What is Financial Modeling?
Financial modeling is the task of building an abstract representation (a model) of a real world financial situation. This is a mathematical model designed to represent (a simplified version of) the performance of a financial asset or portfolio of a business, project, or any other investment.
A Company uses Financial Modeling for following purposes:
- Valuation of a security
- Forecasting future raw material needs
- To know the benefits of a merger
- See the roadmap to profitability
- Discovering new market opportunities
- Check investment requirement
- Predict and quantify risk
- Identify undervalued securities
- Portfolio performance
Who should do Financial Modeling?
- Professionals who wants to explore the world of finance and wants to get into money related decision making matters.
- People who are pursuing CFA, MBA, FRM or other financial certifications as this will work as an added advantage for them.
- Candidates having Degree or Diploma in technical fields like Engineering or B.Tech who wants to make a career in finance.
- Finance aspirants who want to learn financial conceptual terminology and general business procedure that will help them in their job.
Skill set of Financial Modeling Analyst
Financial Modeling itself is a skill that helps you to build a finance career but to be good at financial modeling there are a certain things that one should possess.
Excellent Excel Skills
If you are a financial modeler then it is implied that you excel in your Excel. You have to be good with Formulas, charts, macros, VBAs, etc to make it big in the finance field. If you are good at then you can create the financial and investment models easily. A financial modeling course will help you to become a pro at Excel.
Knowledge about Accounting, Finance & Valuation
Making a career in the field of finance will require a basic understanding of accounting concepts. As a financial modeling analyst, you need to know about the investment appraisal techniques like NPV, DCF, IRR etc. Valuation again is an important part of your job so make sure you are good at it.
Problem solving ability
Usually one creates a financial model to solve a certain problem or to make sure that no other problem arises so it is very important that you have that problem solver’s attitude and you are ready to take the responsibility for any problem.
Time management is a key aspect in financial modeling. Building an effective financial model is important but presenting it on time is more important. If you are bad with management of time then be ready to spend sleepless nights.
Decision Making Ability
You should be able to make decisions based on your financial models. Financial models are build to aide the decision making process so as a financial modeler you should build a model that helps the organization take the right decisions.
After pursuing Financial Modeling, you will have a lot of opportunities and job roles to earn a good salary, one such important job role is Financial Modeling Analyst. Let’s look into the Job Description of Financial Modeling Analyst.
Job Description of Financial Modeling Analyst
- Building financial models using historical data and providing forecasts based on various industry-related operating metrics.
- Conducting Scenario Analysis based on macro and micro factors that will help in accessing risk.
- Ensuring accurate modeling of allocated portfolios and developing new transaction models and enhancing the existing models.
- Recommending and Implementing process for improvements to budget and prepare forecast for company.
- Identifying the key financial and non-financial risks, recommending actions for mitigation of those risks.
- Applying appropriate sensitivity and scenario analysis to support investment actions.
- Updating financial models during earnings seasons and following corporate actions.
- Analyzing and identifying data requirements related derivation rules and model tracking.
- Valuation of Companies.
- Capital Structure Analysis.
- Comparable Company Analysis
Financial Modeling forms a core of various other Finance areas like Investment, Banking, Equity Research, Credit Research etc. It is one of the most sought after skills in the finance industry. EduPristine is an institution that provides the training for Financial Modeling . Pursuing Financial Modeling from us can give you an edge over the other finance professionals so don’t wait more and enroll today.