valuation model to create accurate assessments and valuations.
• They can create specific models to analyse factors, such as potential risks, capital and inflation.
• These professionals also use models to make business forecasts.

Career opportunities:

• Annual salaries range from Rs 9 to Rs 20 lakhs, depending on your location and quality of the organisation.
• Top companies who hire equity research analysts in India — JP Morgan, Goldman Sachs, Credit Suisse, HSBC and MorningStar.

2. M&A analyst

As mergers and acquisitions are a large part of the corporate world, it is only fitting to have a designated expert to handle the paperwork, calculations and perform due diligence.

Benefits of financial modelling:

• Specially designed M&A models help to make close estimations about the deal.
• A DCF model can be used to create valuations for businesses.
• Financial modelling also enables the analyst to make projections and calculations for the future.

Career opportunities:

• M&A analysts receive salaries ranging from Rs 2 to 25 lakhs, depending on the level of experience and size of the firm.
• PwC, Accenture, Ernst & Young, Deutsche Bank, Capgemini are some of the companies who hire M&A analysts.

Become an M&A Analyst with Proschool’s Financial Modelling Course

3. Investment banker

Investment bankers or advisors are professionals who use their industry knowledge and trading expertise to provide clients with services such as investment planning, mergers and acquisition and raising capital.

Benefits of financial modelling:

• Investment professionals can use models to create historical, current or projected values of a company.
• They can also analyse market trends with financial modelling

Career opportunities:

• Investment bankers earn an annual income between Rs 4 to 40 lakhs, depending on their experience, location and company. Some of the high-ranking professionals earn in crores.
• Axis Capital, Goldman Sachs, Edelweiss, ICICI Securities, Citibank and Morgan Stanley are a few companies who require competent investment bankers.

4. Corporate finance

Professionals who work in corporate finance deal with raising capital, various transactions, business developments and other activities that can impact the worth of a company.

Benefits of financial modelling:

• Can build company-specific models for decision-making and forecasting
• Used to make financial statements and analyses.

Career opportunities:

• Depending on the circumstances, professionals can make around Rs 3 to Rs 50 lakhs per annum.
• Companies such as Deloitte, KPMG, Ernst & Young and McKinsey & Company offer corporate finance services.

5. Risk management

Professionals in this line are directly responsible for identifying potential threats — current or future. They are also required to research and analyse factors that could lead to losses or fraud.

Benefits of financial modelling:

• You can create risk models that use distinct metrics to analyse the markets.
• Financial modelling can also help make predictions and take preventive measures.

Career opportunities:

• Over the course of their careers, risk managers earn between Rs 3 to Rs 25 lakhs a year.
• You can work for companies such as HDFC Bank, DBS, BNP Paribas and Deutsche Bank

Proschool’s course showcases the scope of financial modelling