Financial Modeling & Valuation
Course Introduction
Welcome to Financial Modeling & Valuation!
Welcome to the most practical finance course you'll ever take. While other courses teach you theory, this one teaches you to do. By the end of this course, you'll be able to build the same financial models used by investment bankers, private equity professionals, and corporate finance teams at Fortune 500 companies.
Financial modeling and valuation skills are among the most valuable and transferable competencies in finance. Whether you're analyzing a potential acquisition, evaluating a startup investment, or preparing for a career in investment banking, the techniques you'll learn here form the foundation of professional financial analysis.
Why Financial Modeling Matters
Every major business decision involves valuation:
Investment Decisions
- Should we acquire this company?
- Is this stock undervalued or overvalued?
- What's the right price for this asset?
Strategic Planning
- How much is our new project worth?
- What's the value impact of entering a new market?
- Should we invest in growth or return cash to shareholders?
Career Advancement
- Investment banking analysts build models daily
- Private equity associates evaluate deals using these techniques
- Corporate finance teams use models for strategic planning
- Equity research analysts value companies for recommendations
Entrepreneurship
- How much is my startup worth for fundraising?
- What's a fair valuation for my exit?
- How do investors evaluate my company?
The ability to build a financial model and determine what something is worth separates finance professionals from everyone else.
What You'll Learn
By the end of this course, you will be able to:
Financial Statement Analysis
- Interpret financial statements through a modeler's lens
- Link the three financial statements together
- Identify key drivers and model assumptions
- Normalize financials for comparability
3-Statement Modeling
- Build an integrated income statement, balance sheet, and cash flow statement
- Forecast revenue using multiple methodologies
- Model working capital, depreciation, and capital expenditures
- Create debt schedules with automatic interest calculations
- Balance the balance sheet using circular references
DCF Valuation
- Calculate Free Cash Flow to Firm (FCFF) and Free Cash Flow to Equity (FCFE)
- Determine the Weighted Average Cost of Capital (WACC)
- Project cash flows using growth rates and driver-based approaches
- Calculate terminal value using perpetuity growth and exit multiple methods
- Build sensitivity tables for key assumptions
Comparable Company Analysis (Trading Comps)
- Select appropriate peer companies
- Calculate and apply valuation multiples (EV/EBITDA, P/E, EV/Revenue)
- Normalize earnings and adjust for non-recurring items
- Derive implied valuation ranges
Precedent Transactions Analysis
- Source and analyze M&A transactions
- Calculate transaction multiples and control premiums
- Adjust for deal-specific considerations
- Apply to current valuation
LBO Fundamentals
- Understand leveraged buyout mechanics
- Model sources and uses of funds
- Build a simple LBO model
- Calculate returns (IRR and MOIC)
- Understand what makes a good LBO candidate
Practical Application
- Value a real public company using multiple methods
- Reconcile valuations from different approaches
- Present an investment recommendation
- Defend your assumptions and conclusions
Who This Course Is For
Finance Students Preparing for investment banking, private equity, or corporate finance interviews? This course gives you the technical skills recruiters expect. You'll learn the same techniques taught in expensive bootcamps and on-the-job training programs.
Career Changers Transitioning into finance from another field? Financial modeling is the entry ticket. Master these skills, and you'll speak the language of finance fluently.
Working Professionals Already in finance but want to level up? Whether you're in FP&A, corporate development, or equity research, advanced modeling skills differentiate you from peers.
Entrepreneurs and Investors Making investment decisions for your startup or portfolio? Understanding valuation helps you negotiate better terms and make smarter investments.
Anyone Curious About Value Ever wondered what a company is really worth? This course demystifies valuation and gives you tools to answer that question for any business.
Prerequisites
This course builds on foundational finance knowledge. Before starting, you should:
Required Background:
- Completed Corporate Finance Fundamentals (or equivalent knowledge)
- Understanding of financial statements (income statement, balance sheet, cash flow statement)
- Familiarity with the time value of money (NPV, discount rates)
- Basic knowledge of cost of capital (WACC)
Technical Requirements:
- Microsoft Excel or Google Sheets (Excel preferred for advanced features)
- Basic spreadsheet proficiency (formulas, cell references, basic functions)
- Willingness to practice with actual models
Helpful but Not Required:
- Experience reading company annual reports (10-K filings)
- Exposure to financial databases (Bloomberg, Capital IQ)
- Prior coursework in accounting
If you haven't completed the prerequisites, consider taking Corporate Finance Fundamentals first. The concepts build directly on that foundation.
Course Structure
The course is organized into seven core modules plus this introduction and a conclusion:
Module 1: Financial Statement Analysis for Modeling Before you build, you must understand. We'll examine financial statements through a modeler's lens, focusing on the relationships between statements and the key drivers you'll need to forecast.
Module 2: Building a 3-Statement Model The heart of financial modeling. You'll build an integrated model from scratch, with the income statement, balance sheet, and cash flow statement all connected and self-balancing.
Module 3: DCF Valuation The theoretical gold standard of valuation. You'll learn to calculate free cash flows, determine appropriate discount rates, and derive intrinsic value through discounted cash flow analysis.
Module 4: Comparable Company Analysis (Trading Comps) How does the market value similar companies? You'll learn to select peers, calculate multiples, and derive valuation ranges from market data.
Module 5: Precedent Transactions Analysis What have acquirers paid for similar companies? You'll analyze M&A transactions to understand what premiums buyers pay and how to apply those insights.
Module 6: LBO Modeling Fundamentals How do private equity investors think about value? You'll learn the mechanics of leveraged buyouts and build a basic LBO model.
Module 7: Capstone Project Put it all together by valuing a real public company using multiple methods, reconciling your analyses, and presenting an investment recommendation.
How This Course Works
Learn by Doing Each module combines conceptual explanation with hands-on exercises. You'll build actual models, not just read about them. The exercises progress from simple to complex, building your skills systematically.
Real-World Examples We use realistic examples based on actual company data. You'll work with financial statements that look like what you'd encounter in professional settings.
Practice Problems Each module includes practice problems with detailed solutions. Working through these is essential—modeling is a skill that improves with repetition.
Best Practices Beyond mechanics, you'll learn professional best practices: formatting standards, error-checking techniques, and the shortcuts that separate novices from experts.
A Note on Tools
Excel vs. Google Sheets While both work, Excel is the industry standard for financial modeling. Some advanced features (like circular references for interest calculations) work better in Excel. If you're serious about a career in finance, invest in learning Excel well.
Templates and Starting Points We provide starter templates for each module. These give you structure while you focus on learning the logic. Eventually, you'll be able to build models from scratch.
The Goal: Understanding, Not Memorization Don't try to memorize formulas. Focus on understanding why each component works. Once you understand the logic, you can build any model.
Modeling Philosophy
Before we dive in, here are principles that guide professional financial modelers:
1. Simplicity Over Complexity The best models are as simple as possible—but no simpler. Add complexity only when it improves accuracy meaningfully. A 10-tab model isn't better than a 5-tab model if the extra tabs don't add insight.
2. Assumptions Drive Everything Garbage in, garbage out. Your model is only as good as your assumptions. Spend more time thinking about assumptions than building formulas.
3. Transparency Matters Anyone should be able to follow your model. Use clear labels, consistent formatting, and logical organization. The model should tell its own story.
4. Error-Check Obsessively One wrong cell reference can cascade through your entire model. Build in checks, balance figures, and sanity tests. Never trust a model you haven't verified.
5. Sensitivity Is the Answer No one knows the future. Instead of pretending you have the "right" answer, show how value changes with different assumptions. Sensitivity analysis is often more valuable than point estimates.
6. Context Over Precision A valuation of $47.23 per share implies false precision. Valuation is art as much as science. Round numbers, use ranges, and acknowledge uncertainty.
The Professional Standard
What does it mean to build "professional-quality" models?
Formatting Standards
- Inputs in blue font
- Formulas in black font
- Linked cells (from other tabs) in green font
- Hardcoded numbers (that should be inputs) in red font (these are errors)
- Consistent number formatting throughout
Structural Standards
- Separate assumptions, calculations, and outputs
- One formula per row, copied across columns
- No hardcoded numbers buried in formulas
- Clear section headers and labels
Documentation Standards
- Assumption explanations
- Source citations for data
- Version control and change logs
- Executive summary of key outputs
You'll learn these standards throughout the course and apply them in your capstone project.
Career Context
Where do these skills lead?
Investment Banking Analysts build models for M&A transactions, IPOs, and advisory work. Models you build might inform billion-dollar decisions. The hours are long, but the training is unparalleled.
Private Equity Associates evaluate potential acquisitions using LBO models. You'll assess whether a company can support debt, generate returns, and create value post-acquisition.
Corporate Development Strategic acquisitions require valuation. You'll help your company evaluate targets, negotiate prices, and integrate acquisitions.
Equity Research Analysts build models to support buy/sell recommendations. Your models inform how investors allocate capital.
Venture Capital Early-stage investing requires different approaches, but valuation fundamentals still apply. You'll assess startups' potential and appropriate entry prices.
Corporate Finance (FP&A) Financial planning relies on forecasting models. You'll budget, forecast, and analyze scenarios to guide corporate strategy.
Getting Started
You're about to develop skills that will serve you throughout your career. These techniques don't become obsolete—they're as relevant today as they were 30 years ago and will be 30 years from now.
Here's how to succeed:
1. Work Through Every Exercise Reading is not enough. Build the models. Make mistakes. Debug your errors. That's how learning happens.
2. Go Beyond the Examples Once you finish a module, try applying the techniques to a company you're interested in. Real-world application cements learning.
3. Build a Portfolio Save your work. By course end, you'll have models you can show potential employers or use for your own investments.
4. Ask Why, Not Just How Don't just copy formulas. Understand the logic. When you understand why, you can adapt to any situation.
5. Be Patient Modeling takes time to master. Your first model will be slow and messy. Your tenth will be faster. Your hundredth will be professional. Embrace the learning curve.
Ready to Begin?
You're joining thousands of finance professionals who have mastered these skills. They sit in investment banks, private equity firms, hedge funds, and corporate offices around the world. They all started where you are now.
The difference between understanding valuation conceptually and being able to build a model is enormous. This course bridges that gap.
In Module 1, you'll start by looking at financial statements through a modeler's lens—understanding not just what the numbers mean, but how to project them forward.
Let's build.
"Price is what you pay. Value is what you get." — Warren Buffett
"Valuation is more art than science." — Every honest finance professional
"In God we trust. All others bring data." — W. Edwards Deming
The data starts now. Proceed to Module 1: Financial Statement Analysis for Modeling.