Recruiter's Glossary

Examples: Budgeting • DCF Analysis • Exit Strategy

Financial Modeling

Term from Business Advisory industry explained for recruiters

Financial Modeling is a way to create detailed spreadsheets that predict how a business or investment might perform in the future. It's like building a digital replica of a company's finances to help make better business decisions. People who do financial modeling take real numbers about a company (like sales, costs, and growth rates) and use them to make educated guesses about future performance. This is similar to how architects use building models before actual construction. Companies use these models for important decisions like buying other businesses, launching new products, or planning budgets. You might also see this referred to as "financial analysis," "financial forecasting," or "business modeling."

Examples in Resumes

Created Financial Modeling tools that helped clients make investment decisions worth over $50M

Developed complex Financial Models for merger and acquisition deals

Led Financial Modeling workshops for junior analysts

Built Financial Forecasting models to predict 5-year company performance

Typical job title: "Financial Analysts"

Also try searching for:

Financial Analyst Investment Analyst Business Analyst Corporate Finance Analyst Financial Advisory Associate Valuation Analyst Business Advisory Consultant

Where to Find Financial Analysts

Professional Organizations

• Financial Modeling Institute
• CFA Institute
• Association for Financial Professionals

Online Learning Communities

Job Resources

Example Interview Questions

Senior Level Questions

Q: Can you explain how you would approach building a merger model for two large companies?

Expected Answer: A strong answer should explain the process of combining two companies' financials, considering synergies, and analyzing the deal's impact. They should mention gathering historical data, making assumptions about future performance, and calculating the combined company's value.

Q: How do you ensure your financial models are accurate and reliable?

Expected Answer: Look for answers about error-checking methods, data validation, sensitivity analysis, and having others review the work. They should also mention keeping formulas simple and documenting assumptions clearly.

Mid Level Questions

Q: What are the key components you include in a three-statement financial model?

Expected Answer: Should mention income statement, balance sheet, and cash flow statement, explaining how they connect. Should discuss how changes in one statement affect the others.

Q: How do you handle assumptions in your financial models?

Expected Answer: Should discuss creating an assumptions section, using historical data to make projections, and making sure assumptions are realistic and well-documented.

Junior Level Questions

Q: What is the difference between fixed and variable costs in a financial model?

Expected Answer: Should explain that fixed costs stay the same regardless of business activity (like rent), while variable costs change with production or sales (like materials).

Q: What Excel functions do you commonly use in financial modeling?

Expected Answer: Should mention basic functions like SUM, IF statements, VLOOKUP, and fundamental calculation abilities. Should show familiarity with Excel as a tool.