The past 3 summers I have helped teach financial modeling training for the interns and new hires at my investment bank. We give them a blank model with one year of financials, a set of assumptions, and have them build a fully-functional, 3 statement (Income Statement, Balance Sheet, Cash Flow Statement) model with varying levels of complexity.
For the interns this can be quite a challenging task. Most of them are rising seniors in college and have barely taken 1 or 2 finance classes. Sure, many have studied the Vault guide and can recite some finance mumbo jumbo in an interview, but actually building a sophisticated model that is flexible under a variety of assumptions is a new and daunting tasks.
And the new hires aren’t that much better at this task. Most of them have been traveling all summer while simultaneously trying to party and rest as much as possible in advance of 2-3 years of intense works and ridiculously late nights, so they really aren’t on top of their game yet.
I remember the first time I had to teach the modeling in the summer of 2010 I was nervous. I don’t know if I should have been, I mean I had crushed the model in 2008 as an intern, went through the new hire training in 2009, and had a full year of real-world experience as an investment banking analyst during 2009-2010.
But still, I was nervous because I knew that in order to teach a subject you have to know it cold. And be able to answer any and all questions on the subject.
Any good student doesn’t want to just know HOW to do something, they want to know WHY it works like that, why that is the best solution, etc. And the somewhat annoying, teachers pet type of students want to know what about each and every potential obscure situation that would never happen in real life.
You also have to be able to explain a seemingly complicated subject in terms that a novice can understand.
Doing the model correctly is only half the battle. You have to able to clearly and concisely explain the analysis that you performed. The only way you can do that is if you thoroughly understand what you’ve done.
My favorite tip when teaching the model training is to tell them to write out their complex excel formulas as if they were real sentences.* To me, that is the easiest and clearest way to make sure you understand the underlying logic behind the calculation (instead of just copying someone else’s formula).
Regardless, going through the process of teaching the model always makes me feel more comfortable with my own excel skills. It forces me to take the time to make sure I understand everything and can clearly explain it to other people
I haven’t had many opportunities to teach outside of the intern training but I’m looking forward to get more involved with tutoring and/or teaching a Skillshare class on a topic at some point.
* For example, “If the Cash Flow Before Revolver Draw/Payment is negative, then give me the minimum of either (i) the negative Cash Flow Before Revolver Draw/Payment balance, or (ii) the Amount of Revolver Availability. If the Cash Flow Before Revolver Draw/Payment is positive, then give me the negative minimum of either (i) the positive Cash Flow Before Revolver Draw/Payment balance, or (ii) the beginning Revolver balance.” or in excel =IF(AB176<0,MIN(-AB176,AB172),-MIN(AB176,AB178))