An Intro to Financial Data Modeling

Finance & Accounting

  • - by   Mindcypress
  • May 30, 2022
An Intro to Financial Data Modeling

Well let’s not make it hard on ourselves… so let me go ahead and try to explain it in a simpler way, Financial modeling is the process, a way to put together a financial representation of a business or we can say that it’s creating a summary of business operations. This task of building a mathematical model helps financial analysts to foretell likely performance and earnings of the company in future.

Studying these financial models/representations the analysts use numerous projection formulas, valuations and theories to recreate business operations, once these financial models are completed it demonstrates a numerical description of the business procedures which then is used for future business predictions. In a recent survey it has been found that 96% of analysts use excel spreadsheets as a primary tool to create the financial models.

How can one learn to build a financial model in Excel and is it hard?

To be very frank and honest the answer to the above question is yes, if you’re trying to learn it out on your own, but with the help of a professional teaching in “Financial Data Modeling” program this becomes a lot easier to understand. Secondly it’s actually not an issue of whether financial data modeling is hard or not as it totally depends on your purpose and keenness to acquire new skills or to brush up your current skill set. Let me go ahead and explain some things like some techniques in Excel and Skills that will be helpful to know  and have when going for a Financial Data Modeling Certification course.

Some of Financial Modeling Skills and Techniques Every Financial Analyst Must have and know:
 

Financial modeling is the ability of building a dynamic structure (Excel Spreadsheet) that can be used to assess investment opportunities, acquisitions & mergers, capital building or to assess company’s past or future financial presentations. Some of the most important financial modeling skills needed to be a top-notch financial analyst are:

1. Strong Excel skills: To create financial models can sometimes be more of a talent than a science. Knowing things like main keyboard shortcuts helps in saving time resulting in building models more quickly. It will be of great advantage if you will know all the main formulas and functions by heart to carry out calculations and financial analysis.

2. A firm understanding of accounting: In order to build and sort out a financial model, it’s important that you should possess a sound knowledge of accounting basics. It’s important that you have adequate accounting skills to know how to read financial report, how to analyze statements, and how to put them back and forth.

3. Excellent problem solving skills: Good financial analyst has the capability to think logically and in a very well thought of manner. When making a financial model, it is essential to follow a logical flow of order so that your team mates can without doubt understand what you have prepared when they look into your Excel sheets.

4. Historical Data: Here all your assumptions for the future years are based on your historical data of the company. Understanding the historical data can give us some important and close interrelated data for the future of the company.

5. Scenario analysis model: This practice involves creating a scenario from a series of inputs or variables merged collectively. Most businesses will go with 3 scenarios for a phase: A ‘basic phase’, a ‘best phase’ and a ‘worst phase’. In a worst case scenario you may choose a mixture of key variables and look at the probability of business surviving in the worst phase in a given time. You can build a scenario for any situation of specific set of variables that helps you out in planning your business. There’s no need to limit it on macros or top-level variables also.

6. The 3 statement model: You must have probably heard of the 3 statement model by now. If your historical data is well structured and if its cloud based then it’s very easy to create these reports. Generating a forecast statement of these reports also isn’t the same thing as modeling and these statements are the result of your model, not the model itself. Generating a forecast version of these reports also isn’t modeling. The statements are the result of your model, though not the model itself. Your model is setup as a spreadsheet page of assumption and metrics associated by formulas. Financial statements are setup on other sheets that are also linked by formulas so it gives you the capability to make alterations to the assumptions and see the financial outcomes flow throughout the model. And now we are modeling folks!!!

Conclusion:  


At Mindcypress.com certification in Financial Data Modeling gives learners an edge over the others in the same field, as this course is an exciting area for data science learners. In this course from Mindcypress you will study density models, linear and non-linear sequential data with topics like:

  • Excel as a Tool for Financial Modeling
  • Referencing & Excel Shortcuts for Financial Modeling
  • Projecting Cash Flow Statement
  • Advanced Tools in Excel for Auditing Financial Models
  • Understanding Macros etc.

The course offered by Mindcypress are delivered in three choices as per your need live virtual classroom (LVC), Physical learning/classroom learning and e-learning/self-learning to know more about the course get in touch with our customer support team @Mindcypess.com one of the pioneering e-learning sites of the world.

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