The Backbone of the Finance Industry – Financial Modelling

Sandeep was baffled with how swiftly his colleague Rohan managed to work on spreadsheets. Their company was contemplating acquisition of a viable company. It was the current hot topic for the management these days, and they had assigned the task to the finance manager to evaluate the financial health of the prospective company. While Sandeep, a recent entrant, was all excited to grab this opportunity and learn from the entire process, he was struggling in the work assigned to him. On the other hand, his senior Rohan was quick in making excel reports, which helped the management escalate matters in their decision making process.

“Damn Rohan, you’re so quick in preparing excel reports and analysing the financial statements. And here I am, struggling to match up-to the management’s expectations!” moaned Sandeep.

“Sandeep, I too struggled in the initial phase. Yes, though, it was when I learnt financial modelling I learnt to be swift in spreadsheets. You see, one needs to be an expert in spreadsheets while preparing various financial models. And through this, I became an expert in analysing financial statements and evaluating business, on the basis of historical information. In fact, you can grow in your career path by adding this certification to your portfolio. It will open many more avenues for you.”

Sandeep was now on a serious note. He listened keenly. “Tell me more about this certification. I’m interested in it, if it helps me in my career growth.”

Typical to Rohan, who was always good in mentoring his juniors, he kick-started with full zest.

“You see, financial modelling is the backbone of the financial market. Its applications are in many fields.” Saying so, Rohan pulled out his notepad and scribbled on it.

“Look at these options …”

• Investment Banking

Financial Modelling equips the Investment Banker with the art of preparing presentations and interpretations on the basis of financial information of the investment.

• Credit Rating

Credit Analysts need to prepare reports on spreadsheets to determine the risk factor on the basis of historical information of the finances of the organization.

• Project Finance

Preparing project finance reports requires one to have thorough knowledge about how to analyse and predict the future cash flows of the project on the basis of assumptions and historical information. These financial models form the basis for lending institutions to take decision regarding financing the project.

• Mergers & Acquisitions

Of course mergers and acquisitions need you to predict the financial position of the company. While buying/selling business, one needs to analyse the assets and liabilities of the company, compute synergy benefits, etc. Knowledge of financial modelling comes quite handy in such cases.

• Financial Analysis

Every organization needs to keep track of its finances to ensure smooth running of the business. This involves preparing budgets, analysing trends, and accordingly preparing MIS reports.

“You see, like I said above, financial modelling is required in almost all aspects of finance. You’ve to remain abreast with the latest developments, and knowing how to prepare such models with the help of spreadsheets has become a necessity these days. I strongly recommend you to learn it. In fact, while graduating, I had financial management (FM) as one of the core subject. That helped me develop a keen interest in FM. Financial Modelling definitely helped me to add that extra expertise in this arena.”

“Does that imply that even highly qualified candidates like Chartered Accountants need to learn financial modelling?”

“You see, Chartered Accountancy is a highly revered course in India, which gives you technical expertise in accounting and taxation. But learning financial modelling will be like adding another feather on their cap. You see, CAs play a pivotal role in mergers and acquisitions, valuation of investments, management reporting, etc. Hence, financial modelling will definitely be a value-addition to them.”

Sandeep was glad for Rohan’s advice. He had already registered in his mind to enrol himself for the financial modelling course.