Financial Modeling is the activity of creating an abstract representation (model) of the current financial situation. It has various applications and uses of financial models. However, understanding this financial skill in the right way is subjective and leads to misconceptions. Therefore, keySkillset decided to break the myths about financial modeling and encourage future finance professionals.
Financial Modeling is only about valuation
Financial modeling has a wide range of tasks to learn. For example, you should be able to view trends and get insights from projecting financial statements. Besides, a finance professional should see the data through charts, tables, and models to make any business-related decision. The by-products of valuation help to evaluate project transactions and analyze M&A transactions. Thus, not everything is around valuation.
Only very specific degrees learn finance modeling
If any of your colleagues finished an MBA degree and you don’t, it’s not a reason to ignore it. Even if some of the courses don’t mention financial modeling terminology, try to stand out. It will be easier than you think to find jobs that require financial modeling skills. In addition, you will be more prepared and have a competitive set of skills.
There are very few job profiles with financial modeling
Financial modeling might sound specific but it has a lot of applications. For example, investment banking, private equity, or finance industry need modeling skills.
Excel is mandatory for learning financial modeling
The scariest fact is that financial modeling skills require a high level of Excel knowledge. While you need spreadsheets to build models, you don’t need to be an Excel expert straight away. It is a useful tool to perform financial analysis and even basic working Excel knowledge is a great start. Moreover, once you dive deeper into building your modeling skills, Excel proficiency will come naturally. Hence, don’t be harsh with yourself. Everyone can learn Excel and be good at financial modeling.
Financial modeling can be a hard skill to master, but not impossible. Once you believe in yourself and have enough motivation, things will turn into a better direction. Besides, do proper research before making false assumptions. This article with the top four myths about financial modeling will help to make the right decision.