Financial Modeling or Financial Modelling is a core skill that is almost mandatory for anyone who wants to build a career in finance. It is also important for anyone who wants to start his or her own business and even useful for sales/marketing professionals as it comes in handy in bidding for projects, determining payback/utility of campaigns etc.
Whenever we need to make a financial decision, we make a projection of what revenue is to be earned and costs are likely to be incurred and on the basis of such projections, evaluate if that is a wise decision. In a stock market analysis, we look at the past performance of a company to project what the revenue, costs and profit of the company are likely to be and, therefore if we should buy, sell or hold that share.
Applications Financial Modelling
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.
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.
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.
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.
Types of Financial Models
Financial Models can vary in form, type and complexity based on the purpose for which they are built. It can be a one sheet model for a quick analysis or it can be a multi-sheet, multi workbook model with several cross links for a company or an industry. Some of the common applications of financial modeling are:
Valuation using DCF
Discounted Cash Flow (DCF) analysis is one of the most common methods of valuation. DCF analysis gives the result of a company’s current value, known as “net present value,” by forecasting its future free cash flows. It functions on the principle that the value of a business is the sum of its projected future free cash flows, discounted at a suitable rate.
Leveraged Buyout Model (LBO)
In a leveraged buyout a firm finances an acquisition through a large amount of debt. So the LBO modeling exercise is done to estimate whether the business is likely to sustain the debt or what level of business performance will be required to make an eventual sale and retire the debt.
The entire objective of merger modeling is to understand the impact of an acquisition to the acquirer’s EPS and how the new EPS compares with the existing one. If the new EPS is higher, the transaction is called “accretive” while the opposite scenario would be termed “dilutive”.
Comparable Company Analysis
In this analysis we compare the financial metrics of a company against similar firms in the industry. It is based on an assumption that similar companies would have similar valuation multiples, such as EV/EBITDA, P/E, P/BV.
Credit Rating Model
As the name suggests, this model is mainly used by Credit analysts to assess the creditworthiness of the company. The model makes assumptions regarding the future earnings, cost and ebitda margins and assesses if the company will have the ability to pay interest and principle.
Financial Modeling Course Opportunities
With time and emerging technologies, the methodologies and techniques in the finance industry are also advancing. This has led to the concept of Financial models that help in efficient and easy analysis thus making Financial Modeling a pre-requisite for finance professionals in India.
Financial Modelling course opens doors to opportunities in Equity Research, Investment Banking, Credit Ranking Analysis, Financial Analysis, Business Analysis, Project Finance, Fund Management, and Commercial Banking.
Financial modelling course is ideal for professionals at every level including CAs, CFA® Charter holders, FRMs, MBAs, B.Tech graduates and Commerce graduates.
With our financial modelling courses, you can learn how to:
- Apply a structured approach to financial modelling
- Outline the hallmarks of good financial models
- Build a two-stage DCF business valuation model
- Build a monthly FP&A cash flow forecast model
- Build a financial model to analyze a business’ operations
- Build a mergers & acquisitions model
- Build a leveraged buyout (LBO) model
- Build a real estate financial model
- Build a start-up company model
- Build a mining financial model
- Build a renewable energy financial model
ELIGIBILITY CRITERIA FOR FINANCIAL MODELLING COURSE
Financial Statements; Financial Management and Ratio Analysis; Valuation Methods
Excel, Written Communication, Analytical Ability
Financial Statement Analysis, Building financial statements in Excel, Building Financial models
Related Skills / Knowledge
Understanding of Financial markets like market structure, mutual funds, debt markets, credit appraisal and ratings etc.
Financial Modelling Course Details : CLICK HERE
Possible Financial Modelling career opportunities
Junior Research Analyst/Associate
- Sector research and Company profiling
- Extracting quantitative data
- Writing research report
- Building model from scratch
- Testing of Financial Models
- Working on global sector/company research
JP Morgan Chase | Cognizant Technologies | Morning Star | Integreon | Irevna | Aranca | CRISIL
Merger and Acquisition Associate
- Client advisory : Corporate Finance, Mergers & Acquisition
- Conducting financial research for company and industries
- Competitor Study
- Business Valuation
- Project Feasibility report (Financial Modeling)
S&P Global | Ernst & Young | Other Advisory and Valuation companies
Investment Banking Associate
- Evaluate options to buy/partner
- Analyze competition landscape, prepare good pitch-book presentation
- Build financial models
- Conduct qualitative & quantitative research
- Create strategic rationale, positioning pages, pitch book, investment deck
Bank of America, Merill Lynch | Morgan Stanley | Edelweiss | Wipro BPS
Financial Planning & Analysis – Junior Manager
1.Building financial models to forecast future
- Assisting CFO to formulate budget and in day-to-day activities
- Periodic financial planning
- Variance Analysis
- Profitability Analysis
Accenture | GENPACT | Hewlett Packard | IDBI Life Insurance |Idea International
Equity Research Associate
- Conduct end-to-end research covering the sector
- Writing research reports, financial modeling (historical /projections)
- Valuation and DCF models
Cognizant Technologies Solution | Capgemini Consulting
Debt Syndication-Junior Executive
- Preparation of Financial Model, Information Memorandum, Project Reports
- Dealing with bank/NBFCs/Fls
- Legal documentation, due-diligence
Vivro Financial Services | KK Capital services | Blend Financial Services
Want to know more about financial modeling Course by IMS proschool? Click here