Building a successful career in the finance domain requires relevant skills for understanding, organizing, analyzing, and extracting insights, from a company's financial data. There has been a significant increase in the demand for financial modeling and valuation skills, as managing data and making data-based decisions has become crucial for new-age organizations.

Financial modeling specialists summarise an organization's expenditure and income in a spreadsheet, to understand how future decisions or events would impact the company financially. Some commonly used financial models include leveraged buyout (LBO) model, discounted cash flow model, sum-of-the-parts model, and merger & acquisition (M&A) model, required for analyzing and taking finance-related decisions in different scenarios. The financial models or modeling tools are also used to estimate the company's valuation and compare it with competitors in the industry.

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Here are a few lucrative data-driven job roles that would convince a finance enthusiast to build her career in the field of financial modeling and valuation —

• Investment banker – Investment bankers provide financial support to different clients across industries and majorly focus on mergers and acquisitions, capital raising, and advisory mandates. As an investment banker, you will create financial models, implement short and long-term financial plans, seek new business opportunities, collectively work with professionals like accountants and lawyers, negotiate financial deals, and research across market conditions, for your clients. If you aim to work specifically within investment banks, your options include International investment banks, independent investment banks, and investment banking departments of commercial banks. Major clients of investment bankers include private corporations, governments, large public companies, and private equity firms.

• Real estate finance analyst – Real estate finance analysts research and analyze the market and take all strategic decisions related to property investments. The design of detailed financial models to determine the profitability of a project. As a real estate financial analyst, your major responsibilities will involve creating cash flow analysis, calculating internal rate of return (IRR), making projections and recommendations regarding the best use of resources, predicting the future potential of a property, and choosing high-return investments properties for your clients or organization. Other than financial modeling, in this field, you would also require knowledge of legal compliance matters, risk management, property valuation, builder-buyer needs, and an in-depth understanding of commercial, residential, and other forms of properties.
• Equity research analyst – Equity research analysts conduct investment researches, provide financial insights related to securities, and build financial models to understand the future of stocks. As an equity research analyst, you would analyze a stock's statistical data, provide buy/ sell/ hold recommendations, identify future opportunities and risks, write reports, and help your clients make the most appropriate investment decisions. You also study the stock market trends, interact regularly with related team members, participate in industry seminars, disseminate ideas for better returns, and generate timely reports. You can either work with a buyer or seller firm or can work with both. Brokerage houses, non-banking financial corporations, mutual fund companies, and securities firms are a few places where you can work and create, update, and manage financial models.

Required knowledge and skills for financial modeling and valuation

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Knowledge of Excel and accounting and finance is the prerequisite for securing a successful career in financial modeling and valuation. You must know how to use basic tools, financial modeling tools, and formatting and conditions in excel. For building an understanding of investment decision techniques, you must know about the time value of money, future value and compounding, present value, net present value (NPV) and discount rate, internal rate of return (IRR), and payback period. Knowledge of how to apply the decision techniques and analyze financial statements is also essential. Mastery in essential valuation concepts like absolute valuation (DCF Method) and relative valuation would enhance your chances of landing a lucrative position across any industry of your choice.

Courtesy: Internshala Trainings (training.internshala.com) – e-learning platform to learn new-age skills from Internshala

(Disclaimer: The article is sponsored and hence promotes some commercial links.)