What is financial modeling? Do you have experience doing any type of financial modeling? If so, tell me about it?
Financial Modeling gives the company a projected snapshot into the present and future of a what-if scenario. For example, as an entry level Financial Analyst at company ABC, my Finance Manager asked me to build a 5 year projection forecast to determine what impact a 5% increase of materials each year would have to the bottom line. In my model, the control was to keep sales pricing the same YOY (year over year). The model was to show how much costs would increase from a particular supplier, as we purchased nearly 65% of all purchased from this supplier. Historical data over a 10 year period showed an average of 5% increase from this supplier.
In my experience as a Senior Finance Manager, financial modeling is quantitative analysis used to forecast or project hypothetical situations (normally financial or pricing). Financial Modeling plays an important role in long term planning, expansion, development, cost planning, etc. Early in my career, I had worked for a small company with annual sales of 6m. As lead Senior Manager for this company, we were faced with many financial obstacles, to the point where the bank could seize the company's assets since we were in default of the Debt Covenants. I created a financial model including all three financial statements: P&L, BS and CF Statement. The models looked at 3 financial scenarios the company had to flex for options to become in good standing with the bank. One of the options created and the one the company decided to move forward on was to offer higher discount on AR to bring in cash on a faster basis over the next 6 months and to require cash payments and milestone payments on any sales project over 25,000. This was forecasted to pull cash payments forward to meet all debt payments and allow the company to have a cash reserve to cover 2 months worth of all company expenses.
Give a technical definition of financial modeling in your own words and then give an example of your experience with financial modeling. If you do not have any experience that is okay, but always be honest. Most students coming out of college have experience with financial modeling projects, so I would be very surprised if a college graduate did not do a financial modeling project to discuss. Financial Modeling and forecasting is simply What If scenarios (what if the company wants to pay down debt with more cash? what if the company wants to have a price increase on goods?, etc.) Key words to include in your description are: spreadsheet, what if scenarios, Use INDEX AND MATCH instead of V-lookup to query data, use the CHOOSE function to build the scenarios, and make sure to know the difference between inputs and outputs. Don't forget to mention any type of 3D modeling experience (Any employer will find this to be a strength).
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