"Strong financial modelling skills"

Plus, while excel modeling skills are not so rare, being able to correctly apply them and differentiate between historic occurence, probability, and possibility, so you’re boss isn’t giving the Senate Committee a blank stare in response to being asked, “So, let me get this straight, your bank’s MBS models wouldn’t accept negative price movement inputs?” is.

Huh…Sorry but advanced modelling in excel using VBA is likely to be a support job, i.e. building tools that the real finance guys use. Just my 0.02€

I agree with Black Swan. You have no idea how many new people come in and ask you “so exactly what you want me to do”. Being able to put in some fancy formula when given exact instruction is one thing, being able to logically put together a solution and able to defend every assumption you made when asked is another

Strong financial modelling skills = being able to create an earnings or company model that links all the financial statements with forecasts. Linking financial statements or computing ratios is the easy part. Forecasting is the harder part because your model is only as good as your assumptions. To forecast, it requires an understanding on the drivers of revenue and being able to model that logic on to a spreadsheet.

hobbes928 Wrote: ------------------------------------------------------- > Strong financial modelling skills = being able to > create an earnings or company model that links all > the financial statements with forecasts. > > Linking financial statements or computing ratios > is the easy part. > > Forecasting is the harder part because your model > is only as good as your assumptions. To forecast, > it requires an understanding on the drivers of > revenue and being able to model that logic on to a > spreadsheet. + 1

It means you are able to build a 20+ page LBO/recapitalization model from scratch… and know exactly how everything flows together. Excel is still king for front office roles as far as I know…

Why does Financial Modeling = Excel programming, spreadsheets right away to everyone? Once upon a time there was no excel, no vba or the like. Warren Buffet and the like still made alot of money and valued companys. Financial Modeling has nothing to do with excel, excel is just a fancy tool.

adehbone makes a good point, first clarify that the firm has computers.

my cfo makes me do all my m&a valuations long-hand. it’s not so bad. i wish i didn’t have to use pen, though.

I can’t imagine doing an M&A valuation longhand…

momothetired Wrote: ------------------------------------------------------- > I see this line in most PE job ads. > > What exactly does this entail? > > Simple inputting formulae into an excel sheet? > > Sorry if this is a noob question, my background is > in com sci / EE, and I’m really curious. > > Any idea if there are any online examples? I don’t know VBA, but I consider that I have strong financial modelling skills on the grounds that I can build a DDM or DCF reliably and in a short space of time. I don’t think it means anything more than that.

this is a very interesting question that I often wonder about myself. I’ve seen this phrase in 90% of the adverts I’ve looked at and sometimes I wonder what exactly they’ll ask me at an interview, for me to be able to confirm I have “strong financial modelling skills”. I work almost solely with spreadsheets and I’d consider myself an advanced user. I know some elements of VBA and can write basic macros from scratch. However, I still don’t really know if that means I can do what they want. I know one comment here suggests just googling it, but I have done that in desperation and still I am no clearer on exactly what an employer will expect you to be able to do. I live in hope that one day I’ll have it though!!

Etienne Wrote: ------------------------------------------------------- > momothetired Wrote: > -------------------------------------------------- > ----- > > I see this line in most PE job ads. > > > > What exactly does this entail? > > > > Simple inputting formulae into an excel sheet? > > > > Sorry if this is a noob question, my background > is > > in com sci / EE, and I’m really curious. > > > > Any idea if there are any online examples? > > > I don’t know VBA, but I consider that I have > strong financial modelling skills on the grounds > that I can build a DDM or DCF reliably and in a > short space of time. I don’t think it means > anything more than that. To keep it simple, if you can build a DCF model correctly, I would agree that it implies you have good financial modelling skills because: DCF model requires forecasting FCF, Forecasting FCF requires forecasting cash flow and income statement Forecasting Income statement requires understanding the business model and being able to model revenue drivers Forecasting Cash flow requires understanding of how the financial statements link. Etc.etc… This is a simple example off the top of my head and I’m leaving out some details, but the point is that if you can build a proper DCF model, it probably means you have good financial modelling skills.

You should be able to find some excel valuation models on line .

kkent Wrote: ------------------------------------------------------- > daj224 Wrote: > -------------------------------------------------- > ----- > > if you dont know, you dont have it > > That’s not true. I’ve worked in finance and real > estate for 17 months and I use Excel–often fairly > high level modeling–quite often and I’m not even > sure what an ad like that would mean. Does that > mean building absurd spreadsheets with 20 or 30 > macros–which my company delegates to on-site > consultants–or does that simply mean you need to > be able to navigate complicated templates with > strong understanding of the formulas and how they > are all connected? There’s a huge difference. > > I’ll second the original poster–any insight into > what “strong financial modeling skills” typically > means? I think it means that you need to be able to build very in-depth spreadheets from the ground up that are both accurate and presentable. 99% of the time, you don’t need VBA, but you should know how to write macros for the 1% of the time you need them. (In Real Estate, how do you calculate construction interest that funds itself without a macro?)

Ditch, Can you tell me which wall street prep package you are using? Is it just the self study or have you attended classes? I would like to discuss further if you can panny145@gmail.com Thanks!

I would say I’m a good skier, but what does that really tell you? These things are all relative, and so too is financial modelling. As many have said above it depends on what position you are applying for “strong financial modelling skills” for a lender, would required considerably less ability than a number of other jobs. I’d say that you should know what best-practice financial modelling is, and be confident to build a model from scratch in this style. If you can’t, or need exceptions, then chances are you’re not strong.

I think bchadwick answers this well. As someone who works in banking on the private side I’ve seen quite a few models from PE shops and companies that want to do business with us and built and tweaked many models myself. Sometimes the “simplest” models are actually the best. It’s not just the technical skills in excel that matter for building good financial models; it is also the ability to understand the key drivers (be it unit price, volume, fixed costs, variable costs, potential assets sales, changes in interest rates, etc etc) that make a model “good”. A good model should reflect the actual environment as accurately as possible. If you can do this in a clean fashion, and sensitize it so that your model responds to changes in key drivers then you have “good financial modeling skills” IMHO.

Sorry for the interruption, but can someone explain why Buffett does not use Excel and he can still tell which business is good?

Buffet days of valuation// I guess are over…now he is more of a trader…trading burlington options etc…