The chartered accountant qualification is one of India's highest degrees, which requires hard work and relentless dedication from students. To be in pace with the changing times, companies have incorporated the data management system as a result of which financial modelling has become the foundation stone in carving a successful career in today's corporate world.
Financial model
A financial model is a representation of a company's financials. Financial models are typically used to dissect and analyse a company's performance and make predictions about the company's future. Here's why chartered accountants need financial modelling.
1. Acquiring a research-oriented mindset
Chartered accountants are trained well in accounting and taxation, but their approach tends to become mechanical. However, financial modelling trains them to read beyond the financial statements and in between lines. It helps develop an analytical mindset which is very important in investment banking, equity research, and financial analysis.
2. Provide end-to-end financial consultancy
Learning financial modelling will enable your firm to offer a range of solutions like investment banking, equity research, fixed income research, risk management, credit rating, portfolio analysis, etc. This widens your role from being only an auditor, accountant, or tax consultant to being a financial partner of your clients where you help them make critical financial decisions.
Whether you have to value a company, analyse a merger/ acquisition, take a company IPO, and issue shares – the foundation of all this is a detailed understanding of financial modelling.
3. Management reporting
Management reporting includes preparation of financial reports, handling risk and regulatory, and reconciliations. Professionals involved in management reporting are accountable to both the finance and business teams. Therefore, they need to be accurate in their forecasting and planning, which can only be done with the help of financial modelling.
4. Get insights on a company's financial performance and working
Advanced financial modelling will help you learn the fundamentals of how a company operates. Once you understand this thoroughly, your scope for growth in corporate finance is virtually limitless. For example, you will learn that ‘revenue’ is not just a 1-line item in an income statement, but a roll-up of 10-20 different items such as sales pipeline, probability of sales conversion, sales channels, ARPU (average revenue per user), etc.
While Financial Modelling is no substitute for a CA course, a certificate course in financial modeling from a reputed industry body gives professionals the confidence to acquire analytical and forecasting skills. Also, it equips them with the necessary skills to step into research-oriented roles. For the smooth financing of such career upgrades, today, a wide variety of lending options like chartered accountant loans are available in the market.
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