What Is Investment Banking Financial Modeling?

Are you confused about the professions you can enter after doing a financial modeling course? Are you confused about how you can get into Investment Banking after doing the Financial Modeling course? Well, financial modeling is a broad concept that includes several things in it. Be it recording, forecasting, analyzing, etc. Thus to be precise, one can become an investment banker post doing financial modeling. How? Grab some iced latte and read this article to get answers to your queries!

What Does Financial Modeling Mean? 

Financial Modeling is basically a process of recording the data of a company or a firm. Since it is called financial modeling, you can understand that we are referring to financial data. This data refers to the various kinds of monetary transactions like the profits made, losses incurred, investments, revenue collection, etc.

Financial modeling forms a very important part of a business or a firm. It plays a critical role because through the data that is recorded on the excel sheets, one can analyze and forecast future investments. And in our present society, where there are numerous kinds of transactions the work of systematically recording data has become even more difficult.

Think of a client who is making a payment to your company. The payment can be made in cash, cheques, e-payment, etc. Like this, numerous clients will follow their own payment methods. As part of a financial department, you will have to keep track and record all these data.

What does Investment Banking Mean?

Investment Banking is part of the Banking sector. It is basically a sub-part of it. An investment banker is someone who would help individuals or business firms in raising capital. Also, various kinds of financial advice would be provided to that firm by an investment banker.

Investment Banking is a process that includes underwriting new debt and equity securities, aiding in the sale of securities, helping to facilitate mergers, etc.

Investment Banking Financial Modeling 

Investment Banking is a part of financial modeling. Financial modeling is a process. In this process, several kinds of models are used to evaluate and analyze trends. This evaluation and analysis are important for investment banking. A financial model can be a very simple calculative model or it can be a model consisting of extremely complex calculations. 

The calculations and the models used depend upon several factors like the size of the company, investments, business partners, etc. Investment banking uses this model to analyze the next steps like where to invest, what was the original price at which the asset was purchased, profits expected, creating a relationship between the firm and a client, etc.

Investment Banking thus serves as an intermediary between the business firm and the prospective clients. So as an investment banker you are bound to use various kinds of financial models. Also, since both investment banking and financial modeling fall under the broad category of finance, there are a lot of common concepts and methods that are used. The different kinds of financial models reflect upon the different strategies that are upheld by the investment banker.

Eligibility Criteria To Be Working In Investment Banking Financial Modeling

Investment Banking is a purely finance-related profession. The finance department is always considered one of the most important departments in any industry. It may be the health sector, beauty and wellness sector, educational sector, food sector, etc.

While each of the following sectors might have very different needs and requirements, one thing common among them is the crucial role finance plays. What to purchase, how much to purchase, company funds available, new investments, collaboration with other brands, profits expected, revenue collected, etc. All these things depend upon the financial condition of the company. 

The financial condition of the company decides the money it can afford to spend. A loss-making company would look for collaborations rather than making huge and risky investments. Similarly, a profit-making company would search for newer ways to make better profitable deals. But who decides upon this? A person working in a finance department records data, analyzes, evaluates, calculates, and makes decisions. Thus you can understand the importance of the financial department.

A person willing to work in investment banking financial modeling needs to have a minimum graduation degree. This graduation degree can be a Bachelor of Commerce or Bachelors of Arts in  Finance or Economics or Accountancy.

Though this is the basic criteria, most good companies prefer individuals with a postgraduation degree like an MBA- Master of Business Administration. You can also be someone who has completed a BBA- Bachelor of Business Administration and MBA. In short, you need to be from the field of finance or a field related to it.

Since the fate of a company depends upon the proper functioning of the finance department, inexperienced freshers who have no knowledge about the financial concepts and methods are not taken into consideration.

You can also read: Online Financial Modeling Courses

Skills Needed in Investment Banking Financial Modeling

If you look closely, there are several important skills needed to survive and excel in this field. The more the critical field, the greater the skills that are demanded of you. Here, we have mentioned some of the most basic yet important skills needed to be working in the investment banking financial model. They are:

• Proficiency in MS Excel: This is the foremost requirement of a person who wants to enter this field. All your tasks would be centered around excel. From recording the financial transactions to analyzing and calculating, to making forecasts, all are part of this work. All these tasks would require you to use excel on a daily basis. You have to be swift and highly efficient in using excel.

• Master in Financial Modeling: Financial Modeling and MS Excel go side by side. Financial models are created by using excel and spreadsheets. As an investment banker, you have to be well-familiarized with various kinds of financial models. These financial models will ultimately help you to make important decisions and investments. If you are not efficient enough to handle and understand various kinds of financial models, then this field is not for you.

• Good Calculation Skills: Any field related to finance would require you to possess good calculation skills. Though today you have tools and techniques which can make your work a little bit easy, the ultimate work and calculations have to be done by you. You cannot say that you do not like calculations or you are weak in them. You should be able to do various kinds of calculations- simple and critical at the back of your hands.

• Ability to Analyze: Investment banking is a profession that involves a high level of analytical skills. If you are working in this field or department, you must possess good analytical skills. Through a detailed study of the financial model available to you, proper analysis has to be made. This analysis is a very critical process and possesses great importance to the company. Based on this analysis, investments and client relationships are built. A wrong analysis can lead to a complete downfall of the firm. Though the ability to analyze improves with experience, you should have that analytical mind to grasp knowledge from each experience.
• Handling Difficult Situations: People from the finance department are exposed to probably difficult situations quite frequently. Sometimes it may be the lack of funds, losses, low profits, debts, bad deals with clients, etc. Each of these problems is likely to occur in each and every company. As a person belonging to investment banking financial modeling, you must have the patience and a calm mind to handle such a crisis. Each difficult situation will demand a different and unique way of handling it. Without a composed mind, you cannot come up with solutions.

Also read: Financial Modeling Course 

Types of Financial Models Used Frequently in Investment Banking Financial Modeling

• Three Statement Model
• Merger and Acquisition Model- M&A
• Leveraged Buyout Model- LBO
• Discounted Cash Flow Model- DCF
• Budget Model
• Forecasting Model
• Option Pricing Model
• Initial Public Offering Model- IPO
• Consolidation Model
• Sum of the Parts Model

In addition to these, a forecasting model also has various sub-parts. They are Delphi forecasting, Bottom-Up financial forecasting, Top-Down financial forecasting, statistical forecasting, Correlation forecasting, and asset and liability management forecasting.

Also Read: Can I Learn Financial Modeling on my own

How Can a Financial Modeling Course Help You to Get a Job in Investment Banking Financial Modeling

Finance is a critical industry where a lot of practical knowledge which includes application skills is needed on a regular basis. In such a situation, most companies prefer hiring individuals who have a minimum experience of 2 to 3 years in this industry.

But as a fresher, you would obviously not have these many years of experience. But does that mean that you will never find a job in this field? No. You will get a job only when you can assure your employer about the skills that you possess. These skills when proven give your recruiter the assurance that even after being new to the field, you possess a lot of practical knowledge.

Even if you are a graduate with a B.com degree or a BA degree with finance honors, there will still be a sufficient lack in your practical skills. These degree courses are usually theoretical based with very little scope for practical exposure. Even though earlier separate skill-based courses were not required or demanded, today they are demanded.

The reason is the high competition. With thousands of graduates from different places passing out every year, you have to give your interviewer the idea of the added benefit they have in employing you. Without any extra skill, your resume and 30 other people’s resume look the same with just different pictures.

A financial modeling course is a skill-oriented course that is purely practical-based. The theories are not taught separately because there is an assumption that you are familiar with some of the basic concepts. You are trained on how to apply various theoretical concepts in real-life projects.

The case studies, assignments, tests, and practical sessions will give a huge boost to your skills and applicative knowledge. If you want to get a piece of in-depth knowledge about the finance industry and the skills required to enter investment banking financial modeling, then you can definitely go for this course.

Know about the Best Financial Modeling Courses in India

How To Start A Career in Investment Banking Financial Modeling

Whenever we are starting out a career in any field, we must think about it in a systematic way. Usually, as young freshers, we try to jump a few steps and reach the top. But the fact of the matter is that a professional field has several steps which need to be taken one by one to finally achieve your goal.

If you want to become an investment banker, you cannot join directly as an investment banker. When you join the industry as a newcomer, you will have to join as an investment analyst. After gaining sufficient training and experience in this field you can then apply as an associate investment banker.

Thus after passing through the necessary positions in your field, you can finally join as an investment banker. Usually, it takes a little while to become an investment banker but once you become one there is no looking back. Investment Banking is considered to be one of the most successful career choices. The salary packages offered to investment bankers are also quite good. 

Best Financial Modeling Course You Can Do To Enter Investment Banking Financial Modeling

IIM SKILLS

IIM Skills is considered one of the most well-known online educational platforms across the world providing skill-specific courses to students. The courses provided by it are highly technical and market-oriented. With experienced faculty members who impart their professional knowledge to their students, the institute is one of the most trusted institutes. 

All the courses provided by it are online-based hence students from various cities and countries can do the courses. The prompt reply that is received from the institute’s side regarding doubts and queries has been a great help to students. The financial modeling course provided by this institute is a highly technical and practical-based skill where along with a rich knowledge base, you are going to become an expert in the application of different skills.

Course Provided: Financial Modeling Course

Fees: INR 49,990

Duration of the course: 3 to 4 months

Course Curriculum:

Basic and Advanced Excel

• Introduction and understanding of the Ribbon
• Keyboard shortcuts
• Regular use functions- Vlookup, Index, etc
• Rules of Conditional Formatting
• Data Validation
• Table functions
• Pivot tables, Pivot Charts, and Slicers
• Different types of charts and graphs
• Sensitivity analysis
• Delimit and Flash Fill
• Return functions
• What-If analysis

Accounting Concepts and Financial Statements

• Key Accounting Fundamental concepts
• Concepts of keyline items
• Concept of comprehensive Income
• Relevance of Notes 
• Preparing common size financial statements
• Reading of Annual Report

Ratio/KPI Analysis

• Types of Ratios
• Activity Ratios
• Liquidity Ratios
• Solvency Ratios
• Profitability Ratios
• DuPont formula
• Valuation Ratios
• Basic and diluted EPS
• Financial Summary

Basics of Financial Modeling

• Structure for a financial model
• Creating Scenarios
• Building Revenue
• Preparing different schedules
• Projecting financial statements
• Error tracking skills
• Formatting tips
• Addition of cover page

Types of Financial Models

• LBO Model
• Three-Statement Projection Model
• M&A Model
• Private Equity Return Model
• 13 Week Cash Flow Model

Business Valuation

• Relative Valuation
• DCF Valuation
• NAV Approach
• Football field analysis
• Valuation Output
• Valuation Report
• Pre-money and Post-money valuation

Benefits of Doing this Course:

– Being a highly trusted institute, the certificate you are going to receive at the end of the course is recognized all over the world

– The certificate you get is not just a course completion certificate. The certificate would be awarded to you only when you give the skill-based assessment prepared for you by the experts in the faculty. Once you clear the test with flying colors, you will be given the certificate and be referred to as a certified financial modeler

– A lifetime access to LMS is one of the biggest benefits of this institute. Even after completing the course if you feel like revising a topic you can do so. Any new techniques or tools that have been introduced very recently are always included in the curriculum so that no students miss out on anything. Even after 10 years if you want you can access the LMS by logging in

– The classes are conducted as live virtual classes. So even though the course is online, there will be live practical training. Class assignments and group work will force you to pay greater attention to the skills used in a specific situation

– A huge range of topics are included in the course with specific time allotted to each topic. From the knowledge of all the different models used to the techniques and tools to other important concepts. Various important topics that are frequently used and applied in the field of investment banking are taught during this course. So even while doing a financial modeling course, you will be well-acquainted with the skills and knowledge required to be an investment banker

Professional Courses from IIM SKILLS

• Digital Marketing Course
• SEO Course
• Technical Writing Course
• GST Course
• Content Writing Course
• Financial Modeling Course
• Business Accounting And Taxation Course
• CAT Coaching
• Investment Banking Course
• Data Analytics Course

Also Read,

• Investment Banking Courses for Beginners
• Investment Banking Courses in India
• Investment Banking Analyst Jobs
• Investment Banking as a Career in India
• What is an Investment Banking Course

Frequently Asked Questions

Q1. Is a career in investment banking financial modeling in demand?

Yes. A career related to the field of finance is always in demand. Investment banking forms one of the most important professions. If you are someone who wants to get into this field, then go for it. You are not going to regret your career choice. A career in investment banking financial modeling is and will always remain in high demand due to the important role it plays in a company’s progress. A firm’s progress and rising profits are analyzed and evaluated by an investment banker. Also where to invest and being a mediator in creating a profitable relationship between a client and a company, are some of the key tasks involved in this field.

Q2. What is the average salary of an investment banker in India?

A job of an investment banker is a high pay job. The average salary scale of a job of this stature ranges from 20 lakhs to 30 lakhs per annum. Based on the experience and the particular sector you are working in the range of salary varies.

Q3. How will an FMC help me in investment banking financial modeling?

This is a question that arises in the mind of most students. What you need to understand is that you cannot compartmentalize the concepts in a rigid way. A financial modeler and an investment banker ultimately work under the finance department. So even though the tasks of each of them might differ, their work is interdependent and at times interrelated. A financial modeling course is a professional course that includes an array of topics and skills needed to do good work in this department.

If you carefully scan through the course curriculum of such a course, you will find a lot of common topics and skills that you will learn here. Topics that are very important in the field of investment banking are taught here. Along with the teaching part, there are a lot of practical skill-based assignments for you to work upon. You are taught about the types of financial models and also the ways to analyze them. As an investment banker, this will be one of your major tasks. So, you can well understand the benefits of doing a financial modeling course. 

Conclusion:

One of the major problems of today’s society is stress. Due to heavy competition, there is constant stress among people. While we all do realize that there is competition around us, it is important to not allow that competition to consume us. Good things take time. You can want to get into investment banking and financial modeling. But what’s important is that you do not stress about this and try to improve your skills. The greater stress you take the lesser would be your output.

While it’s important to find a good job with a good salary package, it is more important to have a passion for the work you are doing. When there is an intrinsic love for one’s profession, the stress levels are always under control. A career in investment banking involves taking lots of critical decisions which is at times stressful. But your passion can be the medicine to any kind of stress.

So, all you young folks out there, ready to build a career in this field? Follow your passion and have patience. Get ready for a beautiful career ahead!