How Do People Judge the Quality of Financial Modeling?
Is the Financial Modeling course useful? Let us quickly find out without any further ado.
- Let us take a moment and dream big. Imagine having a lot of money, and you end up deciding to make a purchase of a car, but then you are confused about whether to purchase a used luxury convertible with cash or by financing a brand new four-door BMW? Given this case, one would simply hop on any comparison website or create a simple table and emphasize all the pros and cons. Right?
- The very next step would be to find out an estimate of the monthly regular maintenance cost for the convertible as well as the monthly EMI’s for the BMW to determine the average monthly cost for both. The last step would be to check if it would be feasible as per the current monthly income and the cash flows.
- Talking about the cash flows, one might also want to consider the ongoing debts, loans, mortgages, and other relevant factors before finalizing the purchase that would be the best considering the overall long-term financial health. This is what would be considered a simple financial model. The financial models are typically dynamic in nature, and the goal of a financial model is to be roughly correct than being precisely wrong.
- This is exactly what the Financial Modeling course is all about. The Financial Modeling course provides training to the candidates and prepares them to create financial models which may be simple or complex in nature. It is used by many companies for several reasons such as for tracking the company’s overall performance, risk analysis and evaluation, budgeting and forecasting, etc. This can be created by making use of Excel.
Let us now understand how one can judge the quality of financial models?
The quality of a financial model can be judged on the following parameters:
- Models which are easy to use and understand: One of the parameters of a good financial model is that it must be easy to use and understand and should make complex things look simple. A model should be such that it is beneficial for both the analysts and the business owners.
- A good financial model should be very flexible, which should include both the aspects such as design and technique. It should be flexible in the immediate term and should be adaptable in the long term as well. An excellent quality financial model is one that can be easily adjusted and manipulated, and the key to flexibility is simplicity.
- The other parameter is that a good financial model must be based on good assumptions. For a financial model to be successful, it should be based on quantitative values, and must be appropriate and accurate.
Things to keep in mind while creating a good financial model:
- The financial model should be made with great efficiency. It should be made with a lot of attention and with great detail, especially the formulas that go onto the sheet. The formulas need to be organized and portrayed keeping the main objective in mind.
- The layout of the model needs to be consistent, and one must make sure that the readers understand the logic behind it. The consistency should reflect in the columns, number of sheets, formulas, and proper formatting must be done.
- The financial model must be concise and clear. As discussed earlier, it needs to make the complex look simple. A great financial model must be able to forecast future financial numbers with utmost clarity.
How Useful are the Financial Models?
- The financial models are extremely useful, especially while presenting a large amount of data.
- It becomes visually attractive to present data with the help of financial models. Financial models help in understanding the organizational data in depth along with the factors so that the organizations are well prepared to face various uncertain situations that may occur in the future.
- The financial models also help in providing a periodic review of various performances and this activity can be done on a regular basis to obtain feedback.
- Some technical and advanced financial models help in adjusting so that the overall earnings can be increased along with the variance analysis.
EduPristineis one such institute that provides Financial Modeling courses in India. It has designed the Financial Modeling course in collaboration with the BSE Institute Ltd. The Financial Modeling course covers all the aspects and ensures that the candidates can create various financial models from scratch. The best part about pursuing this Financial Modeling course is that there is no specific qualification required and can be pursued by anyone genuinely interested. However, candidates who come from Mathematics, Economics, and Statistics backgrounds find it much easier and feel more confident while creating different financial models.
Are you ready to be the next Financial Modeler? This designation is necessary for all the aspirants as it covers all the relevant skills and provides the right tools to become a top-notch Financial Modeler.
Happy learning!
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