About Financial ModelingLearn More

Research analysts, investment bankers, accountants, and entrepreneurs use financial modeling to better understand a company’s performance before making important business decisions. Financial models are generated using MS Excel and can help you accomplish a variety of important tasks such as forecasting business performance, budgeting, asset management, and understanding cash flow. Financial modeling requires a keen sense of numbers and data to prepare the best financial reports for yourself or your clients.

There are several different types of financial models used by professionals to help them make the best business decisions. Financial models help professionals make important business decisions about raising capital, forecasting business changes and requirements, or what it will take to grow a business. Some examples of these useful financial models are the discounted cash flow (DCF), a valuation method used to determine the worth of investing in a business; leveraged buyout (LBO), which examines the impact of funding an acquisition with debt; and mergers and acquisitions (M&A), a method that analyzes the result of acquiring or merging with another company. These are just three of the models both new and seasoned financial professionals should expect to use in their careers.

Investment bankers assist corporations and individual investors by making a variety of critical decisions to best ensure the success of their business and financial growth. Investment bankers work in four areas of the financial services industry: capital markets, advisory, trading and brokerage, and asset management. Investment bankers usually work for investment banks that serve business clients. These banks are not like traditional commercial banks that members of the public use to handle their checking and savings accounts. In fact, the Dodd-Frank Act of 2010 requires a complete separation between investment banking and commercial banking. Investment bankers provide guidance and expertise to corporate clients seeking to issue an IPO (initial public offering) to raise capital that they could use to expand a business, acquire, or merge with another company.

Balance sheets help business owners, investment bankers, and accountants understand the assets of a business. In particular, balance sheets outline what the business owns, or its assets. It also notes what the business owes, or its debt and liabilities. A company’s income statement is just as important as its balance sheet and tells you how much profit a company generated during a particular year. The statement of cash flows is a useful tool for stakeholders and can provide insight into how effectively the organization manages its operations. Businesses use a statement of cash flows to understand a company’s performance, more specifically, to assess a company’s ability to generate cash from operations, financing, and investing.