Written By Team CFI

Numerical data expressed by using rows and columns and charts is better understood and usable than in long sentences. A Financial Model is, thus, such tabular representation of financial data of a company or a particular investment security or project. And Financial Modelling is creating such models, evaluating them and forecasting the results.

Using historical records, financial models help calculate important statistics to allow the user to take decisions and make likewise recommendations.

Knowing Financial Modelling can be a beneficial add-on, to resumes and work-performance, for Graduates as well as MBAians. Here’s how:

A Reality Check

Colleges do teach us about financial statements and to calculate some ratios out of it. What your prospective employer will be doing is- using Excel sheets to do all this and a lot, lot more calculations. Because, here you will be working with real data and what you do will be put to use. It’s going to be far more different than the hypothetical problems solved for grades.

You can say ‘Reality is out of Syllabus’.

The words “Financial modelling” under your skills list, in your resume, will automatically make a big check mark in the interviewer’s mind.

Multiple skills

You learn to valuate a business’s value. Capital budgeting, costing of the cost of capital, examining the company under different scenarios, risk and return calculations, analyzing and forecasting the company’s cash flows, revenues, net income and more can be done using models you built in the Excel sheets.

So while you are actually mastering your Excel skills, certain soft skills like being analytical, having an opinion, building confidence to make recommendations, decision making, resolving problems and improving errors are learnt over time, as you work on models.

Something out of the textbooks and that you will need at work.

And when you learn these skills and go to the employer, he will be glad knowing it, because a less on-job training will be required.

Specialization and access to diversity

Being one upcoming career skill, you can learn Financial Modelling and YOU can choose from a variety of work positions. Call it a ‘trick’. But learning to build and work on Financial Models opens door to many sub-finance jobs. Specialize in this MS Excel thing and here’s the list where you can apply:

  • Equity research analyst
  • Fixed income analyst
  • Economic Research analyst
  • Mergers and acquisition
  • Private Equity
  • Business planner
  • Project manager
  • Risk management
  • Venture Analyst
  • Business Analyst

The list, of course, doesn’t end here.

Even under these segments, you can opt to go for a particular niche. For example, you look after the companies in the energy sector. You build models for your clients and help them decide whether they should go for a project or an oil-field auction or not.

Thus, having hands on Financial Modelling before you go on for the interview, will add chances of you getting hired (at an Investment Bank or a Credit Rating Agency or for Equity or Fixed Income Research Analyst) and perform better at work.