Financial Modeling is the process used by financial advisors, accountants and investment bankers to help businesses answer various questions about their company finances, for example it can be used to summarise investment management returns, estimate market directions and help determine business valuations. These estimates, summaries and valuations are reached by the preparation of large, highly detailed mathematical models.
The models can be constructed by hand on paper, or through the use of purpose built computer software, most of which is spreadsheet based. In recent years Microsoft Exel has become the program of choice for financial modeling, overtaking the previously popular Lotus 1-2-3 in the 1990’s.
However spreadsheet based modelling can face its own shortcomings, causing several “best practices” to be proposed within the industry. This, along with the inherent complexity of the mathematics behind the models is the reason that specialist financial modeling training is often required.
There are several ways to get the required training to become a financial modeller, including attending a university course, or going through the Open University program. However, many now choose to go to independent companies to obtain their financial modeling training. Companies like AMT offer a wide range of courses in a diverse range of formats including in-house training to allow the courses to be customised to the clients needs, public training to make it more affordable for smaller businesses, as well as e-learning, where the learning materials and testing are based online.
The various options available to train to become a financial modeller all offer their own benefits, and it is important to explore several options to be sure to find the one that suits you, whether you are a business looking for someone to do some financial modeling for you, or an individual looking to break into this highly complex profession.