From the course: Financial Modeling Foundations

Why is financial modeling important?

From the course: Financial Modeling Foundations

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Why is financial modeling important?

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- [Instructor] Financial modeling matters in industry. It's a daily activity for anyone in corporate development or investment banking, financial planning analysis, that is FP&A, equity research, commercial banking, corporate finance, and many other areas. So it's something you wanna be familiar with if you are working in the financial field or wanna get into the financial field as part of your career. Now, financial modeling essentially is really around using tools to help make decisions, whether to invest in a company, asset or security, for example, invest in a project or do a merger acquisition. Should we raise capital? All of these are questions that financial models can help us to answer. And the financial model allows decision makers to go through, test scenarios, observe potential outcomes, and then make informed decisions. Financial modeling is primarily done in Excel. The vast majority of it takes place in Excel. There's a lot of talk today about new software programs being used in modeling, and there's a lot of talk about gen AI, generative artificial intelligence, being used for financial modeling. At this point, the vast majority of financial modeling still takes place in Excel, and you have to be very cautious when using gen AI tools for financial modeling. We're gonna talk about that in an upcoming video, but the high-level note here is, at the end of the day, gen AI is not able to replace human financial modeling at present. It's a helpful and useful tool to improve productivity. It is not a substitute for good financial intuition and model building. So keep all this in mind as we go through the course. This is a skill that is useful and in demand, because it helps to run businesses, and that is an ongoing need that will always exist, as long as there are firms and managers guiding them.

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