FINANCIAL MODELING TRAINING
OVERVIEW OF FINANCIAL MODELING: USE AND PRACTICE
Financial modeling is crucial to the finance industry. Wall Street investment banks rely on financial models to make investment banking decisions and advise clients. However, financial modeling is not only seen in investment banking careers, and related arenas of finance, such as hedge funds, private equity and venture capital. Nearly all aspects of the finance profession are closely related to financial modeling. This is because the financial model is the main tool used for valuation and associated predictions about potential and actual investments, whether they be common stocks, complex derivatives or whole companies considered for a leveraged buyout (LBO).
Financial modeling for the finance industry involves the collection of relevant financial data about the business(es) to be modeled and the representation of these data so that important calculations about the company can be made, such as valuation. This is often referred to as financial statement analysis. After this first stage of financial modeling is complete, the financial analyst, which is the Wall Street career most directly involved in financial modeling, often continues to build sophistication into the financial model by adding comparative data from other similar businesses, information about possible future events relevant to the pricing of the business, or information about the combination of the business under analysis with another business, as in the case of mergers and acquisitions (M&A). In the end, the aim is to build a financial model that provides an accurate current valuation of the business(es) under financial analysis accurately and makes it possible to forecast valuation and other relevant financial information in the future as well.
WHAT SKILLS ARE NEEDED TO CONSTRUCT FINANCIAL MODELS?
Skills in both quantitative analysis and qualitative analysis are utilized in the construction of financial models. The financial analyst must be able to glean all of the relevant information about a business from the financial statement, incorporating this information into the financial model so that important calculations relevant to valuation can be made. This requires knowledge of accounting methods and principles as well as an understanding of how these accounting data relate to the actual functioning and success of a business. In order to build more powerful financial models, e.g., for investment banking, the financial analyst must know how to project future data about a companyÆs finances based on past and current data.
WHAT TRAINING AND EDUCATION IS RELEVANT TO FINANCIAL MODELING?
Often, a junior analyst begins a career in financial modeling with an undergraduate degree in business or finance. Several certifications are relevant to the financial analyst; the Chartered Financial Analyst (CFA) and the Certified Public Accountant (CPA) are two of the most salient qualifications. Both of these qualifications require facility with a substantial portion of the body of knowledge behind financial modeling. The construction of financial models on Wall Street is normally overseen by someone with a relevant advanced degree, such as an MBA or a Masters in Mathematical Finance. However, these advanced degrees tend to focus only on the quantitative (in the case of MA in Mathematical Finance programs) or the qualitative (in the case of many MBA programs) side of financial analysis, at the cost of the other.
The training program offered by the Investment Banking Institute, the Investment Banking Bootcamp, is a unique opportunity for an immersion course in all aspects of financial modeling, quantitative and qualitative. The Investment Banking Bootcamp class offers instruction in all aspects of financial modeling relevant to a career on Wall Street, beginning with financial statement analysis and culminating in the development of a leveraged buyout model and a merger and acquisitions model. These two financial models, utilized in the investment banking profession, are among the most sophisticated and elaborate financial models used on Wall Street. Hence, the preparation a student of the Investment Banking Institute acquires will enable her or him to succeed in all of the many Wall Street careers involving financial modeling.
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