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Skill Building in Finance Financial Modeling with Excel

By : Ravi Agarwal on 30 March 2012 E-mail Comments     Print Print  Report Abuse

Placement scene is usually found challenging in domains like finance and operations. If the college is having an average brand value, then it is more probable than not. Students can do a lot about it, both individually and collectively. One of them is keep building on pertinent and useful skill set.


The most sought after skill by corporate is spreadsheet skills. Also known as financial modeling using spreadsheet, it is an art that can serve a readymade job to a candidate on a platter, irrespective of market conditions.


What is Financial Modeling?


Financial modeling is the task of building up an abstract representation of a real-life financial decision making situation; for example, preparing a model of capital budgeting decision, model of a cash budget, model of financial statements, etc. We have to resort to a spreadsheet program for preparing a model. MS-Excel is the most popular spreadsheet program used by the industry and academia.


What are we supposed to do?


We have to present financial information in a crisp form so as to facilitate decision making by  the user. For instance, a company has to apply to a bank for term loan. Then we are supposed to prepare a spreadsheet that contains all the relevant financial statements of past few years, projected financial statements of coming years, and the relevant ratio analysis based on historical and projected financial statements. When the banker would see this model, he would be in a position to take a decision on loan application.


In the internet era, learning the art of financial modeling doesn't seem difficult at all. Students can register themselves at free websites and they would start receiving practice lessons daily. They can also download lecture notes on financial modeling that are openly available. Besides, a plenty of good books are available that can be used for mastering this wonderful art. Some of these books are mentioned as under (author, title, publisher):


1. Winston - Data Analysis with MS-Excel, Microsoft Corporation, India

2. Chandan Sengupta - Financial Analysis and Modeling with Excel and VBA, Wiley,  India

3. Sinon Benninga - Financial Modeling, Wiley, USA

4. Vijay Gupta - Financial Analysis with Excel, Wiley, USA

5. Mayes - Financial Analysis with Excel, Cengage Publications, USA


There are three keys to gain proficiency in financial modeling - practice, practice, and practice. Loads of readymade financial models are available on internet. Download some of them and try to follow the underlying logic. Try to search and download selective models first, for example, procure models related to capital budgeting OR ratio  analysis OR revenue forecasting OR any area of finance. Then try to make a trail of the used formulae in preparation of the model. Then take up your own model with your own dataset.


Suppose, you have decided to learn financial modeling related to ratio analysis first. So you may download some readymade models from internet. Select the simplest of them first. Try to understand the formulae used in the selected model. Then you may pick up your own data set - the  best way of getting hold of a dataset is to get an annual report of a company. Then you may feed the Income Statement and Balance Sheet into two different sheets (but in one file) of a spreadsheet. Prepare a third sheet with all major financial ratios. Then start defining financial ratios with the help of any standard finance textbook. Finally link the relevant values of income statement and balance sheet of the selected company. Your own financial model on ratio analysis is ready!


You will certainly gain greater confidence and accuracy via repeated practice. A good financial model must have two characteristics - it must be accurate, and it must be prepared in minimum possible time. That is, accuracy and speed are the crux of a good financial model.


MBACLUBINDIA has lots of readymade financial models on different topics. You may like to start from one of them.

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Wrote on 30 July 2012

Sir Good job has been taken up by you. Tons of thanks. This will help all the naive students. Please continue for our benefit.

Ravi Agarwal

Ravi Agarwal

Wrote on 16 April 2012

I am getting lot of queries from readers on useful websites on financial modeling. Please note that there is no substitute to practice. Readers can visit the following website to get a first hand acquaintance with Excel:

Ravi Agarwal

Ravi Agarwal

Wrote on 06 April 2012

Dear Girish and Ravikumar, You can google the keywords to go to respective links for material. You can order online all the books from Amazon.

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