In this article, we will be looking at the top five financial modeling courses on Coursera that can help you start your career in fields like Investment banking, Equity Research, Accounting, Private Equity, etc. With the rapidly changing business landscape, new challenges & opportunities are emerging. To stay relevant, we should stay updated with the latest trends and a bunch of skillsets. Gone are the days when to enter the finance sector, you had to do a CA/CFA or MBA. In this article, we will discuss one of such skill sets that can help you land a dream job in finance add skills for running your business, or assess companies for investments.
What is Financial Modeling?
A financial model enables effective financial decisions through mathematical and analytical operations. It takes historical data, current industry trends, and likely future assumptions as inputs to give the approximate financial position of a business entity in the future as output.
These models are designed on a spreadsheet with the help of software like MS Excel. Such models help to make effective managerial decisions. Let’s take a look at some of these financial models.
- Three Statement Model
The three-statement model is basic and most renowned in financial modeling. This is a foundation model that paves the way for other advanced models. It takes inputs like historical financial parameters that can be revenue growth, profit margins, capital expenditure, accounts receivables, accounts payable, inventory, etc.
These parameters are combined with current circumstances, & likely future hypotheses give future outputs in the form of a profit & loss account, balance sheet, & cash flow statements and that’s why it is a three-statement model.
- Merger Model
Mergers and acquisitions are one of the prime activities of investment banks. When two or more companies are thinking about coming together, they need to know what can be the financial implications of such activity. Before the actual merger, this model helps to know what will be the position of revenues, profit margins, scales, synergies, cashflows, & capital structure of the merged entity. This model is widely used in investment banking before mergers of multiple entities to proceed in the right direction.
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- Discounted Cash Flow Model (DCF)
This model can be employed for evaluating the valuation of businesses, companies, and enterprises. It evaluates the future cash flows of the entity. These future cash flows are discounted at an appropriate rate to arrive at the present value of future cash flows. DCF enables us to evaluate the actual worth of shares of a company. It empowers investors with a better financial view of the company and makes educated decisions regarding investments. This model is widely used for equity research by investors.
- The sum of the Part Model
The Sum of the part model calculates the value of conglomerates. When business entities have multiple sources of revenue, it is difficult to derive a valuation of the conglomerate. The Sum of models combined helps to decide on this model.
- Leveraged Buyout Model
When a business entity is bought by some other entity with debt, this is a leveraged buyout. In this, up to 90% of funding is debt and equity is minimal. Usually, assets of the acquired business are kept mortgaged against the debt. In such scenarios, the leveraged buyout model helps to make informed decisions. Cash flows generated from the acquired business are utilized to pay the debt.
- Comparable Company Analysis
This model is utilized for the valuation of companies under consideration. It is based on the valuation of a similar company operating in the same industry by market.
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- The initial Public Offering (IPO) model
This model is similar to the discounted cash flow model and comparable company analysis model. In the initial public offer model, we come across one more extra element which is the IPO discount. It enables us to evaluate IPO valuations.
- Option Pricing Model
The option pricing model is statistically very heavy. We use Black-Scholes -Merton model or binomial model. This model utilizes complex statistical formulae to reach the outcomes and consequently, it’s a different model from the rest that utilizes more of an accounting approach.
Why Financial Modeling is So Significant?
Its significance lies in the fact that it has a multi-dimensional application. It can be useful to young college student who wants to start their careers in the field of finance or to any working professional who is interested in brushing up on their financial skills and gaining sound decision-making ability.
These financial models help to know the future cash flows and likely expenses. This helps to make sound financial decisions for corporates and run the business effectively.
This hypothesis works closely with real-life scenarios, so it holds huge significance in the financial sector. We shall look into some of the significant contributions of financial modeling for effective decision-making.
- Future Operational Performance
To grow the business, production, and sales should increase. To meet this requirement, the number of employees required shall be known to businesses. It also should know how to break even units sold by a business to manage profit margins.
- Future Financial Performance
Revenue and profitability are the major concern for the company. Financial models are useful for knowing profit margins and revenue structure for businesses in the future.
- Capital Expenditure Requirements
Capital expenditure is the principal expense for a business. The cost of a project can go north, beyond our rough estimates. To make a sound estimation of the cost of the project, we use financial models.
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- Funds Required For Future Obligations
As the business grows further, its working capital requirements rise. To know the timeline and viable source of funds (debt/ equity financing) financial models are significant.
- Free Cash Flows
The excess cash flow over working capital requirements and expenditure on fixed assets is free. To know the occurrence, financial models are helpful.
- Enterprise Valuation
Financial modeling is also employed to calculate the actual valuations of companies and make investment decisions in equity markets.
- Ratio Analysis
Ratio analysis is the critical parameter for obtaining insights into the company. Ratios like profitability ratio, liquidity ratio, debt to equity ratio, etc. can be used in financial models.
- Trends In Business
It can also be employed to know how profits and revenue will grow. It could be upward, downward, static, no growth, or negative. This can help to make an informed step towards business.
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Top 5 Financial Modeling Courses on Coursera
Coursera is a well-renowned & widely used online education resource for students and working professionals. Coursera has tie-ups with leading global universities and companies to offer quality, job-relevant, and cost-effective online courses worldwide. Coursera offers a range of online learning opportunities from hands-on experience on projects to job-ready certification and degree programs. Let us take a look at the top 5 Financial Modeling Courses on Coursera.
1. Fundamentals of Quantitative Modeling
This is one of the most popular Financial Modeling Courses on Coursera. It is suitable for beginner-level participants. It starts with a basic understanding of historical and present data on the spreadsheet. What do numbers tell us about the performance of the company& how to utilize them to forecast future numbers?
Preparing an effective financial model is the answer to these questions. This Financial Modeling Courses on Coursera is one of the highest-rated in the category with a rating of 4.6 out of 5. This course is an 8-hour course that can be completed flexibly within 4 weeks. This course is divided into 4 modules.
All these modules are in demonstrative format and taught with the help of short videos. Apart from videos, it offers reading material and quiz that helps to understand and test your learning.
Post-completion of this course, you will be able to produce quantitative financial models with the help of acquired insights. The experienced faculty of Wharton School offers these Financial Modeling Courses on Coursera.
Contents Of The Course
- Module 1 Introduction To Models
This module helps to understand how financial models are utilized. This will also cover the four essential mathematical functions used in modeling. It also covers four major types of financial models, their identification, and usage.
- Module 2 Linear Models And Optimization
As the name suggests, this module will help you understand linear models, these are building blocks for the rest of the advanced models. This will introduce you to an implementation of the cost function and production function in the business.
This module will enable you to identify structures of linear modules and understand how this can help to improve output from the business. This module can be utilized for present value calculation and ultimately for valuations.
- Module 3 Probabilistic Model
This module is valuable for capturing risk in the modeling process. It is useful when the data is not sufficient to conclude. During the entire process, this model keeps uncertainty and how this affects the output. You will learn widely used models like the Monte Carlo simulation, regression model, probability distribution model, etc.
- Module 4 Regression Model
This module will help you understand when and how to use regression models. Regression models help with predictive analysis & are useful for uncertain data. It also covers the interpretation of regression models with a better understanding.
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2. Introduction To Spreadsheet And Models
Spreadsheets are one of the most widely used tools for data analytics and visualization. To make the most out of it, the user shall know the fine details of spreadsheets. All the financial models are designed on spreadsheets, so this module is very helpful to plan simple, accurate, and easy-to-understand, financial models.
This course is designed in demonstrative short videos that will cover fine details of spreadsheet tools and formulas. This one of the best Financial Modeling Courses on Coursera can be a great resource for your in-depth understanding of financial modes on spreadsheets.
This course covers MS Excel, the Monte Carlo method, Linear programming, etc. This course is divided into four modules, that can be covered in approximately 6 to 7 hours depending on your speed. The experienced faculty of Wharton School offers these Financial Modeling Courses on Coursera.
- Module 1 Spreadsheet A Tool for Thinking With Numbers
This module addresses spreadsheets with their historical journey and basic usage. It teaches how different data types can be utilized to make effective financial models. There are multiple notations for all the mathematical operations, formulas, conditional reference, and how it functions. By the end of this module, you will understand the optimum usage of a spreadsheet, its function, and formulas, and learn to avoid errors on a spreadsheet.
- Module 2 From Spreadsheet To Model
This module will help you transform from spreadsheets to financial models that will be similar to real-life events. You will discover how to arrange model elements and usage of the objective function. Additionally, you will study the sensitivity model, scenario analysis, and other classic models. After completion of this module, you can build models based on assumptions, decision variables, and outcomes.
- Module 3 Managing Uncertainty And Probability In Financial Model
This module deals with how a spreadsheet deals with uncertainty and probability. You will learn about calculating probability and decision trees, and how to use regression tools and make predictions. You will be able to utilize statistical tools to determine the correlation between variables once you have finished this module.
- Module 4 Stimulation And Optimization
This module covers the use of spreadsheets to create linear programming for optimization and Monte Carlo simulations. You will learn the objective of the Monte Carlo simulation and how it is implemented on spreadsheets. By the end of this module, you will be able to model uncertainty and risks, and optimization of resources with the help of an Excel solver.
3. Modeling Risk and Realities
Effective quantitative models enable you to make informed decisions in either chance of clarity or obscurity of relevant attributes. This course also covers quantitative modeling that reflects complicated reality and how to incorporate risk and uncertainty in your model.
After completion of this course, you will be able to able to make models with your data and make effective business decisions. The eminent faculty of Wharton School offers these Financial Modeling Courses on Coursera.
These Financial Modeling Courses on Coursera can be covered within 7-8 hours with four modules that can be done flexibly. The majority of this course is about risk, Practical modeling, and simulation.
This is one of the highest-rated in the category of Financial Modeling Courses on Coursera with a rating of 4.6 out of 5. Let’s dive into these 4 different modules to understand this course better.
- Module 1 Modeling Decision Low Uncertainty
In this module, you will learn how to examine situations with low uncertainties and choose the right course of action. You will come to know about optimization toolkits and learn to make spreadsheet models from algebraic models. After completion of this module, you will be able to build an optimization model and utilize a solver for making optimal decisions based on the data and adjusting data as per risk elements.
- Module 2 Modeling In High Uncertainty
In this module, you will learn to build models for highly uncertain situations. These models deal with plenty of variables, risk reduction, optimization, sensitivity analysis, etc. By the end of this, you will be able to build models that can handle highly uncertain scenarios with multiple variables and control risk.
- Module 3 Distribution Suitable For Your Data
This module teaches the distribution of random variables to model the future. It also covers appropriate data visualization in Excel, the right distribution of data, and choosing the right model for the hypothesis. After completion, you will be able to do effective data visualization and decide on an effective model for a hypothesis.
- Module 4 Balancing Risk And Reward Using Simulation
In this module, you will learn simulation for comparing different alternatives in continuous distributions that are used to represent uncertainty. You will be able to make judgments in highly uncertain situations with random inputs given as continuous probability distributions. After completion, you can make effective decisions and minimize risk by simulation in a rapidly evolving and complex business environment.
4. Decision-making And Scenario
This course guides you to transform your data into effective business decisions. This course will guide you to improve your modeling capability, structure complex problems, and derive useful insights from them.
Once you can build models on existing realities, alternative scenarios, and possible risks, you can choose the most effective model for your business. This is one of the highest-rated financial model courses on Coursera with a rating of 4.6 out of 5.
This one of the best Financial Modeling Courses on Coursera will prove a significant milestone in your journey to be a financial professional. It is an approximately 7 hours course that is diverged into four modules. These modules are learned on a weekly basis with flexible deadlines.
You will learn about cash flows, financial statements, balance sheets, and investments after completing this course. Let’s have a quick look at them.
- Module1 Evaluation Criteria Net Present Value
This module’s goal is to help you decide wisely about investment ventures. The most effective tool to make an investment decision is Net Present Value.
In this module, you will come across essential components of NPV like the cost of capital, time value of money, its actual utility, and why NPV is preferred over all the other criteria.
After this module, you will be able to understand the significance of NPV over other criteria for selecting a particular project such criteria like ROI, payback, and IRR.
- Module 2 Evaluating Projects
This module is about the evaluation of projects concerning after-tax cash flows. It also gives the importance of future cash flows over others, you should ignore financial costs, the effect of tax, working capital requirements, and opportunity costs, and execute sensitivity analysis.
After completion of this module, you can perform effective and in-depth analysis of projects with a view on cashflows after tax. This will help you make effective profitable financial decisions.
- Module 3 Business Strategies In Financial Terms
This module covers how business transactions, events, and activities transform into financial statements. You will discover the interrelation between these statements and how income and balance sheet statements can be used for forecasting future cash flow statements.
By the end of this module, you will understand how the accounting system translates business activities into financial terms and its effective utilization for forecasting future cash flows.
- Module 4 New Product Value
In this module, you will learn the usage of spreadsheets for effective projections for new product ventures and recalculate automatically in case of any deviations. It enables the calculation of NPV with the help of forecasted statements. By the end of this module, you can explore different risks a new venture may face with all the implications of NPV to make effective and profitable financial decisions.
5. Advance Valuation and Strategy
This course on financial modeling on Coursera dives deep into the ocean of valuation. It discusses tools used by investment bankers and venture capitalists for valuation purposes. These tools are helpful in events like mergers and acquisitions, equity research, and investment decisions.
This course can be a great value addition to executives for impeccable value strategies and students with a basic idea of corporate finance and financial statement analysis. Its series of animation videos explained in a demonstrative manner makes this course suitable for corporates and students alike.
Their Financial Modeling courses on Coursera go far beyond traditional tools and methods employed for valuation. It covers expanded NPV, that integrates DCF, game theory, and real options.
The value of leveraged buyouts, high-tech businesses with negative cash flow, and staged investments in new initiatives will all be better understood by managers. This one of the best Financial Modeling Courses on Coursera is offered by the eminent faculty of Erasmus University, Rotterdam.
- Module 1. Executive Summary
This introductory module provides you with a different approach to strategic investment decisions. This course step by step develops a new valuation framework for strategic investments. These new valuation methods can be interesting and useful for investment bankers, venture capitalists, and private equity investors.
- Module 2. Discounted Cash Flow
In this module, you will learn the application of DCF and its potential for valuation methodology. This course also covers multiple DCF approaches, valuation of leveraged buyouts, forecasting free cash flows, etc. By the end of this, you will have an in-depth understanding of Discounted cash flows.
- Module 3. Corporate Strategy
Strategic planning and conventional corporate finance are connected by this module. Valuations are evaluated using expanded NPV. By the end of this module, you will be able to spot strategic growth value in the market value of the business.
- Module 4. Corporate Real Options
This module covers concepts and valuation principles of real options. This theory enables decision-making in highly uncertain scenarios and weighs on wait-and-see flexibility. By the end of this module, you can evaluate the flexibility component of real options.
Frequently Asked Questions
Q1. Are the financial modeling courses on Coursera offered at specific times?
Ans. No, these courses are 100% online and flexible. Most of these courses are provided in prerecorded, demonstrative short video formats along with notes and quizzes. The participants have the freedom to access courses at their convenience and pace.
Q2. What are the industries I can project myself for a job after the Financial Modeling Courses?
Ans. After completing of course on financial modeling, you can find opportunities in investment banks, private equity investment companies, Asset management firms, etc. One can start their career as a Financial Analyst, Business Analyst, Analyst in FP&A, Financial Reporting analyst, etc.
Q3. Can a nonfinance student join Financial Modeling Courses on Coursera?
Ans. The answer to this question is subjective. Some courses are specifically designed for beginners that start with basic concepts of finance and further build on them while others need basic knowledge of corporate finance and financial statement analysis. It’s recommended to know some basic concepts of finance but even if you don’t, a few courses on financial modeling for beginners will be a good resource to start with.
Q4. How difficult are the Financial Modeling Courses on Coursera?
Ans. It’s subjective, if you have an interest and willingness to learn, it will work for you. Understanding the fundamentals of finance will facilitate and speed up learning.