Your reasons for applying and why you deserve a place above other candidates - discuss

your academic interests, career goals and the university and department's reputation, and
write about which aspects of the course you find most appealing, such as modules or work
experience opportunities. Show that you're ready for the demands of postgraduate life by
demonstrating your passion, knowledge and experience.
Your preparation - address how undergraduate study has prepared you for a postgraduate
courses, mentioning your independent work (e.g. dissertation) and topics that most
interest you.
Evidence of your skillset - highlight relevant skills and knowledge that will enable you to
make an impact on the department, summarising your abilities in core areas including IT,
numeracy, organisation, communication, time management and critical thinking. You can
also cover any grades, awards, work placements, extra readings or conferences that you've
attended and how these have contributed to your readiness for Masters study.
Your goals - explain your career aspirations and how the course will help you achieve
them.
Personal statement structure
Your personal statement should follow a logical structure, where each paragraph follows
on from the one before. Capture the reader's attention with an enthusiastic introduction
covering why you want to study a particular Masters. Then, engage the reader in your
middle paragraphs by evidencing your knowledge and skills and demonstrating why the
course is right for you.

Around half of the main body should focus on you and your interests, and the other half on
the course. Your conclusion should be concise, and summarise why you're the ideal
candidate. Overall, aim for four to five paragraphs. You can use headings to break up the
text if you prefer.

Address any clear weaknesses, such as lower-than-expected module performance or gaps

in your education history. The university will want to know about these, so explain them
with a positive spin. Lower-than-expected results may be caused by illness, for example.
Admit this, but mention that you've done extra reading to catch up and want to improve in
this area.

The majority of postgraduate applications are submitted online directly to the university.
If this is the case, present your personal statement in a standard font such as Arial, Calibri
or Times New Roman, text size 11 or 12. If your course application is submitted through
UKPASS (UCAS's postgraduate application service) font style won't matter as personal
statements will be automatically formatted.

How to write a good personal statement

They're often the trickiest part of your postgraduate application, so knowing how to write
a good personal statement will help.

Give yourself plenty of time to complete it. Tutors will be able to tell if you're bluffing, and
showing yourself up as uninformed could be costly. Before you start, read the rules and
guidelines provided, check the selection criteria and research the course and institution.

The best personal statements adopt a positive, enthusiastic tone and are presented in
clear, short sentences. Avoid elaborate or overly-complicated phrases. Unless otherwise
stated in the guidelines, all postgraduate personal statements should be written in English
and your spelling, grammar and punctuation must be perfect, as the personal statement
acts as a test of your written communication ability.

Don't use the same supporting statement for every course - admissions tutors will be able
to spot copy-and-paste jobs. Generic applications demonstrate that you have little
understanding of the course. Masters study is much more advanced, so your
undergraduate personal statement will be of little relevance in this instance. In order to
stand out from the crowd postgraduate personal statements must be unique and specific
to the course and institution.

Continue drafting and redrafting your statement until you're happy, then ask a friend,
family member or careers adviser to read it. Proofreading is incredibly important to avoid
mistakes. Memorise what you've written before any interviews.
What to avoid
You shouldn't:

be negative
follow an online template
include irrelevant course modules, personal facts or extracurricular activities
include inspirational quotes
lie or exaggerate
make pleading statements
namedrop key authors without explanation
needlessly flatter the organisation that you're applying to
repeat information found elsewhere in your application
use clichés, gimmicks, humour, over-used word such as 'passion' or Americanisms
use overly long sentences
use the same statement for each application
use your undergraduate UCAS application as a template
waffle
leave writing your personal statement to the last minute.
How to start a personal statement
Starting a personal statement isn't easy but try not to waste too much time coming up with
a catchy opening. The more you try, the more contrived you'll sound and the more likely
you are to fall into the trap of using clichés.

The most overused opening phrases include:

For as long as I can remember…

From a young age…
I am applying for this course because…
Throughout my life I have always enjoyed
I have always been interested in…
I have always been passionate about…
I have always wanted to pursue a career in…
Reflecting on my educational experiences…
Admissions tutors read hundreds of applications per course so the opening paragraph of
your personal statement needs to get straight to the point and make a real impact. Avoid
overkill statements, gimmicks and popular quotes.

If you're really struggling with starting a personal statement you can always come back
and tackle it once you have written the rest.
How to end a personal statement
Knowing how to end a personal statement is just as important as knowing how to start
one. Conclusions should be short, sharp and memorable, and leave no doubt in an
admissions tutors mind that you deserve a place on a course.

The perfect ending should pull all of your key points together without waffling or
repeating yourself.

Like the rest of your Masters personal statement, keep the ending simple. Be succinct and
to the point - make it clear why you'll be an asset to the university and end on a positive
note, with a statement about why the institution would be lucky to have you as a student.

If you follow these tips your personal statement should leave a lasting impression.

What admissions tutors are looking for

Admissions tutors will be looking for:

an explanation of how the course links your past and future

an insight into your academic and non-academic abilities, and how they'll fit with the
course
evidence of your skills, commitment and enthusiasm
knowledge of the institution's area of expertise
reasons why you want to study at the institution
you to express your interest in the subject, perhaps including some academic references
or readings.
Personal statement examples
The style and content of your personal statement will depend on several variables, such as
the type of qualification that you're applying for - such as a Masters degree, the Legal
Practice Course (LPC) or teacher training. Here are four examples to help you get started:
What is corporate finance?
Corporate finance relates to the financial activities fundamental to running a business and
is primarily concerned with maximising shareholder value. A career in corporate finance
offers the opportunity to be at the centre of how a business operates; it is the way in which
companies finance creation, growth and the acquisition or disposal of business.

A corporate finance professional is primarily tasked with managing an organisations

money and you could find yourself working on a wide range of matters, including capital
raising (through either securing a loan from an investment bank, restructuring the
business or winning financial backing through another platform e.g. crowd-funding),
mergers, acquisitions, changes in ownership and other activities to improve business. The
role of a corporate financier is an exciting one; it’s forward-looking, pro-active, strategic,
entrepreneurial and often international in nature.

What type of person works in corporate finance?

If you enjoy working with numbers and you have strong analytical skills, then corporate
finance could be the career for you. Those who are good problem-solvers and have a
strong attention to detail do well in the area.

In addition to technical ability, you should have an understanding and natural interest in
business; a strong commercial awareness, including keeping up to date with the industry
through business publications to understand market conditions and trends, and some
people even invest themselves. You will also be a natural communicator, enjoy meeting
people and have a natural flair for negotiation.

Often, corporate finance professionals have some kind of related qualification e.g.
ACA/ACCA, CFA, or an accountancy and finance related degree.

What qualifications do I need to work in corporate finance?

Although there is no specific qualification you must have in order to work in corporate
finance, there are some qualifications and courses that will put you in a strong position
and provide you with the foundations necessary to understand the fundamentals.
Depending on where you wish to take your career, you would ideally have studied
accounting & finance or economics.

Many professionals qualify as an accountant first, typically within an audit capacity, taking
either the ACA or the ACCA. More and more professionals are doing the CFA programme
(Chartered Financial Analyst) or the IMC (Investment Management Certificate), especially
when working with the likes of corporate finance boutiques, investment houses and
private equity firms. We are also seeing a rise in the number of people taking specialised
financial modelling courses to help themselves stand out from the crowd.

How do I get into corporate finance?

There are many ways to get into corporate finance and many different career paths, the
most common are highlighted below:

Training within the audit team of an accountancy firm and studying for the ACA/ACCA,
typically qualifying after three years. Having established strong foundations, the move
into corporate finance is much more natural. Typical moves usually include other
accountancy firms, advisory firms, and investment banks.

Joining the corporate finance team of an accountancy firm as a trainee and studying for the
ACA/ACCA, typically qualifying after three years.

Joining an advisory firm or investment bank straight from university as an analyst, with
the option of studying for one of the qualifications if needed.
Roles can vary depending on the firm and which team you sit in; typically, you will either
work within transaction support or M&A/lead advisory. Some firms offer a hybrid role
which provides the opportunity to develop a broad skillset at an early stage.

Where could I work?

As corporate finance is so integral to business and covers such a range of duties, the
opportunities really are endless. Many people choose to qualify and then remain as an
advisor within an accountancy firm, or make the move to professional services companies,
investment banks, brokerage firms, independent advisory firms or within a corporation.
Investment Banking vs. Corporate Finance: An Overview
Corporate finance and investment banking aren't all that different in a general sense.
Investment banks raise capital for other companies through securities operations in the
debt and equity markets. Investment bankers also help coordinate and execute mergers
and acquisitions (M&A). They offer advisory services to big clients and perform complex
financial analyses.

Investment Banking
A generally accepted distinction between corporate finance jobs and investment banking
jobs is that a corporate finance professional deals with day-to-day financial operations
and handles short- and long-term business goals, while an investment banker focuses on
raising capital. She might run private placements and conduct M&A deals. Investment
banking grows a company,
Corporate Finance
Corporate finance manages a company. It's a catch-all title for any business division that
handles financial activities for a firm. It can be a bit tricky to differentiate it from
investment banking because, depending on the context, investment banking might count
as a type of corporate finance. Likewise, an investment banking firm might have a
corporate finance division.

Investment Banking vs. Corporate Finance Example

It's challenging, if not impossible, to nail down an accurate salary for the average
corporate finance position. Too many different jobs are available, and many of them
overlap.
A financial analyst, technically involved in investment banking, could expect a median
salary of $84,300 in 2017, according to the Bureau of Labor Statistics (BLS). Half earned
more and half earned less than $84,300. Meanwhile, a chief financial officer and other top
professionals in the corporate finance field enjoyed a median salary of $104,700 in the
same year, according to the BLS.

Even junior investment banking analysts can expect compensation of $70,000 to $150,000
a year when signing bonuses and performance-based bonuses are factored in, according to
data from Wall Street Oasis.

The BLS expects financial analyst positions to grow at a rate of 11 percent between 2016
and 2026, faster than the 8 percent outlook for corporate finance executives.
Key Differences
Many choose to walk away from investment banking careers after a few years due to
burnout. Investment banking deals tend to be executed by small teams—three to seven is
standard—with one analyst, one or two associates, one vice president, and a lead
managing director. Workflow is bottom-up, and those lowest on the rungs are responsible
for an exceptional amount of effort. Tales abound of investment analysts and associates
working 80- to 100-hour weeks. An 80-hour week works out to five 16-hour days or seven
11.5-hour days.
Those debating a career in investment banking versus a career in corporate finance have
two overriding considerations: workload and salary. The prestige and compensation of
investment banking jobs are alluring to many, so intense working hours are a small hurdle
to clear.

Corporate finance jobs aren't easy to get, but they're more plentiful and less competitive
than investment banking jobs. Corporate finance still offers an excellent career in business
analytics and corporate culture to those who value their weekends, holidays, and
evenings.

Special Considerations
Many different viable career paths can be found in corporate finance because there are so
many different kinds of jobs in the field. Individuals can find their niches as accountants,
advisors, account managers, analysts, treasurers, business analysts, or any number of
other jobs. There are a few necessary skills, such as an understanding of corporate finance
and effective communication skills.

Investment banking is considered one of the premier fields in the financial industry. There
are two standard paths into an investment banking career: attend a noted undergraduate
university and enter on the ground level as an analyst, or go to business school, earn a
Master of Business Administration (MBA), and break through as an associate. Interested
investment bankers should focus on degrees in finance, economics, banking, or
investment analysis. Most intern or take low-level positions at large banks to gain
experience, and many work as analysts before receiving their MBA.

Major investment banks, especially in New York and London, focus their recruiting efforts
on the best-performing prospects from Ivy League schools—although it's not unheard of
for exceptionally analytical prospects with degrees in challenging subjects such as
biopharmaceuticals or other medical fields to make their way into the industry.

KEY TAKEAWAYS
Investment banking grows a company, while corporate finance manages a company.
A corporate finance professional deals with day-to-day financial operations and handles
short- and long-term business goals, while an investment banker focuses on raising
capital.
The academic and experience credentials necessary to become an investment banker are
higher than for most corporate finance positions.

Career Prospects in Corporate Finance

Corporate Finance Career – Companies need funds to thrive in business, looking into every
aspect of funds needed by a company is referred to as Corporate Finance. It can be defined
primarily as the optimum utilization of the financial resources of the company, it is that
area of finance which deals with the arrangement of funds for various projects at
minimum possible cost, so as to maintain the capital structure of the company. A
corporate finance career is generally stable, the work culture is of a lot of responsibility
and accountability since it involves raising capital crucial for the growth and expansion of
business in the form of acquisitions, managing cash resources or charting out the
company’s future roadmap by managing cash efficiently.

Professionals in corporate finance deal with lawyers, researchers, finance providers and
other key professionals which are the driving force behind any organization, hence there
is a lot of learning opportunity available for a corporate finance professional. Good
analytical and problem-solving skills along with commercial awareness are the key
ingredients, companies look for in a candidate planning to make a corporate finance
career.
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Corporate Finance Career Path | Top 9 Jobs You Must Explore!
Home » Finance Careers » Corporate Finance Career Path | Top 9 Jobs You Must Explore!

Career Prospects in Corporate Finance

Corporate Finance Career – Companies need funds to thrive in business, looking into every
aspect of funds needed by a company is referred to as Corporate Finance. It can be defined
primarily as the optimum utilization of the financial resources of the company, it is that
area of finance which deals with the arrangement of funds for various projects at
minimum possible cost, so as to maintain the capital structure of the company. A
corporate finance career is generally stable, the work culture is of a lot of responsibility
and accountability since it involves raising capital crucial for the growth and expansion of
business in the form of acquisitions, managing cash resources or charting out the
company’s future roadmap by managing cash efficiently.

Professionals in corporate finance deal with lawyers, researchers, finance providers and
other key professionals which are the driving force behind any organization, hence there
is a lot of learning opportunity available for a corporate finance professional. Good
analytical and problem-solving skills along with commercial awareness are the key
ingredients, companies look for in a candidate planning to make a corporate finance
career.

Corporate Finance Career Positions

#1 – Financial Analyst
#2 – Cost Analyst
#3 – Credit Manager
#4 – Cash Manager
#5 – Benefits Officer
#6 – Real Estate Officer
#7 – Investor Relations Officer
#8 – Treasurer
#9 – Controller
Corporate Finance Organizational Structure
Skill set for Careers in Corporate finance
Conclusion
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Corporate Finance Career Path
Let’s take a deeper look into some of the most sought-after top 9 corporate finance career
paths.

#1 – Financial Analyst
Role of Financial Analyst
The career of Corporate Finance Financial Analyst can be further classified into capital
budgeting which involves estimation of revenue for annual budget and monitoring the
same from time to time to investigate any deviations.
It also involves assessment of capital proposals and decisions regarding buying or leasing
of a particular equipment.
Financial analysts also differentiate between projects depending upon their profitability.
Every decision has one or more options, to evaluate which option will be better for the
company in the long run is taken by financial analyst for example whether it is profitable
to manufacture a particular product in house or procure it from some other firm
depending upon the comparative cost analysis. (have a look at NPV vs IRR)
Salaries of Financial Analyst
Median salary of Financial Analysts is around $56,928 in United States.

Financial Analyst Salary - Career in Corporate Finance

source: payscale.com
#2 – Cost Analyst
Role of Cost Analyst
A cost analyst is involved in taking decisions regarding cost of any service or product
concerning their pricing.
He/ She also has the role of identifying any areas which will be helpful in cost reduction of
any particular product or service by completely understanding their cost and helping in
taking pricing decisions as well.
Job-order costing, activity-based costing are some of the fields especially in manufacturing
industry where a cost analyst’s profile is most suitable.
Cost Analyst Salary
Median salary of Cost Analyst is around $57,946 in United States.

Cost Analyst Salary - Corporate Finance

source: payscale.com

#3 – Credit Manager
Role of Corporate Finance Credit Manager
A credit manager as the name suggests, is involved in the credit decisions of the company,
how much credit is to be given to the suppliers, the rate, credit guidelines, collection of
receivables and their securitization are all decisions taken by a credit manager.
This profile requires in depth financial statement analysis and complete knowledge of the
customer profile so as to take strong decisions.
Credit Manager Salary
Median salary of Credit Manager is around $61,810 in United States.

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Credit Manager Salary - Corporate Finance
source: payscale.com

#4 – Cash Manager
Role of Corporate Finance Cash Manager
Cash manager manages all the short term as well as long-term cash requirements of a
company.
It involves maintaining a healthy relationship with banks for short-term credit needs,
safeguarding the company’s interest by having adequate working capital and investing the
surplus cash in such avenues that can give sufficient interest.
It also requires managing international fund transfers, hence is a meticulous job and
requires you to have excellent negotiation skills.
Cash Manager Salary
Median salary of Cash Manager is around $61,984 in the United States.

Cash Manager Salary - Corporate Finance

source: payscale.com

#5 – Benefits Officer
Role of Benefits Officer
The job of a benefits officer is that of an intersection between finance and human resource.
It involves managing pension funds and other health care benefits and plans which are
cost effective and at the same time are for the benefit of the employee.
Knowledge of organizational behaviour along with human resources and finance is an
added advantage for a candidate planning for this role.
Benefits Office Salary
Median salary of Benefits Officer is around $46,722 in United States.

Benefit Officer Salary - Corporate Finance

source: payscale.com

#6 – Real Estate Officer

Role of Real Estate Officer
Real estate officer as the name suggests has to deal with the real estate issues of a
company, be it purchasing a piece of land, negotiating lease terms and conditions with the
opposite party, acquiring real estate properties and evaluating them.
It requires thorough commercial knowledge of real estate along with finance.
Real Estate Officer Salary
Median salary of Real Estate Officer is around $56,344 in United States.

Real Estate Analyst - Salary Corporate Finance

#7 – Investor Relations Officer

Role of Investor Relations Officer
Investor Relations officer is responsible for maintaining good relations with a company’s
investors, be it individual or institutional investors.
This job role comes into the ambit of PR and advertising since it involves maintaining good
relations with the top executives, replying to institutional investor queries, organizing
investor teleconferences, issuing a press release for corporate events and circulating
financial information about the company valuable for the investing public.
Investor Relation Officer Salary
Median salary of Investor Relation Officer is around $86,770 in United States.

Investor Relation Salary - Corporate Finance

source: payscale.com

#8 – Treasurer
Role of Treasurer
Treasury Management is an all-encompassing function of any company, it gives a holistic
view of all the duties and functions performed by the other departments, by keeping a
check on their activities. A treasurer’s job role involves supervising the treasury
department which is involved in the following processes.

Financing involves analyzing the funding needs of a company and arranging for the
requisite capital either through the bank for short-term funding internal or external
sources which involve equity, debt, bonds, commercial papers et al.
Cash Management involves sorting out the company’s working capital requirement or
daily cash needs by negotiating with the banks for favorable credit terms and keeping
enough cash for it along with parking the surplus cash in short-term investment options.
Risk Management involves managing the risk of each and every aspect of running a
company be it through investing in insurance policies or currency hedges for the
company’s assets or safeguarding the company’s foreign currency and commodity
exposure by regularly checking it.
Pensions Management involves managing a company’s pension fund pool, investing the
funds in the right avenues, managing a particular employee’s payment schedule after duly
considering the pension payment periodicity. It basically involves taking decisions
regarding every aspect of smooth pension fund investment and disbursement.
Treasurer Salary
Median salary of Treasurer is around $87,435 in United States.

Treasurer Salary - Corporate Finance

source: payscale.com

#9 – Controller
Role of Controller
This is a managerial position which involves duties pertaining to financial planning,
accounting, reporting, and cost analysis.
It also requires financial re-engineering and transfers pricing knowledge along with
developing forecasting models for projection of revenues and costs.
The work arena involves property, revenue, benefits, derivatives, lease and joint interest
accounting of a company.
The controller is an experienced professional who is called upon to sort out complex
costing issues and even be the company’s representative in front of the auditors.
Controller Salary
Median salary of Controller is around $76,344 in United States.

Financial Controller Salary - Corporate Finance

source: payscale.com

Corporate Finance Organization Structure

Let’s understand in detail the areas where you can fit in the structure of corporate finance
in an organization. Like any other industry, the corporate ladder has entry, mid and senior
level positions.

Entry Level Corporate Finance Career

At the entry level a bachelor’s degree in finance or economics is needed.
Practical knowledge of MS office along with good communication and analytical skills will
give you an edge amongst other candidates.
The entry level positions generally include, Financial Analyst, Cost Analyst, Business
Analyst, Support Analyst and reporting.
Mid-Level Corporate Finance Career
A mid-level professional can be employed in the capacity of a Cash Manager, Strategic
Planner, Sr. Financial Analyst, Budgeting and M&A professionals.
Hence a degree in Masters in Business Administration or a Chartered Accountant is sought
after.
If you have good analytical skills, the ability to pay attention to detail and take quick and
informed decisions when needed then you stand a fair chance at a mid-level position in
corporate finance.
Senior Level Corporate Finance Career
As and when you grow in the organization, with further experience you will be exposed to
more challenging situations, which would help in developing strong management skills
and a solid understanding of macroeconomic factors accompanied by persuasive
communication skills along with excellent leadership skills where you won’t waver in
taking bold financial decisions involving large sums of money.
Such capabilities represent the senior level managers who are at the top of the hierarchy
in corporate finance, the positions include the Chief Financial Officer(CFO), Chief Executive
Officer(CEO), Treasurer, Controller, Special Project and Business Development Managers.
Skillset for Careers in Corporate finance
The corporate finance setup requires an individual to have an analytical mind with the
ability to think on his toes and take decisions based upon careful analysis and research.
The skill set needed for corporate finance career include the following
Problem-solving ability
Leadership skills
Communication skills and persuasion ability
Interpersonal and Intrapersonal skills
Team cohesion and management
Commercial Awareness
Research-based thinking
Understands what is Financial modeling
Networking ability
Comfortable with ambiguities and constantly changing scenarios
Do you like taking challenges head on? Then a career in corporate finance is the place for
you. Studies conducted by Robert Half and Arthur Anderson suggest that there is a steady
demand for finance professionals across the world. CEO’s across the world were polled by
CFO magazine regarding the qualities they seek in finance professionals and they
unanimously stated that “Strategic thinking, fresh perspective and candour” are the most
sought after qualities accompanied by excellent interpersonal and communication skills
because it is a team effort after all.

Conclusion
Corporate finance professionals don’t have any targets to pursue like their marketing
counterparts but their job is a lot more exciting and challenging because the employees
have to take decisions regarding the long term benefit of the organization rather than
achieving sort term goals. Undoubtedly, corporate finance careers jobs are the most
sought after and desired in the entire financial industry worldwide.

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Financial Modeling
Home » Financial Modeling » Financial Modeling Basics » Financial Modeling
What is Financial Modeling
This article discusses the following –

What is a Financial Modeling?

Financial Model Uses
Who builds Financial Models?
Learn Financial Modeling
Financial Modeling Examples
Full Blown Three Statement Financial Model
Discounted Cash Flow (DCF) Model
Leveraged Buyout (LBO) Model
Merger & Acquisition (M&A) model
Sum-of-the-parts (SOTP) financial model
Comparative Company Analysis model
Comparable Transaction Analysis Model
Prerequisites
Build a Financial Model
Financial Model Tips
Best Practices
Recommended Courses

Financial Analyst Modeling Course

Online Course on Financial Modeling
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What is Financial Modeling?
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Financial Modeling Definition –

Financial Modeling is an abstract numerical scenario of a real-world financial situation

used to ascertain the future financial performance by making projections. The user can
manipulate the inputs to maintain the quality of a financial model, which will result in
accuracy and dependency one can have on the outputs.

Financial modeling is either building a model from scratch or work on maintaining the
existing model by implementing newly available data to it. As you can notice all the above
financial situations are of a complex and volatile nature. A financial model helps the user
to gain an in-depth understanding of all the components of the complex scenario.
In Investment Banking, Financial Modeling is used to forecast potential future financial
performance of a company by making relevant assumptions of how the firm or a specific
project is expected to perform in the forthcoming years, for instance how much cash flow a
project is expected to produce within 5 years from its initiation.
It is easily possible to work on individual different parts of the model without affecting the
whole structure and avoiding any huge blunders. It is useful when the inputs are of a
volatile nature and are subject to change with newly available data. So there is a certain
flexibility one can have with the structure when working on Financial Modeling as long as
they are accurate, of course!

Though it sounds complex, it can be learned by steady practice and the appropriate know
how.
What is Financial Model used for?
Financial modeling can be done for various situations; for e.g. valuation of a company,
valuation of an asset, pricing strategies, restructuring situations (merger & acquisition),
etc.

Below are the areas in which Financial modeling is generally used for –

Uses of Financial Modeling

Who builds the Financial Models?
Financial Models are build by the following –

Investment Bankers
Equity Research Analysts
Credit Analysts
Risk Analysts
Data Analysts
Portfolio Managers
Investors
Management/Entrepreneurs
Majorly financial modeling is used for determining reasonable forecasts, prices for
markets/products, asset or enterprise valuation (Discounted Cash Flow Analysis, Relative
Valuation), share price of companies, synergies, effects of merger/acquisition on the
companies, Leverage Buy-out (LBO), corporate finance models, option pricing, etc.

How can you learn Financial Modeling?

There are various ways in which you can learn financial modeling.

Learn Financial Modeling in Excel (Basic) – This is a step by step tutorial on Financial
Modeling. Here you will learn to prepare a financial model of Colgate.
Financial Modeling Course (Advanced) – This is an advanced tutorial on Financial
Modeling. You will learn sector modeling of Banking, Petrochemical, Real Estate, Capital
Goods, Telecommunication and more.
Financial Modeling Examples
There are various financial modeling examples differing in type and complexity as the
situation demands. Financial models are widely used for valuation, sensitivity analysis,
and comparative analysis. There are other uses of financial modeling as well, like risk
prediction, pricing strategy, effects of synergies, etc. Different examples of financial
models cater to their own set of specialties, requirements, and users.
This type of financial model represents the complete financial scenario of a company and
projections. This is the most standard and in-depth form of a financial model.
As the name suggests the model is a structure of all the three financial statements (Income
Statement, Balance Sheet and Cash Flow Statement) of a company interlinked together.
There are also schedules supporting the data. (Depreciation schedule, debt schedule,
working capital calculation schedule, etc.).
The interconnectivity of this model sets it apart, which allows the user to tweak the inputs
wherever and whenever required which then immediately reflects the changes on the
entire model.
This feature helps us to get a thorough understanding of all the components in a model
and its effects thereof.
Important uses of this model are for forecasting and understanding trends with the given
set of inputs.
Historically the model can stretch back as long as the conception of the company and
forecasts can stretch up to 2-3 years depending requirement.
Example #2 Discounted Cash Flow (DCF) Model:
Through this financial model template, you will learn Alibaba’s 3 statement forecasts,
interlinkages, DCF Model – FCFF Model and Relative Valuation.Alibaba Financial Modeling
Template
The most widely used method of valuation in the finance industry is the Discounted Cash
Flow analysis method which uses the concept of Time Value of Money.
The concept working behind this method says that the value of the company is the net
present value (NPV) of the sum of the future cash flows generated by the company
discounted back today.
The discounting of the projected future cash flows is done by the discounting factor. One
rather important mechanic in this method is deriving the ‘discounting factor’. Even the
slightest error in the calculation of discounting factor can lead to enormous amounts of
change in the results obtained.
Usually, the Weighted Average Cost of Capital (WACC) of a company is used as the
discounting factor to discount the future cash flows.
DCF helps to identify whether a company’s stock is undervalued or overvalued. This
proves to be a rather important decision making factor in case of investment scenarios.
In simplicity, it helps to determine the attractiveness of an investment opportunity. If the
NPV of the sum of future cash flows is greater than its current value then the opportunity
is profitable or else it is an unprofitable deal.
The reliability of a DCF model is strong as it is calculated on the base of Free Cash Flow,
thus eliminating all the factors of expenses and only focusing on the freely available cash
to the company.
As DCF involves the projection of future cash flows it is usually suited for working on
financials of big organizations, where the growth rates and financials have a steady trend.
Example #3 Leveraged Buyout (LBO) Model:
LBO Financial Model Example
In a leveraged buyout deal a company acquires other company by using borrowed money
(debt) to meet the acquisition costs. Then the cash flows from the assets and operations of
the acquired company are used to pay off the debt and its charges.
Hence, LBO is termed as a very hostile/aggressive way of acquisition as the target
company is not taken under the sanctioning process of the deal.
Usually cash-rich Private Equity firms are seen to be engaged in LBO’s. They acquire the
company with a combination of Debt & Equity (where a majority is of debt, almost above
75%) and sell off after gaining substantial profit after few years (3-5 years)
So the purpose of an LBO model is to determine the amount of profit that can be generated
from such kind of a deal.
As there are multiple ways a debt can be raised each having specific interest payments,
these models have higher levels of complexity.
Following are steps that goes into making a LBO model;
Calculation of purchase price based on forward trading multiple on EBITDA
Weightage of debt and equity funding for acquisition
Building projected income statement and calculate EBITDA
Calculation of cumulative FCF during the total tenure of LBO
Calculating Ending exit values and Returns through IRR.
Example #4 Merger & Acquisition (M&A) model:
M&A Financial Modeling Example
The M&A model helps to figure out the effect of merger or acquisition on the earnings per
share of the newly formed company after the completion of the restructuring and how it
compares with the existing EPS.
If the EPS increases altogether then the transaction is said to be “accretive”, and if the EPS
decreases than the current EPS the transaction is said to be “dilutive”.
The complexity of the model varies with the type and size of operations of the companies
in question.
These models are generally used by Investment Banking, corporate financing companies.
Following are steps that go into making an M&A model;
Valuing Target & Acquirer as standalone firms
Valuing Target & Acquirer with synergies
Working out an Initial offer for the target firm
Determining combined firms ability to finance transaction
Adjust cash/debt according to the ability to finance the transaction
Calculating EPS by combining Net income and figuring out an accretive/dilutive situation.
Example #5 Sum-of-the-parts (SOTP) financial model:
Sum of Parts Financial Model Example
Valuing of huge conglomerates becomes difficult to value the company as a whole with one
single valuation method.
So, valuation for the different segments is carried out separately by suitable valuation
methods for each segment.
Once all the segments are valued separately, the sum of valuations are added together to
get the valuation of the conglomerate as a whole.
Hence, it is called “Sum-of-the-parts” valuation method.
Usually, SOTP is suitable in the case of a spin-off, mergers, Equity carve-outs, etc.
Example #6 Comparative Company Analysis model:
Comparable Comp Financial Model Example
Analysts while working on a comparative valuation analysis of a company looking for
other similar companies that are equal in terms of size, operations and basically the peer
group companies.
By looking at the numbers of its peers, we get a ballpark figure of the valuation of the
company.
It works on the assumption that similar companies will have similar EV/EBITDA and other
valuation multiples.
It is the most basic form of valuation done by analysts in their firms.
Example #7 – Comparable Transaction Analysis Model
SaaS M&A Transaction Comps

Transaction multiples Model is a method where we look at the past Merger & Acquisition
(M&A) transactions and value a comparable company using precedents. The steps
involved are as follows –

Step 1 – Identify the Transaction

Step 2 – Identify the right transaction multiples
Step 3 – Calculate the Transaction Multiple Valuation
Prerequisites to Learning Financial Modeling
Building a Financial model will only be fruitful when it is giving out results which are
accurate and dependable. To achieve efficiency in preparing a model, one should have a
required set of basic skills. Let’s see what those skills are:

What is Financial Modeling

This article discusses the following –
What is a Financial Modeling?
Financial Model Uses
Who builds Financial Models?
Learn Financial Modeling
Financial Modeling Examples
Full Blown Three Statement Financial Model
Discounted Cash Flow (DCF) Model
Leveraged Buyout (LBO) Model
Merger & Acquisition (M&A) model
Sum-of-the-parts (SOTP) financial model
Comparative Company Analysis model
Comparable Transaction Analysis Model
Prerequisites
Build a Financial Model
Financial Model Tips
Best Practices
Recommended Courses

Financial Analyst Modeling Course

Online Course on Financial Modeling
Complete Investment Banking Training
What is Financial Modeling?
Start Your Free Investment Banking Course

Download IB Excel Templates, Accounting, Valuation, Financial Modeling, Video Tutorials

Financial Modeling Definition –

Financial Modeling is an abstract numerical scenario of a real-world financial situation

used to ascertain the future financial performance by making projections. The user can
manipulate the inputs to maintain the quality of a financial model, which will result in
accuracy and dependency one can have on the outputs.

Financial modeling is either building a model from scratch or work on maintaining the
existing model by implementing newly available data to it. As you can notice all the above
financial situations are of a complex and volatile nature. A financial model helps the user
to gain an in-depth understanding of all the components of the complex scenario.
In Investment Banking, Financial Modeling is used to forecast potential future financial
performance of a company by making relevant assumptions of how the firm or a specific
project is expected to perform in the forthcoming years, for instance how much cash flow a
project is expected to produce within 5 years from its initiation.
It is easily possible to work on individual different parts of the model without affecting the
whole structure and avoiding any huge blunders. It is useful when the inputs are of a
volatile nature and are subject to change with newly available data. So there is a certain
flexibility one can have with the structure when working on Financial Modeling as long as
they are accurate, of course!

Though it sounds complex, it can be learned by steady practice and the appropriate know
how.

What is Financial Model used for?

Financial modeling can be done for various situations; for e.g. valuation of a company,
valuation of an asset, pricing strategies, restructuring situations (merger & acquisition),
etc.

Below are the areas in which Financial modeling is generally used for –

Uses of Financial Modeling

Who builds the Financial Models?
Financial Models are build by the following –

Investment Bankers
Equity Research Analysts
Credit Analysts
Risk Analysts
Data Analysts
Portfolio Managers
Investors
Management/Entrepreneurs
Majorly financial modeling is used for determining reasonable forecasts, prices for
markets/products, asset or enterprise valuation (Discounted Cash Flow Analysis, Relative
Valuation), share price of companies, synergies, effects of merger/acquisition on the
companies, Leverage Buy-out (LBO), corporate finance models, option pricing, etc.

How can you learn Financial Modeling?

There are various ways in which you can learn financial modeling.

Learn Financial Modeling in Excel (Basic) – This is a step by step tutorial on Financial
Modeling. Here you will learn to prepare a financial model of Colgate.
Financial Modeling Course (Advanced) – This is an advanced tutorial on Financial
Modeling. You will learn sector modeling of Banking, Petrochemical, Real Estate, Capital
Goods, Telecommunication and more.
Financial Modeling Examples
There are various financial modeling examples differing in type and complexity as the
situation demands. Financial models are widely used for valuation, sensitivity analysis,
and comparative analysis. There are other uses of financial modeling as well, like risk
prediction, pricing strategy, effects of synergies, etc. Different examples of financial
models cater to their own set of specialties, requirements, and users.

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M&A Modeling CourseLBO Modeling CourseValuation Modeling Course
Following are some of the Financial Modeling examples that are widely used in the Finance
Industry:

Example #1 – Full Blown Three Statement Financial Modeling:

Three Statement LBO Financial Model Example
This type of financial model represents the complete financial scenario of a company and
projections. This is the most standard and in-depth form of a financial model.
As the name suggests the model is a structure of all the three financial statements (Income
Statement, Balance Sheet and Cash Flow Statement) of a company interlinked together.
There are also schedules supporting the data. (Depreciation schedule, debt schedule,
working capital calculation schedule, etc.).
The interconnectivity of this model sets it apart, which allows the user to tweak the inputs
wherever and whenever required which then immediately reflects the changes on the
entire model.
This feature helps us to get a thorough understanding of all the components in a model
and its effects thereof.
Important uses of this model are for forecasting and understanding trends with the given
set of inputs.
Historically the model can stretch back as long as the conception of the company and
forecasts can stretch up to 2-3 years depending requirement.
Example #2 Discounted Cash Flow (DCF) Model:
Through this financial model template, you will learn Alibaba’s 3 statement forecasts,
interlinkages, DCF Model – FCFF Model and Relative Valuation.Alibaba Financial Modeling
Template
The most widely used method of valuation in the finance industry is the Discounted Cash
Flow analysis method which uses the concept of Time Value of Money.
The concept working behind this method says that the value of the company is the net
present value (NPV) of the sum of the future cash flows generated by the company
discounted back today.
The discounting of the projected future cash flows is done by the discounting factor. One
rather important mechanic in this method is deriving the ‘discounting factor’. Even the
slightest error in the calculation of discounting factor can lead to enormous amounts of
change in the results obtained.
Usually, the Weighted Average Cost of Capital (WACC) of a company is used as the
discounting factor to discount the future cash flows.
DCF helps to identify whether a company’s stock is undervalued or overvalued. This
proves to be a rather important decision making factor in case of investment scenarios.
In simplicity, it helps to determine the attractiveness of an investment opportunity. If the
NPV of the sum of future cash flows is greater than its current value then the opportunity
is profitable or else it is an unprofitable deal.
The reliability of a DCF model is strong as it is calculated on the base of Free Cash Flow,
thus eliminating all the factors of expenses and only focusing on the freely available cash
to the company.
As DCF involves the projection of future cash flows it is usually suited for working on
financials of big organizations, where the growth rates and financials have a steady trend.
Example #3 Leveraged Buyout (LBO) Model:
LBO Financial Model Example
In a leveraged buyout deal a company acquires other company by using borrowed money
(debt) to meet the acquisition costs. Then the cash flows from the assets and operations of
the acquired company are used to pay off the debt and its charges.
Hence, LBO is termed as a very hostile/aggressive way of acquisition as the target
company is not taken under the sanctioning process of the deal.
Usually cash-rich Private Equity firms are seen to be engaged in LBO’s. They acquire the
company with a combination of Debt & Equity (where a majority is of debt, almost above
75%) and sell off after gaining substantial profit after few years (3-5 years)
So the purpose of an LBO model is to determine the amount of profit that can be generated
from such kind of a deal.
As there are multiple ways a debt can be raised each having specific interest payments,
these models have higher levels of complexity.
Following are steps that goes into making a LBO model;
Calculation of purchase price based on forward trading multiple on EBITDA
Weightage of debt and equity funding for acquisition
Building projected income statement and calculate EBITDA
Calculation of cumulative FCF during the total tenure of LBO
Calculating Ending exit values and Returns through IRR.
Example #4 Merger & Acquisition (M&A) model:
M&A Financial Modeling Example
The M&A model helps to figure out the effect of merger or acquisition on the earnings per
share of the newly formed company after the completion of the restructuring and how it
compares with the existing EPS.
If the EPS increases altogether then the transaction is said to be “accretive”, and if the EPS
decreases than the current EPS the transaction is said to be “dilutive”.
The complexity of the model varies with the type and size of operations of the companies
in question.
These models are generally used by Investment Banking, corporate financing companies.
Following are steps that go into making an M&A model;
Valuing Target & Acquirer as standalone firms
Valuing Target & Acquirer with synergies
Working out an Initial offer for the target firm
Determining combined firms ability to finance transaction
Adjust cash/debt according to the ability to finance the transaction
Calculating EPS by combining Net income and figuring out an accretive/dilutive situation.
Example #5 Sum-of-the-parts (SOTP) financial model:
Sum of Parts Financial Model Example
Valuing of huge conglomerates becomes difficult to value the company as a whole with one
single valuation method.
So, valuation for the different segments is carried out separately by suitable valuation
methods for each segment.
Once all the segments are valued separately, the sum of valuations are added together to
get the valuation of the conglomerate as a whole.
Hence, it is called “Sum-of-the-parts” valuation method.
Usually, SOTP is suitable in the case of a spin-off, mergers, Equity carve-outs, etc.
Example #6 Comparative Company Analysis model:
Comparable Comp Financial Model Example
Analysts while working on a comparative valuation analysis of a company looking for
other similar companies that are equal in terms of size, operations and basically the peer
group companies.
By looking at the numbers of its peers, we get a ballpark figure of the valuation of the
company.
It works on the assumption that similar companies will have similar EV/EBITDA and other
valuation multiples.
It is the most basic form of valuation done by analysts in their firms.
Example #7 – Comparable Transaction Analysis Model
SaaS M&A Transaction Comps

Transaction multiples Model is a method where we look at the past Merger & Acquisition
(M&A) transactions and value a comparable company using precedents. The steps
involved are as follows –

Step 1 – Identify the Transaction

Step 2 – Identify the right transaction multiples
Step 3 – Calculate the Transaction Multiple Valuation
Prerequisites to Learning Financial Modeling
Building a Financial model will only be fruitful when it is giving out results which are
accurate and dependable. To achieve efficiency in preparing a model, one should have a
required set of basic skills. Let’s see what those skills are:

#1 Understanding of Accounting Concepts:

Building a Financial model is a pure financial document which uses financial numbers
from a company or market. There are certain accounting rules and concepts that are
constant in the financial industry over the world, e.g. US GAAP, IFRS (International
Financial Reporting Standards), etc. These rules help in maintaining the consistency of
presentation of financial facts and events. Understanding these rules and concepts are of
extreme importance to maintain accuracy and quality while preparing to build a financial
model in excel.

Our main focus in Accounting is also to identify and predict the accounting malpractices by
companies. These are normally hidden away. You can see the confessions in Satyam Fraud
Case
#2 Excel Skills:
The basic financial modeling in excel where is where a model is prepared is an application
like MS Excel. A Financial Model excel involves a wide range of complex calculations
spread over multiple tabs which are interlinked to show their relationships with each
other. Having an in-depth working knowledge of excel like formulas, keyboard shortcuts,
presentation varieties, VBA Macros, etc. are a must while preparing a financial model
excel. Keeping knowledge of these skills gives the analyst an edge in his working skills
over others.

#3 Interlinking of Financial Model Statements:

A 3 statement financial modeling needs to be interlinked together. The interlinking allows
key numbers in the model to flow from one statement to the other, thus completing the
inter-relationship between them and showing us the complete picture of the financial
situation of the company. Example of interlinking: 1) Net change in cash (from Cash Flow
Statement) must be linked to Cash in Balance Sheet. 2) Net Income from Income statement
should be linked to Retained Earnings in Statement of Stock Holder’s Equity.

#4 Forecast financial model:

The skill of forecasting financial modeling is important because usually, the purpose of a
financial model excel is to arrive at an understanding of the future scenario of any
financial situation. Forecasting is both an art and a science. Using the reasonable
assumptions while predicting the numbers will give an analyst a close enough idea of how
attractive the investment or company will be in the coming period. Good forecasting skills
increase the dependability of a model.

#5 Presentation:
Financial modeling is full of minute details, numbers and complex formulas. A financial
model is used by different groups like operational managers, management, clients. These
people will not be able to decipher any meaning from the model if the model is looking
messy and hard to understand. Hence, keeping the model simple in presentation and at
the same time rich in details is of great importance.