Management Consultants can come from many walks of life and have a background of a variety of subjects. The recent History graduate about to start at McKinsey is therefore unlikely to have come across Financial Modeling. This is a skill (using Excel of course) that is vital in the consulting industry to complete the research into the companies you have been hired to help. Financial models allow you to analyse large sets of data will help you work out what is and is not working in the business. From this you can therefore spot trends and alter the variables for a more favourable outcome – and provide the perfect financial solutions for your clients.
Financial modeling in Excel involves using VBA and so is considered an advanced Excel skill. It is therefore assumed that basic Excel functions and formatting are known. But where does the ‘advanced beginner’ begin?
1) Firstly, read these 6 points about why a spreadsheet is not a financial model! http://www.plumsolutions.com.au/articles/six-reasons-your-spreadsheet-not-financial-model
2) Now take a look at this article on how to build a financial model. It’s just an overview of the process, not a technical guide. http://www.financial-modelling.net/tutorials/building-a-financial-model-step-by-step
3) http://www.investopedia.com/financial-edge/0812/financial-models-you-can-create-with-excel.aspx Investopedia gives a clear explanation here of the types of financial models that you can create in Excel and what they mean. There are plenty of links to follow for DCF (Discounted Cash Flow) analysis.
And now for the actual learning how to build them in Excel…
4) http://chandoo.org/wp/2010/07/21/financial-modeling-introduction/ Chandoo has a great 6 step guide which goes through financial modeling from start to finish. Includes loads of pdfs to download including cheat sheets and case studies. Definitely a good place to start learning how to get to grips with financial modeling and Chandoo is well known for its Excel tutorials so if anything doesn’t make sense about the terms used to talk about formatting etc. then the answer can surely be found elsewhere on the website (and often already has hyperlinks added to skip straight to those sections as they are talked about within the financial modeling article!)
5) http://www.corality.com/knowledge-and-tools A great website of free resources here on all aspects of financial modeling. Includes a really helpful blog and every tutorials comes with Excel and pdf downloads.
6) http://www.bestpracticemodelling.com/ This Australian site has a good range of materials here – the videos are easy to follow and the downloadable templates mean that you can follow along with them. Includes pdf guides that explain everything step by step too.
7) https://www.youtube.com/user/dezyreuniversity/videos BusinessFinance has a good range of financial modeling tutorials here, usefully split into shorter topics such as three statement models and discounted cash flow. Aimed at investment bankers but same skills apply.
8) https://www.youtube.com/user/edupristine/videos edupristine’s channel offers 9 tutorials based on financial modeling in Excel. 30-40 minutes each. They are previews of their masterclasses and are good demos to check out.
9) http://teten.com/blog/2011/11/10/template-startup-financial-model/ Take a look at this template with 5 tabs showing some of the main forms of financial modeling in Excel.
10) http://www.wework.com/magazine/knowledge/financial-modeling-tips-best-practices-ways-save-sanity/ Finally some top tips on how to save your sanity when modeling in Excel!
For paid courses, the top two recommened ones are quite pricey but worth it!
https://breakingintowallstreet.com/biws/excel-financial-modeling-fundamentals/ Recommended by www.financewalk.com this course from Breaking into Wall Street offers 43 hours worth of videos on financial modeling and works through real life case studies such as a valuation of Wal-Mart and large mergers and acquisitions worth millions of dollars. You get a certificate for completion as well which can be added to your CV list of skills. Costs $247 and is aimed at the absolute basic
http://www.wallstreetprep.com/ Said to be a little harder but more thorough. The basic program is $199 and the premium package is $399 and there is also a $39 Excel crash course if you need to do that beforehand. Includes sample demos on the website (and on Youtube) to see if the style of learning suits you and sample downloads to print too. Also offers public programs across America. You can also sign up for a free newsletter which gives you Excel cheat sheets and finance interview questions which may transfer for consultants.
There is also http://www.lynda.com that offers thousands of free videos in return for a monthly or yearly subscription. For one month it is only $15 and there is this 2 hour video going through all the financial functions in Excel which should be worth the price http://www.lynda.com/Excel-2010-tutorials/Financial-Functions-in-Depth/83199-2.html?srchtrk=index:1%0Alinktypeid:2%0Aq:financial%2Bmodeling%0Apage:1%0As:relevance%0Asa:true%0Aproducttypeid:2
And of course, there is always the old fashioned book to learn from. The top ones are:
1) Financial Modeling using Excel and VBA by Chandan Sengupta
And massive plus for this one – you can read it all online for FREE here! http://jcb.gfedu.net/download/Financial%20Modeling%20Using%20Excel%20and%20VBA.pdf
2) Next Generation Excel: Modeling in Excel for Analysts and MBAs
3) Valuation: Measuring and Managing the Value of Companies by McKinsey & Company Inc. (Tim Koller, Marc Goedhart, David Wessels)
4) Mastering Financial Modelling: A practitioner’s guide to applied corporate finance by Alastair Dey