Financial Modeling as a range of abilities is required to score organizations, value, Investment banks, exploring houses, mutual funds, and monetary KPO’s and undertaking fund organizations. Financial Modelling is an all-encompassing field of aptitude that takes into account the need of financial specialists for inside and out learning, in light of the two realities and presumptions with reference to whether interest in a specific organization will be beneficial or not.
The utilizations of these ranges of abilities are enormous thus one must pick up inside and out information of these aptitudes and hands-on understanding to make vocation in monetary displaying.
Here are a few questions that all finance aspirants must have come across at one time or the other.
Would it be advisable for me to go for MBA or CFA?
On the off chance that you are considering influencing a vocation in financial management, to go for MBA and in the event that you need to examine back, go for CFA. Both instructive capabilities can land you a position in the money related examination and research division.
Full time MBA shapes your identity as you cooperate with the workforce, other similarly invested individuals and participate in assemble entries.
In the first year of MBA, you will learn general subjects. In the second year, you can concentrate on maybe a couple subjects and do the specialization.
Then again, CFA program is centered on Financial Analysis and spreads subjects like Portfolio Management, Equity, Derivatives and Fixed Income, in detail.
In spite of the fact that it absolutely relies on the individual whether he/she ought to go for MBA or CFA, a portion of the main components is the individual’s enjoying, the capacity to contemplate freely, accessible time and money related condition.
Both of the courses is adequate to you began in financial modeling.
Do I have to finish MBA to land into positions in Financial Analysis?
In no way, shape or form!
You don’t have to finish MBA to get into financial modeling vocations.
There are many particular projects which concentrate on financial modelling in detail and are perceived in advertise. Such projects concentrate on information and function that furnishes you with certainty and range of abilities.
To put it plainly, they offer specializations which set you up for the occupation in future. Some of them even have tie-ups with great organizations and can get you situations.
Is Training Necessary?
To get into financial modeling vocation employments, you have to learn financial modeling and go for Best Financial Course and practice it. You have to choose which program is reasonable to you and whether you are energetic and resolved to put in the required diligent work.
On the off chance that you fit in the qualification criteria and have the correct outlook required for such professions, there are astounding projects accessible in Financial Training.
There is an immense request of financial experts having such vital ranges of abilities and with the correct system, instruction, expertise, experience and information, you can expect great offers from organizations.
We at Imarticus Learning offers financial modeling courses for those finance aspirants who wish to have a career in this field.
In today’s competitive world, merely being a graduate or a post graduate is not an impetus enough to begin your career in Finance. One has to acquire more than just the customary degree, to gain a competitive edge over others, further focused and specialised courses are compulsory.
Out of the array of courses available, you have to be very clear on your objective of taking up a course, also one has to consider if the said course if relevant. What worked in the times of your parents might not have the same value today? Or what your elder sibling did a few years ago might be redundant in the next few years. Financial capability and availability of time should also be a deciding factor.
There are many short term courses in finance. Like explained above there cannot be a ‘best course’, it is a relative term, you need to finalise basis what suits you the best.
There are many short term finance courses in India. Which usually relate to, Personal Finance, Corporate Finance, International Trade Finance, then there are courses in Financial Management, the object of such specialised courses is that delegates know how Finances, Investments and the Economy can affect an individual or an organisation.
Certain short term courses in personal finance can be pursued intermediately or after graduation. The courses in ‘Personal Finance’ are focused on managing individual finances.
Financial Risk Manager & Certified Financial Planner, are both courses which are highly revered in the finance industry. And also accepted globally. If planned appropriately, doing these short term and spanned financial courses, can easily give you an edge over others and help you not only acquire a relevant job but elevate the professional ladder as well.
Under the umbrella of ‘Corporate Finance’, one can choose short term finance courses between, Banking, Analytical, Financial Modelling, and Financial Management Courses. These courses essentially deal with managing the finances of a corporate or a business.
JAIIB & CAIIB programs from IIBF, PGDBO – Post Graduate Diploma in Banking Operations, are certain short term finance courses to consider.
Chartered Financial Analyst Program is holistic programme one can enrol if they want to take their career ahead in the field of analytics in finance. The program enables participants to be experts in Financial Analysis, Equity Research etc…, This is particularly preferred qualification for finance and investment professions. Also, there is a great demand of CFA charter in corporate finance.
Most of the courses can be planned and taken as a staggered approach.
Some additional short term financial courses that can be considered post-graduation are, Financial Modelling courses, this will give you an added advantage to the existing skill sets and widen your recruitment opportunities.
Global Finance and Accounting Program offers practical global accounting knowledge and creates skills to get career opportunities in finance and accounting.
So once again, reiterating on the fact, that clarity in though and a set objective from the short term finance course, based on your personal needs and limitations should be set. The courses mentioned above may be short but are specific enough to help you secure a relevant good paying job on completion.
In recent times, Chartered Finance Analyst (CFA) is a designation which is quite revered and regarded by most as a key certification for professionals in the areas of portfolio management and research.
The chartered finance analyst program is a certification from the CFA Institute. It is a globally regarded certification. It is essentially a self-study methodology, graduate level program for professionals who want to pursue a career in investment. A person coming out of any discipline or academics can pursue the CFA program. Applications to the program are usually from students and undergraduates to an early professional who intent to get a boost to their career. Although it is important to note that just getting a certification will not guarantee the same.
Passing all the three exams of CFA in itself is a very daunting job when compared to the efforts and commitment of the time required as against other management programs like the MBA. In fact, there are many MBA pass outs and CA’s who join CFA to get into core investment banking jobs. CFA gives a great technical grounding and offers broad-based scopes suitable for investment banking, research analyst, equity research and portfolio management.
The CFA course focuses on ethics, portfolio management, accounting, corporate finance, fixed income and equity investments, so basically if one does not have a very specific choice but needs to build their career in the field of finance then they should opt for the CFA certification as it is broad-based, opening many career opportunities.
Passing a CFA exam shows that the person pursuing the same has the ability to show commitment, tenacity, comes across as a professional with resilience, and rigour. In addition to the learnings from the course, the charter holders are also considered internationally mobile as well due to their association with the global professional network.
Some of the most common jobs taken by the CFA professionals
Since CFA focuses on essentially training you on portfolio management skills, this job becomes a no brainer for most pass outs. Under this profile, you are responsible for making financial/investment based decisions for people who have given the control of their money to you or to your company.
Here the profile is responsible for analysing the financial transactions and records of the firm for its clients. Here you need to prepare your observations and reports and primarily have an insight of what the client would want to know about the financial health of the organisation in such a way that nothing essential is overlooked before making any strategic decisions. There are many other nomenclatures for this role within the organisation, such as investment analyst, rating analyst, financial analyst, equity analyst, to name a few.
Here the person needs to provide suggestions that will benefit the firm with professional advice. The CFA course covers corporate finance which will assist the professional to make alternative decisions and suggestions to the third party or the client satisfying their requirements.
Here you are required to keep a track of all financial footprints and documents of the business or company that you are associated with.
Investment Banking Analyst:
Here a person needs to check all possible pit stops, analyse, evaluate, all possibilities before any investment is made. The person usually is responsible for directing and making the firm aware of mergers and acquisitions. The task can be efficiently performed by any CFA pass out as the course has a section on corporate investment, equity investment, economics and more which prepares them to handle such requirements.
These are just a few opportunities out of the many that you can take advantage of if you wish to pursue the CFA certification.
So to conclude, it is quite obvious that in recent times many organisations and individuals alike are getting highly interested in CFA. The fact that a CFA certification will benefit the organisation and the individual in revenue growth and career growth, it is perhaps why most organisations are also considering sending employees usually from the start up a level for this certification as the long-term advantages cannot be ignored.
It is then true to say that the CFA designation does distinguish the charterholders from other counterparts in the eye of professionals and investors. As a successful CFA charterholder has already proved the test of time and their ability and intention of commitment to conducting their professional life according to high professional standards.
One can describe corporate finance as managing financial activities involved in running a corporation. It involves managing the required finances and its sources. The basic role of corporate finance is to maximise the shareholders’ value in both short and long-term.
Corporate finance understands the financial problems of the organisation beforehand and prevents them. Capital investments become an important part of corporate financial decisions such as, if dividends should be offered to shareholders or not, if the proposed investment option should be rejected or accepted, managing short-term investment and liabilities.
Corporate finance is different from business finance, while business finance refers to finance to all types of business such as partnership firms, joint stock companies, etc.., corporate finance includes, planning, raising, investing and monitoring of finance in order to achieve the financial goals of the organisation.
In the planning phase, corporate finance needs to get a clear perspective on certain aspects, essentially the finance of the company has to be decided on questions like, what are the sources of finance, how much finance is required by the company and will it be profitable?
Making capital investments is perhaps one of the most important tasks of corporate finance, which has serious business implications. To raise the finance, the corporate finance has to raise money from the company with the assistance of sources like shares, debentures, banks, financial institutions, creditors etc.., a company may also choose to sell stocks to equity while raising long-term funds for business expansion. Capital financing is a very delicate balancing act. Corporate finance is also supposed to manage short-term financial management with a goal to have enough liquidity to carry out other operations of the organisation.
There are two types of corporate finance, fixed capital and working capital. As the name suggests fixed capital is used to purchase fixed assets like land, building, property, machinery, etc.., while working capital is generally used to purchase raw material and manage day to day fixed expenses like overheads, salaries etc..,.Financing and investing decisions are like two sides to the same coin. The organisation raises finances only when they have suitable projects. In corporate finance there are various tools and techniques which help take appropriate informed investing decisions, hence it is very vital for the financial health of an organisation.
Monitoring the Finance / Managing Risks
Monitoring finance is a science, there is a method to it, it is a very complex job. It requires many tools and techniques. Corporate finance has to control and manage the finance of the company, they have to minimise the risk of investment and at the same time assure maximum returns on the invested capital.
Imarticus Learning is a professional educational institute that deserves a noteworthy mention. This institute strives to bridge the gap between the industry and academics through their offerings of certification courses in Finance and Analytics.
They have been acknowledged numerous times, for their contribution to the field of professional learning, with various awards. Their EY Finacial Analysis Prodegree is one such course, which is considered to be one of the best in the finance community that helps you create enough comprehension of modern financial requirements and will usually be dedicated to understanding Corporate Strategy, why companies exist and how they make money.
So to conclude, finance is the bloodline of any business, it is required in all kinds of setups, big or small, it is required across all phases in the lifecycle of an organisation, to initiate, build stability, survival, and also in the growth of an organisation. Promotional finance is required to start a company, long-term finance is required to build assets, and development finance is required for growth, expansion and diversification of a business.
Visit Imarticus Learning: Jumpstart your career at India’s leading Financial Institute.
Financial Modeling, as a career option has recently come in to the limelight, as a result of which there is a great increase in the number of finance aspirants, looking to make a career in this field. The skills of financial modeling have become somewhat indispensable, when it comes to making a career in the very competitive industry of Finance. Financial Modeling basically refers to drawing up of, a number of models, with the help of tools like MS excel and the likes, in order to project the financial statements of a particular company. In order to get an entry into this exciting field, a professional is required to have in depth knowledge about certain concepts such as, Financial Accounting, Equity Valuation and MS Excel. While belonging to a background related to Finance, may seem sufficient education qualification, in this highly competitive world, it does not cut it. This is mainly the reason why, a lot of professional education institutes are becoming popular by the day. Institutes like Imarticus Learning, which excel in offering tailor made, industry endorsed courses in various branches of Finance like, asset management, portfolio management, investment banking as well financial modeling; are soon becoming the go-to choices of a number of Finance aspirants.
Once you have the proper educational qualifications, with a certification in financial modeling, the options are limitless. The various opportunities that can come your way, include that of an Equity Research Analyst, these professionals work quite a lot with financial models before giving out recommendations to their clients. Financial models play a substantial role in Investment Banking as a number of Investment Bankers perform valuations of target companies, before they go on to pitch buyers and sellers. Other fields which have a number of opportunities for those with an expertise in financial modeling include, Credit Research, Project Finance, Portfolio Investments and so on.
Apart from the job opportunities, there is one more important thing that any Finance enthusiast must know. It is that, there are various different types of Financial Models and it is equally important to have an expertise in almost all of them. There is Equity Valuation model, which deals with the intrinsic value of the company, which is basically obtained by using a number of valuation methods like Trading comparable, Transaction comparable and so on. Then there is the Leveraged Buyout Model, which basically any substantial debt funding that is supported by a small portion of a company’s own equity. Project Finance Model, consists mainly of capital extensive projects, wherein professionals are expected to build models, which project estimate future revenues, costs, funding structures and so on. Credit Models are basically used in order to evaluate the credit risk, which arises from different business segments, this type of models are used mainly in financial institutions as well as, credit rating agencies. Apart from these said models, there are some other models, which include payroll, equity dilution, mergers and so on. While it is a fact that financial modeling can be easily mastered by someone, from the field of finance. It is also true that anyone who doesn’t belong to the field of finance, but has sufficient interest in the field can also think of making it into a career option.
There are a number of advantages of online learning where a student is at liberty to set their own pace of study. As opposed to classroom courses, which have a set schedule and timings, here it depends on the student as to when and where they want to pursue these courses. Today, with the internet connecting the whole world together, in a more global community manner, it is very possible to gain a degree from anywhere across the world. It is an established fact, that online learning courses usually cost considerably less than what a full time degree course does; while at the same time, these offer similar research, knowledge and skills like any other course would.
Online Learning basically refers to a method of delivering online education, or to students who aren’t able to be physically present on campus. There have been various studies, conducted on whether online courses are really, what they are made out to be. There have been a majority of students as well as professors, who advocate the usefulness and efficiency of these courses. In today’s day and age, where acquiring just one basic degree does not do much for one’s career, pursuing a online learning course, while one is working, is soon becoming a popular trend across a number of fields.
This holds very true, especially in terms of the field of Finance. It is popularly known as a very challenging field, which gives great returns to professionals here. But one thing remains here, that is just having one degree is not suffice to make it big in the world of shares and markets. This has resulted in a lot of finance aspirants seeking out online education or online courses, which let them specialize in any of the finance sub fields.
Imarticus Learning is one of the best education institute, which has made a name for itself in the field of online education, by offering industry relevant courses in various subjects of finance. They have received a trove of awards acknowledging their efforts to bridge the gap between academics and industry. They offer the following online courses in Finance;
Certification In Capital Markets
This is a short term, comprehensive program, which provides candidates with a thorough understanding of various financial instruments and the operations in Capital Markets. Being an online course, apart from live videos, this course also focuses on the concept of webinars, for the benefit of its students. On completion the candidates receive the CISI Certification of Introduction to Securities and Investment.
Chartered Financial Analyst
This online course helps candidates in cracking the chartered Financial Analyst Examination, offered by the American based CFA Institute. This credential is not only recognized on a global scale, but is also helps the candidates build a career in financial markets and capital markets arena.
Financial Risk Manager
The FRM is another globally recognized qualification, which is provided by the Global Association of risk Professionals, for those involved in the risk markets. This online course comes equipped with a FRM charter holder mentor, to guide the candidate as well as a unique policy of full refund, if a candidate isn’t able to pass the examination.
Certified Financial Modeling
This is an innovative online program that opens up various opportunities for the candidates in the field of Investment Banking, Private Equity, Budgeting and Financial Control Space. This online course is also instructor led and has great valuable guidance for candidates from an experienced industry professional.
If you consider Basel II, there are two ways of calculating Market Risks VAR:
• Historical Simulation Approach
• Model Building Approach
What makes them different?
Historical Simulation approach is most frequently used by organisations. As the name suggests, we consider daily changes in past/historical values to compute the likelihood of the variations in values of current portfolio between given time frame. The other advanced version of this model places more emphasis on recent observations. The key assumption in historical simulation is that the set of possible future outcomes is fully represented by what occurred in a definite historical time frame/window.
On the other side, model-building approach involves assumptions about the joint probability distributions of the returns on the market variables. This model is also known as variance-covariance approach.
This is more apt for portfolios which has short as well as long positions in their bucket. This consists of commodities, bonds, equities, etc. in the portfolio. Here, the mean and standard deviation are computed from the distribution of the underlying assets returns and the correlation between them.
Daily returns on the investments are normally assumed to be multivariate normal which can be the models biggest drawback. Hence, model-building approach makes it easy to calculate Var.
Model Building approach assumes two things:
• The daily change in the value of a portfolio is linearly related to the daily returns from market variables
• The returns from the market variables are normally distributed
Shortcomings of Historical Simulations
Over reliance on past data can fail to serve the purpose as markets change every moment. The momentum can be gradual or sudden, but does not remain static.
Large number of factors like Technology, regulatory changes, economic conditions, seasonal patterns, etc. influence market and in such scenarios manager who are using historical simulation can face unfavourable situation.
Shortcomings of Model Building Approach
Also this approach is much more complex to use when a portfolio comprises of nonlinear products such as options. It is also a grim task to relax the assumption that returns are normal without a significant increase in totalling time.
When to use? Model building vs. Historical simulation.
Depending on the situation, appropriate model should be adopted by the organisation. While both of them have pros and cons, it is important to list down the objectives of risk model before adopting either of them.
Model building approach producer quicker results and can be used in conjunction with volatility and other correlation procedures.
The advantage of the historical simulation approach is that the joint probability distribution of the market variables is determined by historical data. This approach may not be very complicated however, it is little slow for computation. However, the methodology used in historical simulation is in line the risk factor and does not involve any estimation of variances or covariance’s which are statistical parameters.
One should use historical simulation model only when they have data on all risk factors over a justified historical period if they want the model to depict strong representation of the outcome in future.
To know more about model building join Imarticus Learning’s Financial Modeling Certification Courses, which will help you understanding opportunities in the Investment Banking, Private Equity, Budgeting and Financial Control space.
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By Reshma Krishnan
Many aspiring candidates ask us what is so special about the FMVC program at Imarticus Learning. After all, shouldn’t an MBA suffice? The problem with MBA’s, regardless of which school you go to, is that they don’t teach you role specific issues. For instance, they don’t have specific modeling modules. They will have a forecasting module but they won’t teach you how to model or how to forecast step by step. In the Financial Modelling and Valuation Course (FMVC), India’s leading Forecasting and Financial Modeling program, we teach you the minutae and we go into specifics. One such specific is modeling and forecasting hygiene.
Hard Coding- the model users bane.
This is the first thing I teach in modeling class. Hard Coding is essentially a stand alone number in a cell, which has no back up. It says nothing about the number. You must never hard code a forecasted number because the forecast is always done on the back of an assumption, which has to be modeled in. Hard coded numbers are usually past data, actual data that has been verified and been the result of auditing. A forecasted number should always be a linked number from an assumption.
Staying with hard coded numbers, it always helps to colour code. In fact, in my class, I mark an assignment zero if it is not colour coded. Red hardcoded number tells me that the forecaster had no option but to hard code. All actuals should be in a different colour to forecasts and all delta numbers, that is the variable you are using to arrive at a forecast needs to also be in a different number.
Give the delta its own cell
Let’s say you want to increase the sale of pencils in 2017 by 10% from 2016. You have two ways to do it.
=(2016 revenue cell) x 10% +(2016 revenue cell) = 2017 revenue.
You create a special cell for 10%
= ((2016 revenue cell) x (10% cell) )+(2016 revenue cell) = 2017 revenue.
Here I am assuming that revenue is growing by 10% . This helps me change the delta as I see fit which then changes my model. The delta is the rational for my model. If you hide it within a formula, I have to constantly look at formulas to find my assumptions.
Learn more about Forecasting by joining our course, FMVC,Financial Modeling and Valuation Course, India’s leading program in Financial Modeling and Valuation and focused on improving your chances on having a career in Investment Banking or Equity Research.
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By Reshma Krishnan
We are continuing to understand the Fundamentals of Forecasting. Please click here
The fewer the assumptions, the stronger the forecast – at least in the beginning when you are learning how to model. Most investment Banking models end up running into 40 assumption sheets, each linked to another. While you might believe such minutiae makes a difference, it’s almost always just to make yourself feel better. Yes, your ability to understand every cost element is good, but its futile if your understanding of the industry works or its cost structure is weak. Key assumptions built into the forecast can also be lost, like trees in a forest. Links can be very hard to find. A simple forecast on the other hand helps you understand what drives basic line items while giving you the ability change basic assumptions. So for instance if you are forecasting the cost of a cup of tea, you break the cup of tea into its major elements, milk, tea, sugar. Three basic drivers, but if you decide to link the price of tea not to the retail rate but to an auction rate that is further linked to an auction house pricing, there are many chances your model will be faulty for no tangible benefit.
Forecasting is hard- if it wasn’t, financial modeling and forecasting would not be the number one skill required in financial services, especially Equity Research, or the most popular program in Financial Services Education. It requires patience and a deep thorough understanding of the industry. Forecasting is what Equity Research Analysts do all the time which is why Equity Research Analysts are industry specialists. You won’t find an analyst doing both steel and retail e-commerce. If you are not detail oriented, you are not going to be great at forecasting.
Your forecast is as good as your data, or your weakest link- using solid numbers always feels like an attractive proposition. Investment Bankers love to receive solid data from the clients. Equity Research analysts love to receive solid numbers from the industry or a company but what data do you trust. How often do you use that data? Can you remove the bias in the data. Data you receive from clients will almost always be optimistic, same with industry. Data you receive from Private Equity will almost always be pessimistic. There is bias in every data and your job is to remove bias.
Learn more about Forecasting by joining our course, FMVC, Financial Modeling and Valuation Course, India’s leading program in Financial Modeling and Valuation and focused on improving your chances on having a career in Investment Banking or Equity Research.
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