Financial modeling is a process in which plausible financial outcomes are determined based on how an organization has performed in the past, as well as any assumptions about its future expenses and revenue. Financial models are generally created using a Microsoft Excel spreadsheet and are generated quarterly, monthly, or yearly. An important factor that goes into deciding to learn a new skill is researching complementary and related skills. Doing so will help you make more informed decisions about what you want to study, and it will help you decide whether learning a specific skill is the right decision for you. You will also find out what sorts of skills you may want to learn to complement your training later on. Read on to explore financial modeling training options such as studying Excel, accounting, forecasting, and the three most basic types of financial statements.

What is Financial Modeling?

Financial modeling is the process of evaluating a company’s past performance to predict the likelihood of various financial outcomes. Those who create financial models rely on financial forecasts to do so. The assumptions in a forecast are played out using the organization’s financial statements to predict how various statements may look in the future. Since these models are based on financial statements, they are typically generated monthly, quarterly, or yearly. It’s common for financial models to be constructed using manual data entry in an Excel spreadsheet. 

Read more about what financial modeling is and why you should learn it. 

What Can You Do with Financial Modeling Skills?

Financial modeling provides a way to perform a detailed analysis of all possible financial outcomes of a business decision. It helps an organization budget for the future and analyze the company’s performance against goals and targets, as well as determine the organization’s current value. Financial models allow individuals to compare one company’s performance against its competitors. These models can analyze financial statements, ratios, and capital structure, as well as estimate financial metrics for new projects. They can help professionals estimate a company’s projected growth, organize its budget, evaluate investments, decide between acquisition or merger, and determine which projects to prioritize.

Skills Related to Financial Modeling

If you’re committed to learning financial modeling, you may wish to learn some related skills that can complement your studies. Acquiring basic Excel spreadsheet skills and accounting knowledge is essential to financial modeling. So, too, are presentation skills, an understanding of the three basic forms of financial statements, and experience with forecasting. The following sections will briefly look at each of these complementary skills and how acquiring them can improve your ability to create financial models. 

Spreadsheet Skills

Microsoft Excel is a spreadsheet program available as part of its family of business applications in Office 365. Those who work with this industry-standard tool can perform a range of data-related tasks, such as formatting information, organizing it into rows and columns, and performing calculations based on the data. Information that’s organized in an Excel spreadsheet is easier for most audiences to access and understand; it also helps them spot data patterns or trends that may otherwise be difficult to see.

Most financial models are created in spreadsheets in Excel. This means that the more you know about Excel worksheets and workbooks, the easier you will find it is to create financial models. Not only is it useful for those creating financial models to know the Excel interface, but they must also be familiar with the core functions and formulas available in this application, which will be needed when making calculations and performing financial analytics. Studying Excel keyboard shortcuts is also a useful time-saving trick that can help you accomplish many Excel tasks in seconds that would take hours to complete manually. These shortcuts can also drastically cut down on time required to create models. 

If you want to take your spreadsheet skills to the next level, Noble Desktop’s Excel Bootcamp is a great way to learn how to work with macros, PivotTables, and a range of Excel features and functions.

Forecasting

Financial forecasts are projections offered to help an organization make more informed decisions about the steps it can take today to ensure optimal business performance in the future. Those who wish to make financial forecasts begin by analyzing how the business performed in the past. This typically entails analyzing data pertaining to how the business performed in the past, in addition to current market trends or any other contributing factors. Those who perform financial forecasting for their organization ensure that decision-makers aren’t blindly making decisions that have the potential to affect the entire organization and its stakeholders. Forecasting is used for tasks like annual budget planning, articulating achievable business expectations and goals, spotting problem areas, reducing financial risk, and attracting potential investors using ROI indicators.

Since financial modeling entails creating accurate and useful forecasts for an organization’s finance, forecasting skills are useful for these professionals. Noble Desktop’s Financial Modeling Bootcamp is an excellent way to learn finance fundamentals, as well as study topics like corporate valuation and accounting.

Knowledge of the Three Basic Kinds of Financial Statements

Another skill that can help you acquire financial modeling is knowledge of the three basic financial statements and how to link to them. Knowledge of the three most basic forms of financial statements, which are balance sheets, cash flow statements, and income statements, is required for those who work in finance. These three tools are used by financial professionals to analyze a company’s current financial standing, as well as to offer a larger idea of the organization’s overall value. Those with the knowledge of how to link these statements using tools like Microsoft Excel are able to perform useful tasks like connecting the income statement’s net income to the balance sheet’s retained earnings value. Many consider this a difficult financial skill to master, but those who can do so will find it much easier to create financial models.

A Basic Understanding of Accounting

It may seem apparent, but the more you know about basic accounting, the easier it will be to create sound financial models. Basic accounting concepts like amortization, accruals, depreciation, amortization, the matching principle, and revenue recognition are just terms to familiarize yourself with if you’re studying financial modeling. You may also wish to explore the basics of financial statements, such as how to read and understand them, as well as how to build them back up.

Presentation Skills

Because it’s important to share financial models with others once they’re created, strong communication skills and experience in presenting complex information are complementary skill sets to explore. Those interested in communicating their models to other internal and external stakeholders often draw from PowerPoint training and may use teleconferencing platforms like Teams or Zoom to share models with remote audience members. 

A great way to explore how you can use PowerPoint to make effective presentations is to enroll in Noble Desktop’s PowerPoint Bootcamp. Participants receive hands-on guidance on how to create engaging and effective PowerPoint presentations.

Learn Financial Modeling Skills with Noble Desktop

Noble Desktop offers several excellent learning options for those interested in financial modeling. Noble’s Financial Modeling Bootcamp covers the basics of accounting, finance, and corporate valuation. Noble also offers a Financial Analyst Training Program that provides instruction on how to create a full valuation model. Noble has financial modeling training courses in-person and live online. Those interested in working with Excel for data modeling can attend the hands-on Excel Bootcamp. Noble’s FinTech Bootcamp is also available, which teaches learners how to create machine learning models and work with programming languages SQL and Python for financial data analysis.

Key Takeaway

• Financial modeling is the process of exploring possible financial outcomes that are based on an organization’s past performance and assumptions about variables like future revenue and expenses.
• If you want to study financial modeling, you may wish to explore complementary skills, such as basic accounting principles and knowledge of the three core kinds of financial statements. In addition, Excel knowledge and familiarity with forecasting are also useful skills.
• Because financial modeling requires presenting findings, those looking to create financial models must also be skilled in presenting.
• If you want to learn how to create financial models, let Noble Desktop help. Noble offers comprehensive training in core financial modeling skills in the in-person and live online format.