Financial Modeling
The Financial Modeling Practical Skills Module helps CFA® Program candidates learn financial modeling by building a best-in-class, three-statement model in Excel. You’ll develop practical financial modeling skills, apply proven techniques, and follow industry financial modeling best practices used by professionals worldwide.
What is financial modeling?
Financial modeling is the process of building structured representations of a company’s financial performance to support analysis, forecasting, and decision-making. Financial models are widely used across investment banking, asset management, corporate finance, and equity research to evaluate investment opportunities and understand how financial variables interact.
Most financial models are built in spreadsheet software such as Excel and combine financial statements, operating assumptions, and forecasting techniques to project future performance. Strong financial modeling skills allow analysts to test scenarios, evaluate risks, and communicate financial insights clearly.
Why financial modeling skills matter in finance
Financial modeling skills are essential for many roles in the investment industry. Analysts use financial models to evaluate businesses, forecast performance, assess valuation, and support investment decisions.
Professionals working in areas such as investment banking, equity research, private equity, corporate finance, and portfolio management rely on financial modeling techniques to analyze financial data and test different strategic scenarios. Developing strong modeling skills helps finance professionals translate complex financial information into structured insights that support better decision-making.
Structure & duration
10–20 hours to complete
Online self-paced
Practical Skills Modules can be completed online at your own pace.
Prerequisites
We recommend candidates have basic familiarity with the principles behind financial modeling or have completed the CFA® Program Level I Financial Statements Analysis content.
Available for Level I only.
Overview of Financial Modeling
Financial modeling skills are essential for anyone pursuing a career in finance. Models synthesize a vast amount of information to help users make better investment and business decisions. The modeler’s technical acumen, design skills, as well as andan understanding of the underlying business determine the model's effectivenesseffectiveness of the model.
In the Financial Modeling Ccourse, you will learn how to build three-statement financial models as is done on Wall Street. You will explore financial modeling best practices, discover optimal model flow and design, and strengthen your Excel skills alongside the instructor in a step-by-step series of videos. Knowledge check questions provide feedback throughout the module. Upon completion, you will be ready to applytackle advancedmorefinancialcomplex modeling techniquescases in practice.
Watch a sample video from the Financial Modeling PSM for a quick lesson in the use of the MIN function.
Financial modeling techniques covered
The Financial Modeling Practical Skills Module introduces a range of techniques commonly used in professional financial analysis. These techniques form the foundation of many real-world financial models used across the investment industry.
During the module, candidates will learn how to:
- Build structured three-statement financial models
- Design model flows that link operating assumptions to financial outcomes
- Forecast revenues, costs, and working capital
- Construct debt and equity schedules within a financial model
- Apply scenario analysis to evaluate different financial outcomes
By working through these techniques step-by-step, candidates develop practical financial modeling skills that can be applied in real-world financial analysis.
Financial modeling best practices
Professional financial models must be accurate, transparent, and easy to understand. Following financial modeling best practices helps ensure that models communicate financial insights clearly and remain reliable as assumptions change.
In this module, candidates learn financial modeling best practices such as:
- Structuring spreadsheets for clarity and usability
- Separating assumptions from calculations
- Linking schedules across financial statements
- Building models that are easy to audit and troubleshoot
- Designing outputs that communicate results effectively
Applying these best practices helps analysts create financial models that function as reliable decision-making tools rather than simple spreadsheets.
Key learning objectives for Financial Modeling
- Explore financial modeling best practices, optimal model design and flow, and financial statements.
- Discover how to build key model schedules, such as revenues, costs, fixed assets, taxes, working capital, debt, and equity.
- Practice advanced Excel techniques in tandem with the instructor.
- Build a working, presentation-ready financial model in Excel.
- Solve the most common financial modeling problems.
Financial modeling skills covered by unit
The module is organized into ten units that guide candidates through the process of building a professional three-statement financial model step by step.
- Explore the purpose and use of financial models.
- Examine the assignment and the company that you will model.
- Discover how to properly plan and design a financial model.
- Explore the common approaches to tab structure.
- Study the optimal flow of a financial model.
- Examine the importance of having a cover page in a financial model.
- Discover the need for a well-designed, customized executive summary.
- Define the optimal way to center titles in a financial model.
- Identify how to properly add headers and footers to your model.
- Explain the importance of having a well-designed assumptions tab in every model.
- Explore powerful custom formatting skills to ensure all the values in your model are clear.
- Discover how to design and build a scenarios page within a model.
- Apply four different methods to create the live case that is used to run the model.
- Examine how to build a combo box to control and change the scenario being used in the model.
- Explore data validation, an alternative way to change the scenario.
- Examine the ideas and themes required to build the model’s engine.
- Explain the importance of a scenario tag and acquire the skills to build it.
- Discover the design, structure, and optimal flow of a revenue schedule.
- Explore the reasons behind building a capacity constraint into a financial model and apply the techniques to do so.
- Examine the importance of forecasting both variable and fixed costs in a financial model.
- Practice the four steps to properly build up a cost schedule in any model.
- Discover how to back into the variable and fixed costs if they were not provided.
- Determine whether the company you are modeling is experiencing operating leverage.
- Explore the third category of costs—semi-variable costs—and how to incorporate them into a model.
- Examine the concept of “build it, then link it,” so that you can start building your financial statements.
- Examine the concepts and skills that are required to build a depreciation schedule.
- Discover the optimal design and structure of the depreciation schedule.
- Practice using the HLOOKUP function to display the CAPEX vertically on the depreciation schedule.
- Explore how to automate the HLOOKUP function so that it works when you add rows to your table.
- Practice using the SUMIF function to display the CAPEX vertically on the depreciation schedule.
- Study a few different ways to transpose data, which can be helpful on the depreciation schedule.
- Discover how to create the waterfall in the middle of the depreciation schedule.
- Examine how to fully depreciate CAPEX within the life of the financial model.
- Calculate depreciation expense using the declining balance method.
- Explore how to convert your depreciation schedule into a fixed assets (PP&E) schedule.
- Examine why it is important to create an income tax schedule in a financial model.
- Discover why companies don’t always pay their taxes as cash in the current period.
- Study an example to understand how to calculate current and deferred taxes on the financial statements.
- Practice building the income tax schedule within the financial model.
- Examine the working capital concepts that are required in a financial model.
- Explore the concept of working capital days and why this is so important in a financial model.
- Discover the design of and the steps required to build an effective working capital schedule.
- Practice how to automate the days per year on the working capital schedule.
- Calculate the historical working capital days and learn how to forecast the days in the future.
- Calculate the working capital balances in the forecast periods.
- Examine the structure and discipline required to build effective debt and equity schedules.
- Explore the debt schedule and analyze the optimal order in which to build the schedule.
- Practice building up the cash section at the top of the debt schedule.
- Practice building up the long-term debt on the debt schedule.
- Discover the purpose of a revolver and the rules to build up a revolver in a financial model.
- Practice building up the revolving credit facility on the debt schedule.
- Practice building up the equity schedule in a financial model.
- Discover how to build up the income statement within the financial model and practice the techniques demonstrated.
- Explore how to build up the cash flow statement within the financial model and apply the strategies demonstrated.
- Examine how to build up the balance sheet within the financial model and implement the methods demonstrated.
- Explore the top 10 reasons that balance sheets in models don’t balance.
- Discover how to incorporate outputs into a model and how to create a powerful executive summary.
- Examine key techniques to ensure your model looks like a professional communication tool when printed.
Who should learn financial modeling?
Learning financial modeling can benefit professionals and students who want to strengthen their analytical skills in finance. This practical skills module may be particularly useful for:
- CFA® Program candidates preparing for careers in finance
- Finance students developing technical modeling skills
- Analysts who want to strengthen their financial modeling techniques
- Professionals working in investment analysis, corporate finance, or valuation
Financial modeling FAQs
Financial modeling is used to analyze financial performance, forecast future results, and support investment or business decisions. Financial analysts often use models to evaluate companies, assess valuation, test different scenarios, and understand how changes in key assumptions affect financial outcomes.
Basic familiarity with financial statements is recommended. Candidates who have completed the CFA® Program Level I Financial Statements Analysis content will be well prepared for this module.
The Financial Modeling Practical Skills Module teaches techniques used to build three-statement financial models, including revenue forecasting, cost modeling, working capital analysis, capital structure modeling, and linking financial statements within a single model.
The module typically takes 10–20 hours to complete and can be completed online at your own pace.
The module uses Microsoft Excel, which is widely used in financial modeling across investment banking, corporate finance, and investment analysis.
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