Financial Modeling is a way through which we can forecast the future of the company or any other security on the basis of historical performance. In this company specific models are prepared, through which decision about the company and its performance can be made.
Nowadays Microsoft Excel is a spreadsheet tool which is used worldwide for performing, financial modeling as it gives more flexibility. With proper analysis of the model the decisions like fund requirement, risk associated, offerings, investment and return analysis can be done.
Why Financial Modeling?
In the business world what is required is transparency, in all the activities which you are doing. There are different users of your financial information for different purposes. Financial Modeling integrates all aspects (macro environment as well as microenvironment) into an excel sheet for better analysis. So in order 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 finance understandings and skills. The Financial Modeling Course from eduCBA is widely recognized in the industry. Clearing their Financial Modeling test from eduCBA is a proof that you are groomed with the practical aspects of Financial Modeling. And it is needless to say that with the certificate you will land up grabbing the best finance job for you.
Which kind of Employers are there in the Industry?
Financial Modeling is a function which is almost required in every practical aspect of the finance industry. Hence there can be following kind of firms which needs qualified staff in the modeling area:
- Investment Banks
- Analytical/Research Firms
- Knowledge Process Outsourcing
- Credit Rating Organizations
- Private Equity
- Hedge Funds
- Mutual Funds
Important 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, Private management.
- 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 is due:
- Time constraint
- Lack of Preparation
- Lack of Basic Excel or modeling skills
With eduCBA’s test your confidence will be boosted.
Sample Financial Modeling Test Questions:
1. Which is the correct formula for finding average in excel?
- a) =Avg(AB)
- b) =Average(A1;B1)
- c) = AVERAGE(A1:B1)
- d) =Average(A1B1)
Correct Answer: c) =AVERAGE(A1:B1)
2. 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)
3. 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
4. Which 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
5. If Current Asset= 30 million, Current Liability= 15million, Inventory= 7million, What is its Quick Ratio?
- a) 3.1
- b) 2
- c) 1.53
- d) 2.5
Correct Answer: c) 1.53
6. Calculate the cost of equity from the data: Beta= 1.5, The risk free rate is 4%, Market return is 10%.
- a) 11%
- b) 12%
- c) 13%
- d) 9%
Correct Answer: c) 13%
7. 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
8. 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
9. 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
10. What is Net block?
- a) Sum 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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