Learning financial modelling

I am currently in an entry level job in a prime brokerage function (1 year in), studying for CFA L1 and looking to move into Trading, ER, or Portfolio Mgmt. It looks like most of these jobs are looking for people with modelling experience, which I doubt I will be getting in my job (i sit within product management - my responsibilites are mostly helping to devleop product strategy, financial reporting/PnL analysis, and market research). Any advice on the best way to gain this experience. Night classes? Online classes? I am in NYC. Alternatively, what else can I do to make myself a better candidate for the aforementioned jobs? Thank you!

Deal Maven is a great way to get an intro to financial modelling and to learn how to create models from scratch. Based on other posts it looks like such a program in itself will be limited in helping you get a job in the fields you mentioned. Nothing beats networking to uncover the hidden job market. I do think as you make contacts this might lead people to take you a little more seriously. Just my .02.

The online courses like Wall St Prep and DealMaven may have limited benefit on a resume (probably some benefit, but limited). The main benefit is that you will probably be a little more confident talking about modeling, because you will have seen and practiced more of it. Don’t be fooled into thinking it’s going to be the be-all and end-all, but if you’re interested and have the dough to spend, it can be worthwhile.

You might want to look at a program like The Analyst Exchange. From The Analyst Exchanges website: “The Analyst Exchange is now registered with CFA Institute as an Approved Provider of continuing education programs. If you are a CFA Institute member, you are eligible for up to 34 CE credits.” The program is pricey but worth it if you want modeling experience and you will not have the opportunity to gain it from you current employer.

The best way to learn modeling skills is to go ahead and try to model. As you work on it, then you’ll see your own weaknesses and strengths. In the process, you are essentially trying to mimic the income statement into the future. Start with oil & gas, since it’s likely the easiest. So start with revenue, what goes into to revenue? If it were an oil & gas company, it’s P*Q. Your assumption there is P, since Q is usually provided by the company. You can tweak Q, if you do not believe management. Then figure out a margin. Typically, an oil company will tell you C, so it’s pretty easy, ie (P-C)*Q. If it is not provided, you can also take a look at historical margins, and try to figure out if margins are going to improve or weaken. So, now you should have an EBITDA number. For some, that’s where they stop. For others, you have to go all the way down to EPS. In that case, take a depreciation number by taking the prior quarter and adjust. The tax rate will likely be provided by the company, so take their number and adjust. Now you should have something close to net income. Then take your assumption as to option dilution and share buybacks, and voila, you have an EPS. Now, take a look on bbg, and see if your model is anywhere close to the Street. If not, figure out the hole and plug it. Each sector is different, and you’ll see when you try to get to your revenue what will you need to do.

i’m in corporate strategy right now, and we do all the m&a work. my models are terrible right now. i need to look into these programs.

Go to business school, get the CFA designation, order Wall Street Prep/Deal Maven, and look at sell side models day and night covering all industries

>> “move into Trading, ER, or Portfolio Mgmt” Get a very good MBA. Anything else will be a waste of time. Forget about night classes or online courses.

Easier said than done. The last thing you need is an MBA if your sole objective is to become a financial modeling expert.

Learn the basics with Wall Street Prep and start building your own models. Nothing beasts hands-on experience.

You can also go to: http://www.wilmott.com/ there I think you can get the best answer as almost all the guys posting in the forum are high quanto!

I totally concurr. DM and WSP are great for interview prep but I wouldn’t place them on a resume because - while they do teach you about the financial modeling arena - it’s a pretty dam big arena. It’s not unlike some 26 year old earning her CFA and then having an “I am now prepared to run a fund” mentality. Takes way more than passing three exams to run a fund. Willy

I just stumbled into this collection of little books: http://www.matchettgroup.com/FinancialLearning/Publications/MidnightManuals.aspx The basic “Modeling” mixes basic financial statement modeling (projection, balancing, etc.) with very pragmatic Excel tips and instruction. “Power Modeling” is for putting some spit and polish on themodel (styling, data tables/sensitization, other nice-to-have’s).

Financial Modeling, Simon Benninga 3rd ed. In the MFin program at UofT the profs gave us this book… we never had to use it, but the profs thought it would be helpful. It does a good job tying in Excel.

Trevor- I had just done a search on amazon.com and that came up. Did you use it? Would it be worth the $70?

thems, In your post you ask to different questions. If I understood your long-term goal, you want to move to Trading, ER or PM. To get into these areas, either get a strong MBA and hope to get hired from there, get a PhD in a strong quant discipline (quant trading) or (for ER) get some experience in your target industry and do a CFA. Those are the realistic inroads into those three segments. They all take years of effort. DealMaven, Wall Street, Benninga and similar things two orders of magnitude smaller in terms of effort and, of course, in corresponding benefits. If you want to improve your modelling skills only (but forget ever getting even close to any of the above, other than in a MO function), a used copy of Benning or Jackson will do just fine. DM/WS are too expensive for an individual (given their benefit) unless you get your employer to pay for it.

Why would bulge bracket firms spend the cash to put their recruits through WSP, DM, WST, programs if their going to finish and not be operational. I suspect that one can glean a lot from such courses. If you have the finance skills, excel skills and industry knowledge, coupled with a good prep course, it would seem plausible one could augment the “ccokie cutter” DM/WSP/WST models to meet their analysis needs quite simply.

DarienHacker, where did you find the descriptions of those Midnight Manuals? I had a look on the website and couldn’t find anything. Cheers

duncs, I have several of them. They’re sort of a Cliff Notes style, very terse and compact.

Do you have Benninga as well? Would you recommend them?