Discover the importance of financial modeling in the business world, from creating detailed forecasts to making investment decisions. Learn about different tools used in financial modeling, such as Microsoft Excel and Oracle BI, and explore the career benefits of gaining these skills.
Key Insights
- Financial modeling is a crucial process in business, allowing for evaluation of past performance to predict future financial outcomes. This is typically done using Excel spreadsheets.
- These models have various applications across industries, aiding in budgeting, performance analysis, business valuation, and more.
- The cost of performing financial modeling depends on the tools used. Microsoft Excel, a common tool for financial modeling, starts at $6/user/month, while Oracle BI, a more comprehensive business intelligence software, starts at $10-$50/account/month.
- Financial models provide valuable insights for businesses, aiding in budget forecasting, evaluating potential outcomes of management decisions, and assessing a company's ability to repay debts.
- Noble Desktop offers a range of courses and resources for learning financial modeling, including a Financial Modeling Bootcamp and a Financial Analyst Training Program, as well as free online tutorials and videos.
- Investing in learning financial modeling can open up various career opportunities, as these skills are integral to many business operations and financial decision-making processes.
The costs associated with performing financial modeling vary depending on the applications and programs you work with. Most individuals who create financial models use Microsoft Excel, which is available starting at $6/user/month. Others use financial modeling or business intelligence software, such as Oracle BI, which is available starting at $10-$50/account/month.
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.
Read more about what financial modeling is and why you should learn it.
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.
In-Depth Review of the Cost
Financial modeling is a complex process that relies on various tools and skills. One common application used by most who create financial models is Microsoft Excel. Excel is a spreadsheet application for organizing and visualizing data. You can also download free Excel templates capable of performing various kinds of financial calculations and creating financial documents and models. The Corporate Finance Institute has a financial model template library that contains hundreds of free Excel files. For those who wish to purchase Excel, it’s available as part of a subscription that includes other Microsoft 365 apps such as Word, Teams, PowerPoint, and OneDrive, among others. You can download Excel directly from Microsoft’s website.
Different price points are offered depending on which version of Excel you wish to use. Microsoft 365 Business Basic costs $6/user/month; Microsoft 365 Business Standard is available for $12.50/user/month; Microsoft 365 Business Premium costs $22/user/month; Microsoft 365 Apps for Business costs $8.25/user/month. In addition, if you want to try out Excel before purchasing a subscription, Microsoft has a free Excel trial.
Those who create financial models sometimes use other financial modeling and business intelligence software besides Microsoft Excel. Oracle BI is one such tool. This suite of applications and business tools was designed to make data analytics and reporting tasks more efficient. This platform uses machine learning and AI technology to help an organization make more accurate predictions. For those who wish to download Oracle BI, it’s available on Oracle’s website. Even though their site doesn’t list price points, the following is a breakdown of the cost associated with purchasing Oracle BI:
- Small businesses can buy a single Oracle BI account for $10-50/month. Multiple accounts cost from $300-$500.
- Medium-sized businesses can purchase Oracle BI for about $50-$500, depending upon their specific needs.
- Large organizations can expect to spend from $500-$10,000 for Oracle BI.
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.
Read more about why you should learn financial modeling.
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.
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.
