What is Financial Modeling?
What is Financial Modeling?
Financial Modelling is an essential course in finance that empowers students with core financial skills and methods in business financing to analyse, assess, and strategise the operations of any organisation.
It involves forecasting future financial performance based on historical data and other assumptions, such as revenue, expenses, and cash flows. Financial models evaluate investments, develop budgets, plan for future expenses, and measure the performance of a business.
Financial Modeling can be availed of by undergraduate students, postgraduate students, and students who just passed their 12th examination. We will further discuss it comprehensively in the blog later.
Applications Financial Modelling
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Investment Banking / Equity Research
Financial Modeling is the basic tool for fundamental analysis and valuations. Investment bankers use it to arrive at a valuation in M&A or fund raising transactions. Equity Analysts use it to value stocks and come up with buy/sell/hold recommendations.
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Project Finance/Credit Rating
Financial models help bankers, credit analysts to project future revenues and costs and to make an informed judgment about a project’s viability. They are then able to decide if they should extend loans or what the credit rating of a project or company should be.
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Corporate Finance
Financial Modeling is used by companies to assess their own finances and projects. It is hence an input in creating funding plans for corporate projects.
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Entrepreneurs/Private Equity
Entrepreneurs use Financial Models to present their plans to potential investors as much as to plan their strategies. Running different simulations can often be an important tool in avoiding potential risks.
What are the Types of Financial Models?
Every business leverages some type of financial model to run its business. A well-developed financial model allows businesses to optimise their financial performance, identify potential risks and opportunities, and nourish better organisational growth.
There are various models when it comes to financial modelling, and each model has its attributes and characteristics to satisfy different business needs. Some of them are mentioned down below:
Types of Financial Models |
Attributes |
Valuation Modelling | It involves forecasting a company’s future performance and estimating its value based on the projected results. |
Strategic Modelling | It is an impact-based business model where the impact of different strategic decisions and initiatives on a company’s performance is evaluated, and decisions are formulated. |
Risk Modelling | It involves modelling the financial risks associated with a particular investment or project. |
Asset-Liability Modeling | It is a form of modelling where the interactions between a company’s assets and liabilities are evaluated to measure their financial risk. |
Capital Budgeting Modeling | It includes modelling the expected return on a particular capital expenditure. |
Merger and Acquisition Modeling | This type of modelling calculates the impact of a merger or acquisition on a company’s financial performance. |
Financial Planning Modeling | This involves modelling the financial needs of a company in order to create a viable financial plan. |
A Comprehensive Look at the Financial Modeling Course
Financial Modelling is a highly prominent course that equips students with the fundamental knowledge and practical skills needed in core financial subjects like
- Investment Banking
- Equity Research
- Portfolio Management
- Project Finance
- Credit Research
- Financial Planning & Analysis
As mentioned above, the course can be availed of by different categories of students. Whether you are a postgraduate, undergraduate, or just passed your 12th examinations, you can pursue Financial Modelling.
Here are a few details about the Financial Modelling certification for different categories of students:
Financial Modeling Course Duration
The duration of the FM course depends upon the type of certification the candidates have enrolled for. Here is the course duration for different FM certifications:
- Financial Modelling : It covers core knowledge of FSA, Corporate Finance, etc., and is a fundamental course in finance of 3 months duration.
- Certificate in Equity Research: It is another vital financial course you can opt for. It is a 6 months course that helps master your skills in FM subjects, M&A, and sectoral models.
- Certificate in Investment Banking: It is another vital financial course you can opt for. It is a 6 months course that helps master your skills in FM subjects, Risk Management & Investment Baking Operations.
Eligibility for Financial Modelling
As the FM certification offers different courses for students with different educational qualifications, the eligibility criteria also differ from one another. The following criteria must be fulfilled by students enrolling for financial modelling course:
Syllabus for a Financial Modelling Course
The syllabus for Financial Modelling varies for different courses and certifications that the students opt for. Here is the syllabus for different courses offered in Financial Modelling:
Certification | Syllabus |
Financial Modelling |
|
Certificate in Equity Research | Everything from Financial Modeling Course plus,
|
Certificate in Investment Banking | Everything from Financial Modeling Course plus,
|
Why is Financial Modelling Gaining Importance and Prominence in 2023?
Financial modelling is becoming increasingly important in the current business environment. As companies strive to understand their financial performance, the demand for financial professionals is tremendously growing. In 2023, financial modelling skills are even more in demand as companies turn to financial models to make better business decisions.
Here are some reasons why you must consider pursuing a course in Financial Modelling in 2023:
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It is a Practical Course Offering Deep Knowledge of Finance & Business Economics
Financial Modelling is one of the most prevalent courses in finance. It helps students develop a deep understanding of financial concepts and provides a platform for learning about financial instruments and their valuations in businesses. It also provides a framework for understanding the different ways to structure and finance a business which is a key requirement for most companies today.
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Financial Modelling Facilitates Accurate Business Predictions
Companies are always eager to gain insights into their business analytics. Financial Modelling offers many such tools that are capable of examining vital company data and generating forecasts and predictions for the business. It helps businesses to stay in line or ahead of their competitors. Yet, the demand for more and more financial professionals with financial modelling skills is the need of the hour.
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It is a Significant Tool Used for Raising Capital or Equity
Financial Modelling is a course that encompasses all the financial aspects of a business. A great capability you gain with FM is providing accurate business valuations to companies and organisations. When you provide insights and precise business valuations based on real-time data to your clients, they will have no problem investing in your business.
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FM Provides Valuable Insights on Business Performance
Financial Modelling helps organisations gain visibility into the financial health of their business. It includes tracking expenses, monitoring cash flow, analysing expenses, and understanding financial trends.
Apart from that, Financial Modelling can also help businesses identify areas of potential cost savings, areas of risks, and growth opportunities. That is why a course in Financial Modelling makes you skilled to be a part of any organisation in the world.
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It Helps Minimise the Risk Factor for Businesses
FM is an exceptional tool that helps businesses minimise risk by ensuring they have sufficient working capital, efficient financial systems, and clear financial goals. These three elements together create the backbone of a robust financial system.
Hence, by pursuing FM, you will learn the tools and techniques to master these three financial areas, which will further help predict and measure future business outcomes. With such skills in the real financial field, companies would be looking forward to taking your assistance.
Learn More Benefits of Financial Modelling!
Discussing the Scope of Financial Modeling in India and Overseas
Financial Modelling is considered a core skill for all finance professionals. The expertise you gain on financial tools and methods in FM makes you competent to solve real-world financial challenges.
Besides, the growing number of businesses worldwide has developed an underlying need for more financial employees. That is why most students today, even after pursuing courses like MBA, B-Tech, CFA, Investment banking, etc., are learning FM to earn good job positions.
The scope for FM in future is extensively vast. There will be many jobs in Equity Research, Investment Banking, Financial Analytics, Business Risk Consulting, and various other financial fields.
In India, Financial Modeling is a growing field with demand for professionals in the areas of:
- Corporate Finance
- Investment Banking
- Mergers and Acquisitions
- Risk Management
- Financial Planning
Overseas, Financial Modelling is extensively used in investment banking, corporate finance, and financial services. Employers are increasingly looking for candidates with financial modelling experience. Financial Analysts, Portfolio Managers, Venture Capitalists, etc., are some common job positions you earn after FM.
How Much Will Financial Modeling Get You Paid?
Financial Modelling salaries usually vary depending on experience, job title, and geographic location of a person. In India, the average salary of a Financial Modeling Associate is around Rs 5.3 LPA, while an experienced financer can earn even up to 20-25 LPA.
However, the global salaries are much more lucrative, with the UK’s average Financial Modeling expert earning up to £34,131/yr, while in the USA, the average is around $64,233 annually.
Entry-level financial modellers in the USA typically earn between $50,000 – $75,000 per year, and the numbers go higher as you gain experience in the field.
How to Pursue a Career in Financial Modeling?
The financial sector is a goldmine right now, awaiting as many financial professionals as possible to evolve it into an even bigger market. To become a professional financial individual, the first step is to obtain relevant qualifications for the current financial industry.
The best way is to pursue a course in Financial Modelling by a reputed and reliable institution like IMS Proschool.
IMS Proschool offers one of the most exclusive certifications in the Financial Modelling field that will help you gain swift skills and gain better job positions at a higher level. IMS has trained over 15k+ students in FM who are working with some top institutions of the world.
The Financial Modelling courses designed by IMS Proschool have a 60% practical course structure that is delivered using a case study-based methodology. You can get in touch with us to find detailed information about the course.
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