A financial model is a model of a company’s finances, made usually on MS Excel spreadsheets. It studies the historical performance of a company and the present financial status to make future financial predictions about an organisation’s performance. It is the summary of a company’s financial performance. By doing a financial modelling course you can pursue a career under different job roles.
What is the use of financial models?
Financial models are used to make decisions and perform financial analysis for an organisation either inside or outside the company. Financial models are used to make different decisions like raising capital, calculating equity or debt, entering new markets or opening up a store, new ventures, selling of assets or business units, budgeting and forecasting on financial topics, management of accounts, risk calculations, make a business valuation, analysis of financial statements, allocation of budgets, etc. A cash budget is a good example of a financial model.
Professionals need to have extensive knowledge of the company’s operations, corporate finance, budgeting, accounting, etc. to build the right financial model. It helps to predict how a certain business will be able to perform in a different economic or market situation. It helps to understand what or how a financial decision is taken or considered by the company will affect its business operations before making considerable funds are invested in it.
Who is responsible for building financial models?
The most common professionals who build financial models are investment bankers, equity research, corporate development, accounting, FP&A etc.
What are the prospects with a financial modelling course?
More and more organisations are in search of professionals who can collect raw data, organize, and study it to generate business insights and valuable recommendations.
- With a degree in finance modelling, you can be an investment banker who builds excel models to make company valuations for a variety of tasks like capital raising, debt, equity, follow-on offerings, mergers and acquisitions etc. An investment banker can have clients in public companies, private corporations, governments and some institutions.
- Equity research analysts build financial models to analyse a company’s performances. This modelled data is used by the clients or the banks who need it to decide whether they would want to invest in some public security.
- Financial planners and analysts (FP&A) are needed to forecast a company’s financial performance. This is done to make sure if the company is funded well and what is to be planned for the future. It is highly essential for making important business decisions.
- Professionals can work in commercial banking where financial models are used to understand a company’s financial health, service debt, lender’s credits and covenants.
- Venture capital or FC firms need financial models to make business estimates like revenue models or cost structures.
Apart from these roles, one can also work in real estate development, mezzanine finance (lenders who provide the capital which ranks between debt and equity); startups also need finance models to keep a tab on revenue and expenses of an organisation and is usually done by the finance team along with the higher management, especially the founders.
Overall, there are several job profiles in this field, and they are expanding with time with more updates and developments coming up in businesses and finance models.
Sign up on a financial modelling course today to make a sharp move in your career.