In these modern times, there are a lot of tools that a business typically makes use of on a regular basis, but among all of them, one that is crucial to determining its success is financial modelling. As an aspiring financial analyst, it is crucial for you to know the true potential of financial modelling and why it is so important. Thus, in this article, we will explain to you the meaning of financial modelling as well as outline the concepts that encompass a financial modelling course. Let’s get started.
What is A Financial Model?
In the simplest of terms, a financial model can be described as being a tool that is primarily built on Excel and used by companies to predict its future cash flow as well as potential income sources. The most common use of this tool is to predict the future of the company’s financials and how it can prepare itself for future challenges as well as opportunities.
In order to build a financial model or forecast, a number of factors need to be taken into account. This includes the history of the company’s performance and its assumptions for the future of its business among many others. Along with this, an income statement, cash flow statement and balance sheet need to be drafted which make up for the key fundamentals in developing a financial model.
A financial model can be used by a business for several applications including the creation of predictions for mergers and acquisitions, leveraged buyouts as well as discounted cash flow statements.
Uses Of A Financial Model
Now that you know about the basic concept of a financial model, let us quickly understand the main uses of a financial model in a business environment.
1. Raise Capital: One of the most common uses of a financial model is to raise capital from investors as well as take working capital if necessary.
2. Acquisition: Second to raising capital, companies often make use of financial models to acquire new markets, skills as well as shares.
3. Forecasting and Budgeting: Last but not the least, a well defined financial model helps companies forecast the way for the future, as well as decide on the budget for various of its activities.
What is a Financial Modelling Course?
Now that you are aware of what a financial model is, along with its main uses, let us take a look at the various components a financial modelling course encompasses.
1. Educate you on the basics of financial modelling and the skills you need to acquire in order to successfully create a financial model.
2. Analyse real-life case studies of companies that actively make use of financial models and how it has helped them grow.
3. Various skills on software that are used to create financial models, including Excel among others.
4. Educate you on the various types of financial models that can be created, those that are being actively used by businesses and their most common applications.
One of the most important pointers you need to take note as a future financial analyst is the fact that in order to create sustainable models that provide solutions, one aspect that trumps others is regular practice and implementation.
Job Roles And Career Opportunities
Last but not the least, it is important for you to know the main job roles or designations that are responsible for creating financial models. This includes but is not limited to:
1. Investment Bankers
2. Financial Analysts
4. Corporate Executives
Financial modelling as a skill is becoming more and more important to acquire on a regular basis and thus in order to better equip yourself for the future, it is necessary that you undertake a financial modelling course today.
Also Read: Brief About Financial Modelling