347 647 9001+1 714 797 8196Request a Call
Call Me

Financial Modeling – A valued skillset

September 26, 2012
, ,

“Financial modeling” is one hot topic of recent years. The term usually refers to creating an integrated model of a company's business and financial data within a set of spreadsheets – normally with Microsoft Excel.

Investment banks, or more specifically: their equity research departments have been using detailed financial models for their forecasts and valuations for ages. However, the development of financial modeling as a service offered by specialized providers is more recent. This was mostly driven by investors asking for more reliable business plans to base their decisions upon. But also, although it may seem trivial, a lot of today's financial models would have remained unthinkable with technical limitations that were only lifted with Excel 2007 – such as the ridiculous limitation to 256 columns. Across all industries, Excel remains the single most important tool for financial modeling purposes, with only some specific tasks being solved in Access or other, more specialized software.

On the one hand, today's market conditions require financial modeling experts that take care of the specification and implementation of a financial model. On the other hand, financials models are often embedded in a broader context, like a restructuring or a financial transaction, and against that background, advisors that provide the financial model must usually offer expertise in additional areas. It then comes to little surprise that the market is mostly divided between the “usual suspects”: Big 4 accounting companies like Ernst & Young are in many countries the market leaders when it comes to financial models, as they already provide a lot of analyses and advice within bigger transactions; strategy consulting companies like McKinsey often deliver high-level plans with a more strategic angle, often purposefully ignoring complexity for the sake of simplicity; and specialized smaller providers offer specific industry expertise, but usually lack a global reach.

With more experience gained by both consultants and clients, financial modeling is now a service asked for from many more former and potential clients, reaching even smaller medium-sized companies that are hoping for some value from detailed financial models. One issue for the upcoming years is that, in many projects, clients realize that financial models, particularly in Excel, do allow for great simplifications and can deliver many useful results – but they also learn that not every problem can be solved transparently as if magic were involved. It will be interesting to see which direction the industry will take over the next years.


About the Author

This article was published courtesy of, which contains many articles, tutorials and short courses about finance and Excel.


Global Association of Risk Professionals, Inc. (GARP®) does not endorse, promote, review or warrant the accuracy of the products or services offered by EduPristine for FRM® related information, nor does it endorse any pass rates claimed by the provider. Further, GARP® is not responsible for any fees or costs paid by the user to EduPristine nor is GARP® responsible for any fees or costs of any person or entity providing any services to EduPristine Study Program. FRM®, GARP® and Global Association of Risk Professionals®, are trademarks owned by the Global Association of Risk Professionals, Inc

CFA Institute does not endorse, promote, or warrant the accuracy or quality of the products or services offered by EduPristine. CFA Institute, CFA®, Claritas® and Chartered Financial Analyst® are trademarks owned by CFA Institute.

Utmost care has been taken to ensure that there is no copyright violation or infringement in any of our content. Still, in case you feel that there is any copyright violation of any kind please send a mail to and we will rectify it.

Popular Blogs: Whatsapp Revenue Model | CFA vs CPA | CMA vs CPA | ACCA vs CPA | CFA vs FRM

Post ID = 20590