Job Profile of a Financial Modeling Analyst
The job profile of a Financial Modeling analyst pertains to working in equity research, investment banking, corporate development, private equity, corporate finance etc where they perform analysis of financial data, transactions, establish links between the financial statements, prepare presentations, perform sensitivity analysis etc.
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Source: Financial Modeling Job Description (wallstreetmojo.com)
Skills and Education
The basic educational criteria for financial modeling job include:
- Bachelor degree in engineering, mathematics or accounting
- Chartered Accounts, CFAs or MBAs enjoy preference.
Besides, a candidate should acquire the following skills to become a financial modeling analyst –
- Excellent Excel Skills: As a financial modeling analyst, excel skills are expected to be outstanding with exemplary proficiency in using pre-defined formulas, creating charts, building macrosBuilding MacrosMacro in excel is a series of instructions in code that helps automate manual tasks, thereby saving time. Excel executes those instructions in a step-by-step manner on the given data. read more etc. Also, knowledge of VBA along with another programming language (such as Python) is a must to make it big in this field.
- Knowledge of Basic Accounting Concepts: To build a career in the field of finance, one needs to understand the basic accounting conceptsBasic Accounting ConceptsAccounting concepts are the principles, assumptions, and conditions that govern accounting's foundation. They ensure that the accounting is done in a way that the financial statements present a true and fair view.read more. A financial modeler will be required to prepare investment appraisals using various financial techniques like DCF, NPV, IRR etc. and the knowledge of accounting comes handy in such situations.
- Problem-Solving Ability: One of the primary responsibilities of a financial model analyst is to solve problems by creating financial models. So, the analyst must have the ability to build a robust model, ensuring that solving the problem at hand doesn’t lead to another problem.
- Time Management: It is another key aspect of financial modelingFinancial ModelingFinancial modeling refers to the use of excel-based models to reflect a company's projected financial performance. Such models represent the financial situation by taking into account risks and future assumptions, which are critical for making significant decisions in the future, such as raising capital or valuing a business, and interpreting their impact.read more. An analyst will not be praised even after building an effective financial model if it not completed within the stipulated time frame. So, a financial model analyst should be able to manage time to taste success in this career path.
- Ability to Build a Model that is Easy to Understand: The model should be such that it aids the decision making the process of the organization. So, the analyst should build the model in such a way that the decision-makers can understand the model easily and take an informed decision.
Responsibilities
- Build financial models in excelFinancial Models In ExcelFinancial modeling in Excel refers to a tool used for preparing the expected financial statements predicting the company's financial performance in a future period using the assumptions and historical performance information.read more based on historical information and other available industry-specific operating metrics.
- Conduct scenario analysis based on microeconomic and macroeconomic factors to access business riskBusiness RiskBusiness risk is associated with running a business. The risk can be higher or lower from time to time. But it will be there as long as you run a business or want to operate and expand.read more.
- Evaluate companies using various financial valuation methodsValuation MethodsDiscounted cash flow, comparable company analysis, comparable transaction comps, asset valuation, and sum of parts are the five methods for valuing a company.read more, such as DCFDCFDiscounted cash flow analysis is a method of analyzing the present value of a company, investment, or cash flow by adjusting future cash flows to the time value of money. This analysis assesses the present fair value of assets, projects, or companies by taking into account many factors such as inflation, risk, and cost of capital, as well as analyzing the company's future performance.read more, comparable company analysis, capital structureCapital StructureCapital Structure is the composition of company’s sources of funds, which is a mix of owner’s capital (equity) and loan (debt) from outsiders and is used to finance its overall operations and investment activities.read more analysis etc.
- Ensure the accuracy of the new models while enhancing the quality of the existing models.
- Recommend and implement process improvement measures.
- Identify key financial as well as non-financial risks and advise mitigants for those risks.
- Conduct scenario and sensitivity analysisSensitivity AnalysisSensitivity analysis is a type of analysis that is based on what-if analysis, which examines how independent factors influence the dependent aspect and predicts the outcome when an analysis is performed under certain conditions.read more with the intent to support investment activities.
- Update the financial models after each earnings roll out or other similar corporate actions.
- Analyse and identify data required to support model tracking.
Salary for Financial Modeling Job
The financial industry is known for paying high salaries, that too for financial modeling profile. However, the salary varies a lot depending on the candidate’s experience, the company in which they apply and their location – candidates from Chicago and New York can secure relatively higher remunerations.
As far as salary is concerned for financial modeling profile, a financial analyst can earn a salary in the range of $50k to $80k per annum; a private equity analystPrivate Equity AnalystA private equity analyst is an analyst who looks for undervalued companies for a private equity investor to buy, take them private and earn profits. The companies are primarily unlisted, and the risk is higher.read more earns an average salary in the range of $70k to $200k per annum. An investment banking analystInvestment Banking AnalystInvestment Banking Analyst works with investment banking team and expertise in the area of Accounting, Financial Modeling, Project financing, Project Valuation, and Financial statement Analysis. These analyst has deep knowledge in Excel and they are good at VBA to analyze the market data and financial modeling. The analytic work consists of building a financial model for different projects like Infrastructure projects (i.e. Power projects, real estate, etc.).read more gets somewhere between $85k and $180k. The compensation along with bonus is much higher for professionals who have a wealth of experience and are sitting at senior positions.
Experience
The best sort of experience of financial modeling can only be earned while working for investment banks, equity research firmsEquity Research FirmsThe list of top 10 equity research firms in the world comprise: JP Morgan Chases and Co, Bank of America Merrill Lynch, Credit Suisse, Barclays Capital, Citigroup, Goldman Sachs, Morgan Stanley, AllianceBernstein L.P.,UBS, and Nomura Holding Inc.read more or other such firms that are concerned with corporate finance transactions. However, freshers can use the alternative option of online courses to gain experience in financial modeling. Experience primarily means working knowledge of building a financial model from scratch, wherein the analyst is familiar with all the practical challenges and knows how to overcome them.
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