What is Financial Modelling and How Can It Help Your Career?


The first industrial revolution brought about a new era of economic productivity. The steam engine surpassed human physical capacity and delivered better and faster results in the industrial world. Similarly, the recent digital revolution has exceeded the capacity of the human mind. Today, computer algorithms work alongside the human potential to yield even quicker outcomes. The concept of financial modelling is something similar. It helps professionals to make more accurate and faster financial decisions by undertaking computational activities that the human mind cannot process at the same given time.

So, what is financial modelling?

Technically, a financial model is an equation. It has a few independent parameters which act as inputs to yield a dependent variable or the output. Finance professionals, Investment bankers, investors and founders use such models to predict the behaviour of investments and assets. These give an insight into the future of a volatile market and help to determine the feasible investment that can be made now. Without financial models, professionals are burdened with large chunks of data that often date back to decades and analysing the same and predicting various possible outcomes can take an exceptionally long time for a person if done manually. Financial models typically look at past trends and predict the future according to the lessons available.

How can it help your career?

Name any financial institution’s strategy or a long-term projection by a business house and you will see that the underlying common factor is a financial model. Even non-financial enterprises use financial models to make business decisions and plan out an optimal approach. As examples, investment banks use the IPO valuation model to calculate the fair price of a firm’s shares. A typical B2C enterprise also uses financial modelling to forecast sales growth or employee acquisition. Real estate businesses to venture capitalists all need to know how to build a financial model in their specific sectors to make future growth plans.

The number of options available is the first outright benefit. With the knowledge of how to build a financial model, you can work in almost any industry. Plus, with the recent shift in the BFSI sector where fintech startups are challenging the retail banks and the latter being forced to expand their areas of operations, financial modelling professionals will hold the center stage in the demand curve. The right certification can place you in the mid-hierarchy. Your niche will also not diminish in the coming few decades.

Where to gain expertise?

A few pundits suggest that a master’s degree is the right way to gain the required knowledge in financial modelling. But that will consume 1-2 years of your valuable professional time. Online courses offer a flexible alternative where the process is not only economic but time-saving as well. The brand value on the certificate will be the shining star on your CV. And you will learn the required nuances on how to build a financial model and work professionally with financial models. You can build one from scratch or analyse with the existing ones, you will hold the expertise to do all.

Comments

  1. Markwatson28 July 2022 at 21:14

    Nice post. Well defined Financial Modelling. Contact Gridlines if you're interested in taking a free course on financial modelling and want to earn your free financial modeling training certificate. I recently enrolled in this course as well. They teach you the core financial model design and construction techniques every professional should know.Truly, they are experts in their specialty.

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