What is financial modeling and, what are its applications in the industry? This question is now much more important for finance individuals than ever. Corporate organizations and banks have realized the importance of financial models. Usually, financial analysts are responsible for creating financial models.
Business organizations can take better decisions when they have access to detailed financial reports. Read on to know what is financial modeling and how to learn more about it.
Understanding financial modeling
Any real-life financial situation can be represented in numbers via a financial model. Any company, investment idea, or project can be represented in numbers with the help of a financial model. It is a type of mathematical model that represents the performance of a project or any company. Before indulging in a new project, company executives predict the benefits and costs of the project via financial models.
Company executives use financial models to predict the impact of a business decision on the company’s financial performance. If there is a change in business strategies, financial models help in predicting the performance of company shares/stocks. Financial models can explain the financial impact of change in external factors like economic regulations or tax regulations. Financial models include cash flow analysis, expenses, profits, etc. Usually, financial models are created on excel sheets by financial analysts.
Top financial modeling trends
Before starting a new business or venture, financial models are made to predict its performance. Many financial models turn out to be successful businesses or projects. Some of the top financial modeling trends that have carved a niche are as follows:
- Billing models
Many businesses offer digital services to customers and charge them based on various billing models. Among all the billing models, subscription-based billing has gained popularity in recent times. Consider OTT platforms that are offering a subscription to people for viewing unlimited video content. Similarly, many social media platforms ask users to get a premium subscription for accessing the content without any advertisement. Subscription-based billing models are gaining popularity as businesses can see profit in them.
- Fintech models
Many corporate firms are investing in fintech start-ups nowadays. It is because people love to gain access to financial services just by a few taps on their smartphones. Many fintech models have become reality and converted into successful businesses. Financial institutions that are looking for digital transformation are relying on fintech models. Analyzing the impact of digital transformation on your company is one of the financial modeling best practices.
- M&A models
Gone are the days when business organizations could not predict the impact of an M&A (Mergers and Acquisition) deal. Financial modeling can help you predict the performance of a company after it acquires or merges with some other company. Using the financial modeling best practices, financial analysts can help in finding beneficial M&A deals that could boost the overall revenue. Seeing the benefits of financial models for making business decisions, many M&A advisory firms have started hiring financial analysts. You can also become a successful financial analyst with a financial modeling certification.
How to learn financial modeling?
A financial modeling certification course can help you know more about industry practices. The best option is to go for the Imarticus Learning’s Financial Analysis Prodegree program. We focus on a hands-on learning approach to make finance enthusiasts job-ready. The best about the financial analysis program is that it is recognized by KPMG, one of the accounting giants.
The financial analysis course also allows you to work on industry projects and case studies. By working on financial modeling projects, you will get to know which financial models can convert into successful businesses. Start your financial analysis course now!