Financial Modeling is a way to forecast the company’s future or any other security based on historical performance. In this, company’s specific models are prepared, and decisions about the company and its performance can be made.
Microsoft Excel is a spreadsheet tool used worldwide for performing financial modeling as it gives more flexibility. With proper model analysis, decisions like fund requirement, risk associated, offerings, investment, and return analysis can be made.
Why Financial Modeling?
In the business world, what is required is transparency in all the activities you are doing. There are different users of your financial information for various purposes. Financial modeling integrates all aspects (macro environment and microenvironment) into an Excel sheet for better analysis. So, to achieve the objective mentioned above, financial modeling plays a vital role.
How Financial Modeling Tests are Beneficial?
With financial modeling tests, you will strengthen your financial understanding and skills. The financial modeling course from eduCBA is widely recognized in the industry. Clearing their financial modeling test from eduCBA proves that you are groomed with the practical aspects of financial modeling. And with the certificate, you will also get the best finance job.
What Kind of Employers Are There in the Industry?
Financial modeling is a function that is almost required in every practical aspect of the finance industry. Hence, the following are kind of firms that needs qualified staff in the modeling area:
- Investment Banks
- Analytical/Research Firms
- Knowledge Process Outsourcing
- Credit Rating Organizations
- Private Equity
- Hedge Funds
- Mutual Funds
Essential Topics in Financial Modeling Tests
- Historical Ratio Analysis
- Assumptions in Financial Modeling
- Calculating the Historical Ratios
- Projecting the Income Statement
- Projecting Income Statement Revenues
- Projecting Income Statement Costs
- Projecting Working Capital
- Calculating the Turnover Ratios
- Forecasting the Working Capital
- Working Capital Flow Diagram
- Depreciation Schedule
- BASE Equation Projecting Capital Expenditure
- Projecting Depreciation
- Amortization Schedule
- Projecting Intangibles
- Other Long-Term Schedule
- Shareholders Equity Schedule
- Projecting Share Repurchase Buy Back and Effect of Stock Options
- Shareholders Outstanding Schedule
- Projecting Outstanding Shares
- Cash Flow Statements
Master these topics by doing EduCBA’s Financial Modeling Programs or Financial Modeling Internships.
Who can Appear for Financial Modeling Tests?
- People interested in investment banking, equity research, analysis, business planning & strategy, and private management.
- Also, ideal for candidates with any graduation field who want a career in finance.
- The test is to verify your financial modeling skills.
Most of the Candidates Find Difficulty in Passing such Financial Modeling Tests Due to the Following Reasons.
- Time constraint
- Lack of preparation
- Lack of basic Excel or modeling skills
Thus, with eduCBA’s test, you will have confidence.
Sample Financial Modeling Test Questions
Q1. What is the correct formula for finding the average in Excel?
- a) =Avg(AB)
- b) =Average(A1;B1)
- c) = AVERAGE(A1:B1)
- d) =Average(A1B1)
Correct Answer: c) =AVERAGE(A1:B1)
Q2. Sales to total asset base ratio is:
- a) Basic asset turnover (BAT)
- b) Current asset turnover (CAT)
- c) Total asset turnover (TAT)
- d) Net asset turnover (NAT)
Correct Answer: c) Total asset turnover (TAT)
Q3. What can be said about a financial model?
- a) Excel spreadsheet with numbers
- b) Calculation tool
- c) A decision-making tool
- d) Excel containing historical financial data
Correct Answer: c) A decision-making tool
Q4. What is the application of a financial model?
- a) Equity Research
- b) Project Appraisal
- c) Merger Valuation
- d) All of the above
Correct Answer: d) All of the above
Q5. If the current asset is 30 million, current liability is 15 million and inventory is 7 million, what is its Quick Ratio?
- a) 3.1
- b) 2
- c) 1.53
- d) 2.5
Correct Answer: c) 1.53
Q6. Calculate the cost of equity from the data when Beta= 1.5, the risk-free rate is 4%, and the market return is 10%.
- a) 11%
- b) 12%
- c) 13%
- d) 9%
Correct Answer: c) 13%
Q7. DCF stands for:
- a) Discounted Capital Flow
- b) Discounted Commission Flow
- c) Discounted Capacity Flow
- d) Discounted Cash Flow
Correct Answer: d) Discounted Cash Flow
Q8. EBITDA stands for:
- a) Earnings Behalf of Interest, Taxes, Depreciation, and Amortization
- b) Earnings Before Interest, Taxes, Depreciation, and Amortization
- c) Earnings Before Income Taxes, Depreciation, and Amortization
- d) Earnings Between Interest, Taxes, Depreciation, and Amortization
Correct Answer: b) Earnings Before Interest, Taxes, Depreciation, and Amortization
Q9. What is the color formatting code used in Excel?
- a) Blue Font Color: All formulas, Black Font Color: All direct links, Green Font Color: All hard-coded
- b) Blue Font Color: All direct links, Black Font Color: All hard-coded, Green Font Color: All formulas
- c) Blue Font Color: All hard-coded, Black Font Color: All formulas, Green Font Color: All direct links
- d) Blue Font Color: All hard-coded, Black Font Color: All direct links, Green Font Color: All formulas
Correct Answer: c) Blue Font Color: All hard-coded, Black Font Color: All formulas, Green Font Color: All direct links
Q10. What is a net block?
- a) Total of all assets of the company valued at their cost of acquisition
- b) Shareholders’ equity + total liabilities
- c) assets that help companies reap economic benefits over a period of time
- d) The gross block less accumulated depreciation on assets
Correct Answer: d) The gross block less accumulated depreciation on assets
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