By Kristen Walsh
Many finance jobs require forecasting the future, and like forecasting the weather, there’s always room for error. But rain on a beach day is less devastating than investing millions into a project that’s going to fail or wrongly valuing a business before a buyout. That’s why companies are hiring employees with financial modeling skills.
“Making a good financial decision requires not only an understanding of financial concepts but also an ability to think logically and break down complex problems into simpler steps using computer models,” says Bentley Finance Chair Kartik Raman.
It’s the reason that more and more jobs in financial services are relying on extensive computer financial forecasting models and software development, according to according to Assistant Professor of Finance Chenguang Shang, who teaches a graduate course in financial statement analysis and financial modeling at Bentley, starting in fall of 2016. Finance faculty members met with employers and Bentley alumni in the financial services sector to discuss the need for talent when it comes to advanced financial modeling and Excel skills.
Part of Bentley’s Master of Science in Finance curriculum, the course will begin with financial statement analysis, a critical component in corporate finance. The second major part of the course is financial modeling, which aims to help students apply basic corporate finance theories and financial models to practice using sophisticated Excel techniques.
“Students will learn to apply Excel to major subject areas in finance, including the time value of money, equity valuation, stock portfolio development, and options,” says Peter Siy, senior lecturer in finance, who pioneered a similar course at the undergraduate level. “Computer programming and coding using Excel spreadsheets will help them design codes and macros to automate these models.”
Visual Basic programming skills, he adds, are in high demand in the industry. “Students need to understand the theory of finance and when they have that down, need to be able to use all the available technological tools at their disposal.”
Moving beyond theory
When it comes to financial modeling, Raman says that the challenge comes with developing models that will minimize errors and those estimates. “That’s where critical thinking and rigorous testing of models comes into play.”
In theory, it’s about looking at given variables and solving a problem. But life doesn’t work on theory; in practice, many financial decisions are based on expectations of the future.
“You need to make adjustments to models to reflect the frictions in practice and unknown variables,” Raman says. “This requires coming up with reasonable assumptions, then testing out whether those assumptions are meaningful and how sensitive the model is to change with these assumptions.”
The hands-on experience students gain from Bentley’s modeling course will help fill a gap between finance theories and real-world problem solving, says Shang. “Technology has become a crucial part of the business world, and this course offers an excellent opportunity to help students implement financial models in Excel.”
Highly application-oriented and Excel intensive, the course isn’t easy. But Siy says that it “absolutely gets students prepared.”“Students live in Excel and VBA in this class and I see them much more comfortable in a computing environment by the time they finish.”