Financial modeling is a skill that helps a retail organization decide how and where to open its store. It is a key skill that is mandatory if you are looking for a career in finance. It is also helpful for entrepreneurs planning to start their own gig, and can even prove to be handy for marketing and sales professionals.
Financial modeling also includes looking at projections, evaluating the practicality of the decision, and analyzing the stock market in terms of cost, revenue, and profit.
If you do not have work experience, do not be afraid, you can still have your own business or make a career in finance by enrolling yourself in a financial modeling course.
What are the Various Application Areas?
- Corporate Finance
This model is used by various companies to evaluate their finances and projects and help create plans for funding projects.
- Investment Banking
Financial modeling is the fundamental tool for valuation and analysis. An investment banker uses this model to come to a valuation in fundraising transactions. An equity analyst will use this model to come up with buy/sell or hold recommendations by applying them to value stocks.
Entrepreneurs use the financial model to pitch their plans to prospective investors and to strategize their future plans. Carrying out various experiments can be beneficial to avoid any risks and financial loss in upcoming businesses.
Types of Models
When you enroll in a financial analyst course you will be taught about the following financial models:
- Leveraged Buyout Model (LBO)
In this kind of layout, the firm will finance its acquisition via a considerable amount of debt. The LBO model is used so this model helps to critically analyze whether the business can manage the debtor if a certain degree of performance is needed to make sales and eventually pay off the debt.
- Credit Rating Model
This model is employed by credit analysts to figure out the creditworthiness of a firm. The model makes assumptions with respect to future earnings and if the company can pay the interest and principle.
- Comparable Company Analyst
Under this model, the financial metrics of a company are compared with similar organizations in the industry.
- M&A Model
The whole purpose behind the merger model is to decode the effect of the acquisition on the acquirer and whether the new EPS is comparable with the existing one. If the new EPS is higher, the transaction is referred to as ‘accretive’, and vice versa is referred to as ‘dilutive’.
Skills You Need to Have
Although you can learn the tricks of the trade in this discipline by enrolling yourself in a financial modeling course, some skills that whether inherent or learned are essential to making this career work are:
Financial management and ratio analysis, financial statement, valuation methods, written communication, and analytical ability.
- Core Skills
Drawing up financial statements in excel, analyzing financial statements, and being able to build from scratch fresh financial models with high potential for success.
- Related Skills
Knowledge of mutual funds, debt markets, credit appraisal, and understanding of various financial market tools can help to build your business in finance, banking, and investment.
A financial modeling course is an in-demand qualification for many lucrative opportunities in the market such as equity researcher, portfolio manager, and credit researcher. If you do not have a background in this field professionally, you can easily join a course as a fresh graduate, post-graduate, or MBA student, and learn what it takes to be successful on this path.