Why is Financial Modeling Important & How Can It Help You Achieve Your Goals

Chris Haroun
A free video tutorial from Chris Haroun
Award Winning MBA Professor, Venture Capitalist and Author.
4.5 instructor rating • 34 courses • 872,572 students

Lecture description

Why is financial modeling important & how can it help you achieve your goals? Now that we understand how to analyze and create an income statement, balance sheet and cash flow statement, we can project the aforementioned financial statements. Once we are finished with the 4 valuation sections, then we will learn how to come up with the appropriate target prices for companies we are doing research on. 

Learn more from the full course

The Complete Financial Analyst Training & Investing Course

Succeed as a Financial Analyst &Investor by Award Winning MBA Prof who worked @Goldman, in Hedge Funds & Venture Capital

22:31:28 of on-demand video • Updated June 2020

  • 22+ hour complete financial analyst course!
  • #1 Best Selling Investing Course on Udemy!
  • How to pick stocks.
  • Become an expert in Excel for financial analysts (no prior Excel knowledge is required).
  • How to manage a portfolio.
  • How an IPO works.
  • How to build financial models.
  • How to get hired and promoted as a financial analyst.
  • How risk management works.
  • How to use technical analysis.
  • How to value companies.
  • Use and create Excel based templates developed by Chris to help you create financial statements from scratch (meaning income statements, balance sheets, cash flow statements and more).
  • Use and create Excel based templates developed by Chris to help you value companies using several different valuation methodologies, including P/E, P/R and Discounted Cash Flow (DCF).
  • Use and create Excel based templates developed by Chris to help you manage a portfolio.
  • How Monetary Policy works.
  • How Fiscal Policy works.
  • How interest rates are changed and why this is crucial to understand for successful financial analysts.
  • How to pitch long and short ideas to portfolio managers.
  • How to find great venture capital investment ideas.
  • How to come up with mutual fund investment ideas (longs - meaning buys) using an easy to understand top down and bottoms up research process.
  • How to come up with hedge fund investment ideas (longs and shorts) using an easy to understand top down and bottoms up research process.
  • Identify crucial catalysts (timed events) in order to know when the optimal time is to buy or short a stock.
  • Understand how investment banks (the 'Sell Side') can help you be more successful in a hedge fund or mutual fund career.
  • Analyze and understand an income statement (even if you have no experience with income statements).
  • Analyze and understand a balance sheet (even if you have no experience with balance sheets).
  • Analyze and understand a cash flow statement (even if you have no experience with cash flow statements).
  • Understand and use modeling best practices so you can create financial models.
  • Know where to get data in order to build a financial model (in depth understanding of identifying and using/navigating the best free websites and sources to build your financial model)!
  • Create a financial model (projecting the future) for an income statement.
  • Other valuation methodologies, including EV/Sales, EV/EBITDA, P/B, EV/FCF, etc.
  • Create a financial model (projecting the future) for a balance sheet.
  • Create a financial model (projecting the future) for a cash flow statement.
  • Understand valuation best practices so you can create target prices based on your financial models.
  • How to use Discounted Cash Flow (DCF) and how to create the Weighted Average Cost of Capital and Terminal values in order to pick target prices.
  • How to use P/E in order to pick target prices.
  • How to use P/R in order to pick target prices.
  • Come up with a target price based on an average of several different valuation methodologies.
  • Learn about 14 different Financial Analyst jobs and how they overlap and work together (including Investment Banking, Venture Capital, Private Equity, Private Wealth Management etc.).
  • Investment Banking: Understand from a high level perspective what an Investment Bank is as well as what the role/job is of an Investment Banking Financial Analyst, including the pros and cons.
  • Venture Capital: Understand from a high level perspective what a Venture Capital firm is as well as what the role/job is of a Venture Capital Financial Analyst, including the pros and cons.
  • Private Equity: Understand from a high level perspective what a Private Equity firm is as well as what the role/job is of a Private Equity Financial Analyst, including the pros and cons.
  • Private Wealth Management: Understand from a high level perspective what a Private Wealth Management firm is as well as what the role/job is of a Private Wealth Management Financial Analyst, including the pros and cons.
  • Sell Side Research Analyst: Understand from a high level perspective what a Sell Side Research Analyst’s firm is as well as what the role/job is of a Sell Side Research Financial Analyst, including the pros and cons.
  • Sales Trader: Understand from a high level perspective what a Sales Trader’s firm is as well as what the role/job is of a Sales Trader Financial Analyst, including the pros and cons.
  • Buy Side Trader: Understand from a high level perspective what a Buy Side Trader’s firm is as well as what the role/job is of a Buy Side Trader Financial Analyst, including the pros and cons.
  • Mutual Fund: Understand from a high level perspective what a Mutual Fund is as well as what the role/job is of a Mutual Fund Financial Analyst, including the pros and cons.
  • Sell Side Trader: Understand from a high level perspective what a Sell Side Trader’s firm is as well as what the role/job is of a Sell Side Trader Financial Analyst, including the pros and cons.
  • Large Non Finance Company: Understand from a high level perspective what a Large Non Finance Company firm is as well as what the role/job is of a Large Non Finance Company Financial Analyst, including the pros and cons.
  • Equity Capital Markets: Understand from a high level perspective what an Equity Capital Markets’ firm is as well as what the role/job is of a Equity Capital Markets Financial Analyst, including the pros and cons.
  • Hedge Fund: Understand from a high level perspective what a Hedge Fund is as well as what the role/job is of a Hedge Fund Financial Analyst, including the pros and cons.
  • Equity Sales: Understand from a high level perspective what an Equity Sales’ firm is as well as what the role/job is of an Equity Sales Financial Analyst, including the pros and cons.
  • Tech / Artificial Intelligence: Understand from a high level perspective what a Tech / Artificial Intelligence’s firm is as well as what the role/job is of a Tech / Artificial Intelligence Financial Analyst, including the pros and cons.
  • Learn what finance role you are most passionate about pursuing.
English [Auto] Let's talk about financial modeling Now you understand financial statements let's talk about how to create and analyze financial models. So by the end of this section you'll understand what financial modeling is what the best practices are and why this skill is so important for you to be successful as an analyst and a stock picker. OK. Let's kick it off with what is financial modeling. Well it's basically the ability to build out a spreadsheet. Ok several years into the future and understand what the financials will look like in the future for a company is kind of like a crystal ball. Why are we doing this. Because once we finish with financial modeling we can come up with target prices meaning what companies should be worth. OK and how we get into this. Well of course we're in use Excel and we're going to use our knowledge of the three financial statements that we've already studied. OK and we're going to forecast the future for those financial statements and then what we'll do is we'll use a little bit of magic longer term how we'll be able to figure out what the target price is we'll know earnings is we'll know cash flow in revenue. Okay. And then we'll be able to to create your prices based on those three metrics from the three financial statements. Now what we'll do is we'll take an average of all three valuation methodology is K-1 using earnings per share income statement. Another reason Cashell from the cash flow statement and other one are using revenue from the income statement and we'll get the valuations using three different methodologies. And I'll explain that the valuation section very soon in this course. Then what we'll do is we'll divide the target prices by three and care of all those three and we'll get the blended average for what we think the company should be worth that we're analyzing. Okay. So in this section we're just going to study modeling but very soon the course we're going to talk about valuation and this is important because we need to forecast the future for Tony sharks company and then we need to value the company as well if we're going to create the IPO documents an IPO model for for Tony shark plus began.