Learn more about our Financial Modeling Classes
Who should attend our Financial Modeling courses?
Our financial modeling and Excel courses are perfect for those interviewing for or starting a job in finance, including investment banking, hedge funds, private equity, real estate, and venture capital. The core finance, accounting, and Excel skills are applicable in almost any financial field.
If you are interviewing for a position in finance, this course will prepare you for typical interview questions, and help you decide which type of firm is the right fit.
Why Learn Financial Modeling at NYIM?
Build Intuition & Analytical Skills: Throughout the course, we will use real-world examples and financial data, so you're prepared for a position as a financial analyst. We use these examples to help build intuition for how financial modeling, accounting, and valuation work together, instead of just providing unfounded formulas. You will also read company financials, presentations, and management commentary to determine the revenue projections and profitability ratios.
Excel Tricks: The class provides extensive Excel tips and tricks that you will need to cut down errors and hours of work daily.
100% Practical: We've cultivated a course that focuses 100% on the practical skills and knowledge required for analyst and associate positions at investment banking, hedge funds, private equity, and asset management.
See for yourself why NYIM is rated the best Financial Modeling Training in NYC by our customers:
100+ 5-star Yelp Reviews: Best Financial Modeling Classes NYC
What are the prerequisites for the Financial Modeling course?
Since the course is intensive in Excel modeling, intermediate-to-advanced Excel skills are required. We offer a Financial Analyst Training Program which includes three days of Excel training for those who need an Excel refresher. Basic knowledge of financial concepts is helpful.
Financial Modeling Course Detailed Overview
Financial Modeling Course PDF Outline
- Finance Principles: Review essential finance concepts, such as Net Present Value (NPV), Internal Rate of Return (IRR), and how to calculate them in Excel.
- Market Capitalization: Learn how to calculate market cap for real companies, and which share count to use (basic versus diluted, and treasury stock method).
- Enterprise Value: What is Enterprise Value and why do we use it? What should and shouldn't be included and why?
- Financial Accounting: Learn accounting principles including accrual versus cash accounting. Analyze the core financial statements, including the income statement, balance sheet and statement of cash flow. Review financial ratios and working capital and discuss how these items impact modeling and valuation.
- Discount Cash Flow Modeling: Learn the "skeleton" of DCF modeling, how to project cash flow and a terminal value, and derive a share price from the model.
- Excel Techniques: Learn various Excel techniques, including Data Validation, CHOOSE, Data Tables, Goal Seek and more.
- Leveraged Buyouts: Review LBOs essentials, the players, and typical transaction structures. Create a simple LBO model to illustrate how these deals work and how private equity firms analyze them.
- Real Company Analysis: At home, review a presentation and financial statements for a public restaurant company. Understand the company's business model, growth drivers, profitability metrics, and other factors that impact valuation.
- Set up the Financial Model: Input historical financials, capital structure and other company information to start setting up your financial model.
- Model Projections: Analyze the company's revenue and expenses via financial statements and management commentary. Adjust for one-time items. Understand what is causing revenue increases/decreases and margin expansion/contraction. What will happen going forward?
- Corporate Valuation: Calculate the WACC for the discount rate. Use the WACC and terminal growth rate to determine the Terminal Value (Gordon Growth Model).
- Derive a value per share: Using the projections and discounted cash flows, derive an equity value per share. Review the model for reasonableness and sensitize the fundamental assumptions.
- Analyze the Model Output: Should we invest in the stock? What more information do we need? Where is our model deficient? Where do we feel confident? How do these projections compare to management's and the analyst community?
What You'll Learn in our Financial Modeling Courses
By the end of our Financial Modeling course, you will feel comfortable answering the following questions during an interview or applying the concepts at your job. You will work on exercises and projects to reinforce these concepts, using real-world companies and examples.
What is Market Capitalization and why is it important?
- Market capitalization = shares outstanding * stock price.
- It measures the total equity valuation (value to the equity holders) of a company.
- Remember, stock prices don’t mean much – a company can split or reverse split. It’s the market cap that informs on the real equity value.
What is Total Enterprise Value (TEV) and why is it important?
- Enterprise value = market cap + debt – cash.
- TEV tells us the value of the company to all its stakeholders, not only the equity holders.
- It is the theoretical total price an acquirer would have to pay to buy the company and settle all the claims against it (using the cash to reduce the purchase price).
- We treat other claims against the business, like preferred stock, minority interests and underfunded pension liabilities, as debt
- We treat excess assets, like investments unrelated to the business operation, property not used in running the business, etc. as cash.
- We don’t double count assets – either the asset generates cash and the value is in the cash flow, or the asset isn’t used in the business and is assumed to be sold for cash and added to the cash balance (even if it isn't ultimately sold).
What share count should I use to calculate market cap?
- Basic shares outstanding includes only the shares issued and outstanding and doesn’t include stock options or restricted stock.
- Since restricted stock hasn’t vested yet (usually management has to either hit performance hurdles or merely remain at the company), we don’t need to include them
- However, stock options, especially those in the money, should be included.
- The most common method is the treasury stock method
- Another method would be to use an option pricing model to value the outstanding stock options and treat that as debt when calculating enterprise value
What is the Treasury Stock Method?
- Method for accounting for the unexercised, outstanding stock options
- This method increases the share count (diluted shares outstanding)
- Add the total options outstanding that are in-the-money
- Assume the company receives cash from the exercise of those options (strike price * the number of options)
- Reduce the share count by assuming the company uses that cash to buy shares at the current market price
What is a DCF model and what is it used for?
- A Discount Cash Flow model is a financial model used to value a company by projecting and discounting future cash flows.
What is unlevered Free Cash Flow?
- It is the free cash flow assuming the company had no leverage. Generally, it is EBITDA - Capex - Taxes - Change in Working Capital, but other items may be included as well. However, interest expenses and debt repayments/raises should not be included. The idea is to determine the value of the whole company and later subtract out debtor claims to derive the value to equity holders.
What cash flows do I discount in a DCF model?
- There are two main methods of DCF modeling: Unlevered FCF and Levered FCF. When using the former, discount the unlevered FCF.
When I sum up the discounted cash flows in the DCF model (unlevered FCF method), what does that represent?
- The enterprise value, or total value to all stakeholders.
After discounting cash flows in a DCF model, how do we derive a value per share?
- When using the unlevered free cash flow method (and the WACC), the discounted cash flows represent the enterprise value, or value to all stakeholders.
- To derive equity value, subtract debt (and other debt-like items like preferred stock), and add cash (and other excess assets).
- To derive the equity value per share, divide the result by the number of shares.
- What is a terminal value and how I do calculate it?
- Once the company's cash flow reaches a steady-state (growing at a steady pace), we need to calculate the terminal value, or the value in the last year of our model.
- One method is to apply an EBITDA multiple to the next year's EBITDA.
- Another method is the Gordon Growth Model: Unlevered FCF / (WACC - terminal growth rate)
What is the WACC and how do I calculate it?
- The weighted average cost of capital takes the weight of each component in the capital structure and multiples it by the cost of that component
- (Cost of equity * equity weighting) + (cost of debt net of tax benefit* debt weighting) + (cost of preferred stock * preferred stock weighting)
- Since interest on the debt is tax deductible (at least to specified limits under the new tax law), we tax-adjust the cost of the debt
What is the CAPM?
- Capital Asset Pricing Model is the method used to calculate the cost of equity
- Cost of equity = Risk Free Rate + beta * Equity Risk Premium
What is a stock?
- A stock is a piece of ownership of a larger company. Stockholders are also called equity holders.
What is a bond?
- A bond is a piece of ownership of debt.
What is a stock option?
- An option to buy or sell a stock at a specified price (usually within a certain timeframe)
- Call option: an option to purchase a stock at a specified price
- Put option: an option to sell a stock at a specified price
When bond yields go up, what happens to prices?
- Prices go down; prices and yields have an inverse relationship.
- Since the new buyer requires a higher yield, the price needs to be lower (the lower you pay, the more you make / i.e., higher yield).
What is an IRR, or Internal Rate of Return?
- Measures the “average” yield of an investment of the investment period
- It is the discount rate that makes the Net Present Value equal to 0 (at what discount rate am I indifferent between investing and not)
What is an LBO (Leveraged Buyout)?
- A leveraged buyout is when an acquirer, usually a private equity firm, buys another company and uses debt to fund a (typically large) portion of the acquisition.
- A form of financial modeling that private equity firms use to evaluate the merits of LBO deals.
What is a cap rate?
- A cap rate is a valuation metric used in real estate
- It is Net Operating Income (NOI) divided by the asset value
What are the three sections in the statement of cash flows?
- Cash flows from operations
- Cash flows from investing
- Cash flows from financing
What is working capital?
- Current assets less current liabilities
- Current assets: cash, inventory, accounts receivable, prepaid expenses
- Current liabilities: accounts payable, accrued expenses, short-term debt
What is days inventory?
If my inventory increases, what is the impact to cash?
- Cash decreases. If inventory balances rise, cash is needed to purchase the additional inventory, thereby decreasing cash.
If my accounts payable increases, what is the impact to cash?
- Cash increases. If it takes longer to pay vendors, cash is being held in the meantime.
How do I calculate LTM (or TTM) and when would I need to?
What is gross margin?
- Revenue less cost of goods sold
What is EBITDA?
- Earnings before interest, taxes, depreciation and amortization
Applications of Excel to Financial Modeling
What Excel features can I use for sensitivity analysis?
- Data Tables (in What-if Analysis)
What Excel features can I use for a drop-down menu?
- With Data Validation, you can create drop-down menus to set up scenarios in financial models.
What Excel tricks should I know to navigate around my financial model?
- Trace precedents: Formulas > Trace Precedents, or CTRL + [
- Trace dependents: Formulas > Trace Dependents, or CTRL + ]
- Editing the active cell with F2 and ESC
- Show formulas
- Named ranges to name specific cells
How to build a financial model
- Research the company: Learn about the company's business, competitors, geographical presence, operating segments, and other relevant information.
- Input the historical date: Start by inputting the historical financial statements, including the income statement, balance sheet, and statement of cash flows. You can pull financial statements from the SEC website, the company's investor relation section on the website, or an aggregation tool like BamSEC.
- Calculate historical financial ratios and metrics: Before projecting future cash flows, you should get a sense for how the business is performing by calculating revenue growth, operating margins, and working capital ratios. These metrics will help you project future cash flows.
- Project future cash flows
- Discount future cash flows
- Audit the model and check for reasonability
- Sensitize key assumptions