February 5, 2014
So I’m thinking some of you have thought about “How is CFA related to Financial Modeling?” or vice versa. I daresay I have, and I spent quite some time looking for answers on Google. Needless to say, I didn’t find something that quelled my doubts and answered my questions. So the purpose of this blog is to tell you, the avid finance professional, what the relationship between CFA and Financial Modeling is.
I am going to follow the K.I.S.S rule. Age old rule that brought Warren Buffet enormous success, fame, wealth, you name it!
Keep It Simple, Stupid. (Or whatever works best for you!)
So here it goes.
In CFA, you learn many topics and subjects. You learn about Corporate Finance Tools and Techniques, Mergers and Acquisitions, Comparable Analysis, Valuation using Discounted Cash Flow and Market Multiples, Financial Statement Analysis and much more. So what do you do when you are faced with a problem related to this in the real world? Yes, your theoretical knowledge has been greatly enhanced by your CFA study stint. What about the practical application of this
This is where Financial Modeling comes into the picture. In Financial Modeling, you can use the theoretical knowledge gained during your CFA classes for practical purposes. You can create a financial model based on your knowledge of CFA concepts.
I am not telling you that you cannot be a Chartered Financial Analyst independent of Financial Modeling. You most definitely can. I am merely telling you that the theoretical knowledge gained by you will be complemented by practical application of the same knowledge.
Similarly, Financial Modeling can be taught independent of CFA concepts. But building a financial model in Excel requires a foundation. That foundation is created using your theoretical knowledge of the CFA course.
Bottom-line: If you are a Chartered Financial Analyst and a Financial Modeler, imagine how good that would look on your resume. Also imagine the knowledge you will gain and the edge that you will attain over your peers. You will also be the one that employers want on their teams.
So, do you want to be that person?
I hope this answers a very basic question with a very basic answer. If you want more points of similarity, stay tuned!
Are you interested in pursuing Financial Modeling? Follow the link to read more! You can even opt for a Free 30 Day Trial Course if you want to go ahead with Financial Modeling.
Do you want to know about the average salaries and prospective jobs of Financial Modelers? Follow the link to read about Careers and Salaries After Financial Modeling.