Financial modeling is vital for anyone working in finance, but especially Analysts. It’s used to determine whether raising capital, making acquisitions, business strategies, selling assets, and allocating capital in specific ways are viable options. It is also important to know in order to budget, value a business, and create financial statements. It’s used in public accounting firms, banks, investment institutions, and corporations.
In order to perform financial modelling, you’ll need to be proficient in Excel, know how to gather and format data, and understand the different types of financial modelling. These are all basic skills expected of anyone working in finance, especially Analysts.
A Financial Analyst uses financial modeling to explain or anticipate the impact of events on a company’s stock. This event could be strategy changes, business model, economic policy changes, or regulations.
An Investment Analyst uses financial modeling to educate their decision to recommend investing. They also look at stocks changes, strategies, business models, and policies. They look at the results from the perspective on investing in a company that is implementing those actions instead of the company that would be affected by those actions.
Investment Bankers and Private Equity Associates use financial modeling to inform their investment decisions. They usually rely on Analysts to do the heavy lifting of the actual modelling, but they must know how to do it themselves, too.
A Research Analyst should learn financial modeling, especially if they want to move out of the research analyst role. Understanding financial modelling can also help them do their job better and provide the proper information to Analysts so that their modeling tasks go more smoothly.
Financial Modeling Career Options
Here are a few career paths for which you’ll likely need Financial Modeling skills in order to succeed. We also include additional info about their average salaries, their day-to-day responsibilities, and a link to learn more about each career.
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Financial Analyst
Financial analysts use their business, finance, or accounting background to analyze data and make recommendations for investments. They study past, present, and future business and economic trends to provide data-driven insights for business decision-making. Financial analysts take on roles as fund managers, portfolio managers, investment advisors, and risk analysts. Many earn additional credentials in the field, such as Certified Public Accountant or Project Management Professional certifications.
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Private Equity Associate
Private Equity Associates are responsible for leading deal processes from beginning to end. They work with private equity firms to analyze and monitor data, look for potential investment opportunities for their firm, and raise capital from outside investors.
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Research Analyst
A Research Analyst researches, analyzes, and interprets data on markets, operations, finance, economics, and customers in their industry. They can find work in nearly any industry but are found at the highest concentration in the financial services sector.
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Investment Banker
Investment bankers are financial advisors for corporations. These professionals help clients with mergers and acquisitions and advise on investments in capital markets. Companies looking to make capital investments or to expand operations may turn to an investment banker to help locate and acquire capital. Investment bankers have nearly limitless earning potential, as they are compensated for the value they provide.
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Investment Analyst
Investment analysts are experts in analyzing financial and investment information and using it to make recommendations. Buy-side investment analysts help mutual fund managers target investment opportunities, and sell-side analysts work with investment banks. Using their deep expertise in stock, bonds, commodities, and currencies, these financial professionals continuously analyze trends to forecast performance. Experienced analysts can become certified as a Chartered Financial Analyst (CFA).
Learn about becoming a Investment Analyst