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Learn Financial Modeling

A Comprehensive Guide to Start Learning Financial Modeling

Financial modeling uses real-world data to create projections for a business's or other entity's financial future. Finance professionals traditionally use spreadsheet applications such as Microsoft Excel to make financial models.

Financial modeling describes creating a forecast for a business that predicts its future financial performance. To do so, a robust financial model considers the past results of an organization’s efforts and its current expenses and earnings to predict how future decisions will impact the bottom line. If you’ve always wanted to learn financial modeling but aren’t sure how to get started, this guide is for you. Here, you’ll learn more about the various ways to learn financial modeling, free resources to take advantage of, and the types of careers that commonly use financial modeling.

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. 

Financial modeling is a valuable tool for estimating how a business or a specific project will perform based on relevant factors, as well as risk assumptions and growth, then evaluating their impact. This process helps to present a concise understanding of the variables used to make financial forecasts. Those who create financial models either build them from scratch or work with existing models, making changes based on newer data that’s become available since its creation. Because financial situations are complex and can change quickly and rapidly, financial modeling helps to create a detailed understanding of the different components.

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What Can You Do with Financial Modeling?

Without well-executed financial modeling, any business operation would be analogous to a ship floating aimlessly in the sea with no navigation system. Although one could use gut instinct to steer the ship in the correct direction, there would be no guarantee that this course would be accurate. The more sound a financial model is, the less unnecessary risk a business will likely encounter. And the less likely it will be to drift aimlessly. 

Financial modeling has numerous applications across industries. Strong financial models are the backbone of many businesses and are a critical component to help them continue to grow and mitigate risk. Financial models provide a way to perform a detailed analysis of all possible financial outcomes of a business decision. These models seek to avoid loss as well as increase profits.

Financial modeling is a powerful tool for a range of financial analysis tasks. It can help an organization budget for the future and analyze the company’s performance against goals and targets. It also can be used for business valuation. Financial models allow individuals to compare one company’s performance against its competitors. It is often used to analyze financial statements, ratios, and capital structure, as well as to estimate financial metrics for new projects. Not only are these models imperative for solving problems, but they are used to make decisions about future outcomes. Some of the many decisions financial models can help with are estimating a company’s projected growth, organizing its budget, choosing investments, deciding between acquisition or merger, and deciding which projects should be prioritized.

Careers that Use Financial Modeling

Financial modeling has always played an essential role in the field of finance. Now, more jobs outside of finance require financial modeling skills. Many finance professionals, such as Investment Bankers, Private Equity Professionals, and Research Analysts, use financial modeling. The following are some of the professions in which financial modeling skills are a must:

  • Investment Bankers create financial models for various tasks, such as evaluating mergers and acquisitions and the long-term impact of compounding debt. 
  • Careers in private equity involve creating financial models for a leveraged buyout (LBO). 
  • Individuals who work in real estate development must account for a range of variables, like financing, cash flow, and leverage. Financial modeling can help manage these variables.
  • Those who work in commercial banking use financial modeling when handling deposits or loans. 
  • Equity Research Analysts create reports for bank clients pertaining to equity investing. Before creating a report, an Equity Research Analyst has to analyze publicly traded companies. Financial modeling plays a vital role in this analysis.
  • Venture capital companies provide companies at an early stage of development with the necessary capital for growth. When deciding which companies deserve funds, Venture Capitalists rely on tools like financial modeling to inform their decision-making process.
  • Another career in which financial modeling skills can play an important role is for those who work in a startup. One of the main issues facing startups is relying on an operating model with insufficient cash flow to make it from one round of funding to the next. Startup employees with a financial modeling background can ensure their organization doesn’t encounter this common obstacle.

Why Learn Financial Modeling?

Financial models have a range of uses for businesses of all sizes. They can provide an overview of how much a company is worth before it goes public and whether it’s eligible for a loan or financing options. Budget forecasting models are a valuable tool for those working in finance to understand how the organization is performing based on input from different departments. Financial models also help evaluate potential outcomes of management decisions before they are executed, which can help predict any changes to revenue that may be associated with raising the price of a product. In addition, investors sometimes work with financial models to establish how likely a company is to repay its debts.

Financial models are extremely valuable for organizations because they provide a simple way to calculate performance and anticipate outcomes. Not only can these models provide insights into the risks of implementing decisions, but they can also offer a financial statement that highlights how a company is operating financially. Although there are many different kinds of financial models, they all present a comprehensive overview of how an organization performed in the past, where it currently stands, and what can be expected in the months and years ahead.

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How to Learn Financial Modeling

If you’re interested in learning more about financial modeling, a variety of in-person and live online study options are available from top educational providers. In-person financial modeling classes are an excellent option for extroverted learners who thrive in traditional classrooms. These hands-on classes provide a computer lab with the most up-to-date software. They are also a great way to network with other learners who are studying financial modeling. Courses are taught by expert instructors, who are available to answer questions as they arise and provide guidance on complex financial theories. 

For those interested in studying financial modeling in a live environment but who don’t want to waste time or money commuting to and from campus, live online financial modeling courses are also offered. These classes provide the same quality of education as in-person study and access to an instructor in real-time but can be completed remotely from the comfort of your home or office. Participants in live online financial modeling classes complete real-world assignments and receive hands-on training from instructors with industry experience, just as they would in the classroom setting.

For individuals who need to balance their study of financial modeling with other commitments, such as full-time work or travel, self-paced coursework is for you. Unlike in-person and live online study, on-demand financial modeling classes are pre-recorded. Students can access the content at any time and from any location. Students can pause and rewind videos, which can help facilitate note-taking. Although it may be tricky to master complex financial modeling concepts like nested functions or VLOOKUP, self-paced courses are a good option for beginners looking to get started with financial modeling. In addition, self-paced material is a more affordable option. Some are even available for free from top providers.

For those who want to learn more about the stock market, Noble Desktop’s Stock Market Investing Fundamentals is a great place to start. This hour-long video is a great resource for investing fundamentals, such as what stocks and bonds are, how they are priced, and the basics of valuation. Noble also has more than 100 resources devoted exclusively to financial modeling. Noble’s Financial Modeling Training Resources & Tutorials provide a wealth of knowledge about stock options, capital markets, and foreign exchange. Noble’s Finance & FinTech YouTube playlist can also help you master specific financial modeling concepts and skills. You can also search for Financial Modeling classes close to home

Read the full guide on how to learn financial marketing

Free Introductory Financial Modeling Course Online 

Not ready to dive into an entire course? If you’re looking for an overview of financial modeling, the good news is you can get started learning for free online. Noble Desktop offers a range of short YouTube clips to help learners start working with financial modeling. These videos are each only several minutes long and offer insights into topics like Foreign Exchange,

Interest Rates and the Fed, and Understanding Terminal Value. Noble also provides over 100 free financial modeling tutorials on its Training Resources & Articles page. Learners can browse topics like stock options, the stock exchange, and a liquid market, among others. 

In addition to the free resources provided by Noble, other top educators also offer free content devoted to financial modeling. Udemy’s Introduction to Financial Modeling is a free course that teaches participants how to build a simple integrated financial statement model. Coursera also has several free financial modeling classes and tutorials available. One option is their Business and Financial Modeling Specialization, a beginner-friendly course that takes approximately six months to complete. Those enrolled receive instruction on how to create quantitative models, how to use spreadsheets to map and predict data, and how to measure and manage risk. 

Read more about free financial modeling videos and online tutorials.

Level of Difficulty, Prerequisites, & Cost 

The field of finance can be complicated to understand, and financial modeling is considered one of the most challenging tasks in this field. Unlike other branches of finance that are specifically backward-looking or forward-looking, financial modeling has to look both ways simultaneously. In addition, there are many hidden assumptions the individual creating a model may not be aware of and, therefore, cannot be completely accurate.

Another contributing factor to how difficult it is to perform financial modeling is the level of detail that has to be built into the model. In an ideal scenario, a decision-maker would approach the information with as much granularity as possible, and the model would allow the user to drill down data from the aggregate level to the granular. It is up to the Financial Modeler to create this ability. This means they must fully understand how the numbers work on a micro and macro level. In addition, to be a successful Financial Modeler, it’s essential to be an expert working with technology to convey the process as a reusable model. For this reason, those who perform financial modeling must wear many hats and have expertise in various fields. 

Financial modeling is a process that involves a variety of skills and tools. Those who create financial models must have an understanding of finance and accounting and a grasp of how the economy works. In addition, one of the most widely used programs for financial modeling is Microsoft Excel. This spreadsheet application is available as part of a subscription that includes other Microsoft 365 apps, such as Word, PowerPoint, Teams, and OneDrive. Microsoft 365 Business Basic is available for $6/user/month. If you want to explore Excel before committing to buying a subscription, Microsoft offers a free Excel trial

Read more about how difficult it is to learn financial modeling.

How Does Learning Financial Modeling Compare to Other Fields?

The process of creating financial models is complex and challenging. It requires individuals to wear many hats and have a range of technical and mathematical skills, as well as soft skills such as decision-making, problem-solving, and attention to detail. For most people, it takes years to become skilled at building financial models. While reading equity research reports can help with this process, acquiring these skills is often accomplished through the learn-by-doing method. Financial modeling is considered a difficult task, even for those who work in the financial field. 

On the other hand, accounting is a much easier skill to acquire. Accounting is the act of recording an organization’s various financial transactions. This process involves summarizing, analyzing, and reporting each transaction to entities such as tax collectors, regulators, and oversight agencies. The financial statements created by Accountants are typically a summary of any financial transactions that occurred during an accounting period. They’re designed to present an overview of the organization’s financial position, operation, and cash flow. 

Learning accounting is considered to be an easier skill to acquire than financial modeling. Although Accountants must have skills such as proficiency with accounting software, understanding financial practices, and training with data analytics, it’s not much more challenging to learn accounting than studying any other popular field. On the other hand, Financial Modelers require significant technical training and real-world experience to create successful models. 

Another field similar to financial modeling is investing. Investing is the act of purchasing assets that are expected to increase in value over time and will generate returns such as capital gains or income. This requires sacrificing some portion of your current assets, such as money, effort, or time. Although it takes time and requires developing a solid investment strategy and acquiring financial literacy, it’s not considered as difficult a skill to acquire as financial modeling. If you’re new to investing and want to learn how to get started, Noble Desktop’s free online class, Stock Market Investing Fundamentals, is a great way to master investment basics. This hour-long course covers topics like the risk-reward principle, capital gains tax, and some basics of valuation.

How to Decide the Best Way to Learn Financial Modeling

If you want to start learning financial modeling, the good news is that many different educational resources are available in-person and online. When deciding which learning environment is most suited for you, it’s important to consider why you’re interested in studying this skill and what you’ll do with your financial modeling knowledge once you have it.

Free introductory-level courses and on-demand financial modeling resources are good starting points for those without prior financial modeling experience. These videos and tutorials are pre-recorded, which means they can be watched anytime and from any location. This is the most flexible learning format in that it allows students to balance studying financial modeling with other commitments, like travel, family, and work. Learners can pause and rewind lessons as often as needed when taking notes and revisit entire videos to help with more complicated modeling skills. Because these resources are free, they offer a low-stakes starting point for financial modeling study. However, since these classes don’t give students access to an instructor, they are better suited for beginner-level study rather than trying to master complex financial modeling concepts.

Noble Desktop’s Learn Financial Modeling blog provides a wealth of information on creating financial projections and models. Articles are available on topics like mergers and acquisitions, three-statement financial modeling, and internal rate of return. For those who are also looking to learn more about FinTech, Noble offers free FinTech resources and tutorials as well. 

If you’re interested in studying financial modeling to develop a solid working knowledge of this process, to plug a skill gap, or to progress in your current career, enrolling in a Financial Modeling Bootcamp such as the one offered by Noble Desktop may be a better option. This course is offered both in-person and live online, meaning students can choose whether to commute to campus for expert instruction or complete lessons from the comfort of their home or office. Participants receive instruction on finance and accounting fundamentals and how to use Excel to create a robust financial model. While in-person and live online coursework costs more than asynchronous study materials, it often includes additional perks, such as the option of a free course retake. This learning format also allows students to connect with an instructor in real time, who can answer questions and provide guidance along the way.

For those who want to master financial modeling to begin a new career or pivot to a different industry, certificate study is an excellent option. Certificate study is typically the most expensive learning option. The additional cost is worth it because participants in financial modeling certificate programs receive perks such as one-on-one mentoring, career coaching, and professional development. 

Learn Financial Modeling with Hands-on Training at Noble Desktop

Noble Desktop offers several excellent learning options for those interested in studying financial modeling. Noble’s Financial Modeling Bootcamp covers the basics of accounting, finance, and corporate valuation. Those enrolled in this hands-on class work with Excel to create a discounted cash flow model. Students who don’t have a background in accounting or finance will be sent a short guide on terminology before class starts. All participants should have intermediate Excel proficiency as a prerequisite.

Noble’s Financial Analyst Training Program provides learners with instruction on pertinent corporate and financial concepts and how to create a full valuation model. This intensive program teaches core Excel skills, like how to work with PivotTables and shortcuts, as well as advanced Excel techniques, including cash flow projection tools and Goal Seek. All students will create an integrated, three-statement financial model based on current financial data.

Noble also offers financial modeling training courses in-person and live online. Those interested in learning more about how to use Excel for modeling can attend the Excel Bootcamp. In addition, FinTech courses such as Python for Data Science Bootcamp, Algorithmic Trading With Python, and FinTech Bootcamp are also available. Noble’s FinTech Bootcamp provides hands-on training from expert instructors in creating machine learning models, using programming languages like SQL and Python to analyze financial data, and working with various types of data, such as integers, strings, and floats. One-on-one mentoring and the option of a free course retake is included for all participants. 

Financial Modeling Resources

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