Have you ever wondered what a Financial Modeling course is? What purpose does it serve? What is the scope of the Financial Modeling course? Is the financial modeling course useful? How do I get started with a financial model? I’m sure these questions would have come to your mind at least once, and you may be curious to find out answers to all these questions. Let’s quickly get started.
Let us first start with what is Financial Modeling course? Let me ask you a question before answering this question. Did you know that financial modeling is a vital skill that is required before starting a career in finance?
Well, we often need to make certain important financial decisions, and before that, we must estimate the revenue and expenses on the basis of projections. We must create a plan and evaluate it carefully so that the decisions taken are fruitful and align with the goals.
It is all about identifying and making the most out of the opportunities for increased profits, improvising financial strategies, and reducing operating costs.
By now, you must have got a better understanding of financial modeling. Let us now understand
- The financial model serves five major purposes, which are:
- To demonstrate the size of the market
- To show a path for profitability
- To explain the business model
- To facilitate the valuation of the business
- Last but not least, to quantify the investment requirement
- The scope and demand for financial modeling have increased tremendously, and the Certified Financial Modelers are getting hired by banks, credit rating companies, equity research firms, and project finance. It is considered as the core area because the financial model is used to make critical decisions and is also used for performing financial analysis.
- Opting for a Financial Modeling course will help you stand out from the competition and provide precise and relevant information about the industry.
- With the growing demand, employers now prefer candidates who have knowledge about financial modeling to candidates who don’t have any knowledge. The best part about the financial modeling course is that it can be easily completed in 15-30 days, and there is no minimum qualification required.
- Anyone interested to know how to create a financial model can enroll in this course. However, we have observed that students coming from Mathematics, Economics, Statistics background find it much easier to understand the various concepts of financial modeling.
- Imagine how advantageous it would be if you could predict the future? It will be very useful, especially for all the business owners, budding entrepreneurs, operations managers, if they could predict what could happen in the next quarter or the next year. Financial models can help in making informed decisions that will be based on estimates related to future business trends and performance.
- A financial model can help in the creation of projected scenarios through numeric financial data that can later be turned into graphics.
- The financial model can also be utilized to understand the past data of any organization and understand what happened to the company and why? Knowing “why” is usually a key to avoiding unfavorable circumstances. And that’s why the financial model is very useful because it can provide far more valuable insights.
Types of Financial Models: These are just a few examples of various financial models:
- Three Statement Financial Model:
- As the name suggests, this model is a structure that includes all three financial statements like Income statement, Balance Sheet, and Cash Flow statements.
- Discounted Cash Flow model:
- This is one of the most widely used financial models as it helps the company to identify whether the stocks are undervalued or overvalued.
- This becomes an important factor in the case of investment scenarios.
- Leveraged Buyout model:
- This model has a higher level of complexity, and hence this model is designed for advanced financial practitioners.
- It is more suitable for professionals working in investment banking and private equity.
In simple terms, we can say that a financial model takes input in the form of financial statements and gives output in terms of valuation. It takes 7-8 steps for building a financial model, and the model that will be built has to be flexible so that it can accommodate the updates. It also follows a non-sequential learning path. A basic understanding of MS Excel, Balance sheet, P&L, cash flow is required before switching to financial modeling.
With this, we hope now you have a clear picture of what exactly is a financial model, how is it useful and what purpose does it serve? Thus, having a financial model in place helps in saving time and makes the processes much faster and easier. Are you also ready to save time and become the next Certified Financial Modeler?