Financial Modeling Courses for Investment Bankers

Investment banking is part of the overall financial industry that focuses on evaluating the worth of companies. Its primary purpose is to create capital for corporations, governments, and other institutional organizations. They also help manage and facilitate mergers and acquisitions (M&A) such as leveraged buyouts (LBOs), help with corporate restructuring and reorganizations, and in the overall investment of capital by commercial enterprises. That's why financial modeling is an important skill that many investment banking professionals should possess. This article looks at the basics of financial modeling, why investment bankers should consider taking courses, as well as some of the widely recognized educational options out there.

What Is Financial Modeling?

Financial modeling is the process of creating a mathematical model that reflects the historical, current, or projected value or financial performance of a company, a stock, a project, an investment, or financial asset. Models are used to calculate the impact of different variables, such as interest rates or corporate growth rates, on the value of an asset. Financial models are often used by financial analysts to determine how stocks perform based on different factors such as company events or decisions made by management.

A financial model can range from a simple calculation or formula to a complex series of calculations. Virtually any mathematical formula used to calculate or estimate a value related to corporate finance can be used as a financial model.

Commonly used financial models in the field of investment banking include:

• Financial statement modeling
• Discounted cash flow (DCF) analysis
• Accretion/dilution modeling for mergers or acquisitions (M&A)

These, as well as various enterprise value calculations and estimations, assist in the ability to value assets.

Why Take a Financial Modeling Course?

Financial modeling courses are often sought out by those who want to establish themselves in investment banking careers. But they can also prove to be helpful as continuing education courses for people who already work in the industry. As the field of financial modeling encompasses a vast array of modeling tools and techniques, it potentially offers many years' worth of ongoing training.

For example, an investment banking analyst who has primarily engaged in doing DCF equity valuation analysis for several years may benefit from studying course material that presents a methodology for doing accretion/dilution modeling prior to moving into handling mergers and acquisitions.

There are both live instruction courses and online self-study curricula available from almost every business school. Online programs are considerably less expensive and allow students to work their way through the material at their own pace. In some cases, companies may reimburse employees or pay tuition for those who decide to upgrade or take continuing education courses.

Wall Street Prep Premium Package

If you're looking for courses to help you with financial modeling, why not turn to the experts? Wall Street Prep provides online training to those who work in the financial industry by investment bankers. According to the site, which was launched in 2004, instructors teach thousands of students and other professionals. It offers two different financial modeling education packages—a basic and a premium package.

The Wall Street Prep Premium package is designed to mimic the actual experience of a financial analyst and relies heavily on presentations of real-world case studies. This course is used for in-house training at prestigious investment banks. The course material is authored by a group of senior investment bankers from firms such as JPMorgan Chase and Credit Suisse.

The Training

Wall Street Prep Premium provides training in basic financial statement modeling and teaches students how to construct financial statement projection models in Microsoft Excel, including sensitivity analysis and industry best practices. The course has a module completely devoted to DCF analysis, including calculating the weighted average cost of capital (WACC), terminal values, as well as levered and unlevered free cash flow. Other topics include calculating options values and convertible securities.

The M&A section covers assessing accretion or dilution in stock deals, purchase accounting and purchase price allocation, common buy-side and sell-side processes, and adjustments for intangible assets, such as goodwill. The course has a separate segment on leveraged buyouts that covers constructing buyout models used to value a company or calculate returns for investors.

Also covered are the various capital structures common for buyouts, such as bonds, bridge loans, and equity. Considerable attention is given to modeling LBO debt, including analysis of mandatory amortization, senior and subordinated notes, and the effects of preferred stock.

Additional Modules and Extras

Two additional course modules provide thorough instruction in modeling using trading and transaction comparables, including selecting the most relevant multiples for equity evaluation.

Course extras included are free access to Boost, an Excel add-in designed to increase financial modeling efficiency, and access to a library of Excel templates for creating financial models.

Official Certification

After completing the course material and passing an exam, students receive an official certification in financial and valuation modeling. A number of investment banks require this certification and use the Wall Street Prep program for their own in-house financial analyst programs.

Breaking Into Wall Street Premium Package

Another option for professionals is the Breaking Into Wall Street (BIWS) Premium course—also created and taught by professionals. This course costs about the same as the Wall Street Prep Premium package—around $497—and covers essentially the same material as the Wall Street Prep curriculum, including sections on DCF analysis, financial statement modeling, M&A and comparables. The course relies heavily on video training and includes extensive practice exercises in using Excel, comparing different valuations, and examining actual case studies of M&A deals.

This package also includes Excel and financial modeling fundamentals courses at no extra charge. The BIWS course does not offer a free Boost Excel add-on but the package does include a financial and valuation modeling certification upon completion.

Wall Street Training Core Module Packages 2 to 6

The Wall Street Training program does not offer a packaged curriculum that directly corresponds to the Premium programs offered by Wall Street Prep and BIWS. The closest approximation in terms of material covered is contained in packages 2 through 6 of its Core Modules training.

• Package 2 offers instruction in basic evaluation and financial modeling.
• Package 3 provides comprehensive advanced financial modeling that teaches a student how to prepare an integrated five-year financial statement model, including figuring in dividend payments and simulating share buyback programs.
• Package 4 covers corporate finance and valuation methodologies, including trading comparables, although it does not offer in-depth coverage of transaction comparables evaluation.
• Package 5 is about M&A modeling and includes topics such as accretion and dilution merger consequence evaluation, ability to pay analysis, and M&A deal structuring.
• Package 6 covers financial modeling for leveraged buyouts.

Together, the five modules cost $1,850—more than three times the cost of the Wall Street Prep or BIWS programs. However, individuals seeking only specific instruction in one or two areas of financial modeling may save money by purchasing individual courses offered for as little as $150 each. A separate module of in-depth fundamental and advanced Excel training is offered for $500.

The Wall Street Training program offers its own free macros designed to improve the functionality of Microsoft Excel, but they lack the extensive capabilities of the Boost add-on offered by Wall Street Prep. It also gives a financial and valuation modeling certification upon completion of all of the individual financial modeling modules.