Financial modelling is used to analyse various financial aspects of a business, such as its cash flow, revenue, expenses, profits, and valuation. It can also be used to analyse investments, capital budgeting, and other financial decisions. They are often created using spreadsheet software, such as Microsoft Excel, which allows for complex calculations and data analysis.

To better understand financial modelling, consider taking the following steps:

• Study relevant concepts: Start by gaining a solid understanding of finance and accounting concepts. Familiarise yourself with financial statements (income statement, balance sheet, cash flow statement), financial ratios, valuation methods, and other key financial metrics. This will provide the necessary knowledge for building financial models.
• Learn Excel: Excel is the primary tool used for financial modeling. Invest time in learning and mastering Excel functions, formulas, and features that are commonly used in financial modeling, such as data manipulation, calculations, and data visualisation. Online tutorials and courses can be helpful in developing Excel skills.
• Take financial modelling courses: Enrol in financial modelling courses or programs offered by reputable institutions or online platforms. These courses provide structured learning, practical examples, and hands-on exercises to help you develop financial modeling skills. Look for courses that cover topics like financial statement modeling, valuation techniques, and scenario analysis. Check out these online resources:
  • The University of Sydney's Centre for Continuing - Financial modelling online courses
  • This LinkedIN article offers a list of free financial modelling courses
• Analyse financial reports: Develop the habit of analysing financial reports, including annual reports and financial statements of publicly traded companies. Pay attention to how financial data is presented, understand the key drivers of performance, and try to connect the numbers to the company's strategy and operations. This hands-on analysis will help you grasp the practical implications of financial modeling.
• Practice with real-world examples: Gain practical experience by working on real-world financial modeling examples. Start with simple models and gradually move on to more complex scenarios. Practice building models for different industries, such as healthcare, technology, or energy, to develop industry-specific knowledge and understand the nuances of modeling in different contexts.

Remember that financial modeling is a skill that develops with practice and experience. The more you engage in modeling exercises, work on real-world examples, and seek feedback, the better your understanding and proficiency will become. Persistence, dedication, and a willingness to continuously learn and refine your skills will contribute to your success in financial modeling.

More resources:

• Access all the teaching and writing from renowned Professor Aswath Damodaran, from Stern School of Business at New York University
• Financial modeling definition and what its used for
• 10 most common types of financial models
• Financial modelling best practice: Hacks for intelligent, error-free modeling