This week, we have a week-long modeling training that helps us learn the essential knowledge of Finance – modeling.
Due to a conflict, I missed the first two sessions. Luckily, I have been learning concepts such as free cash flow, CAPM, and time present value for summer school, so I did not miss too much. Beth also kindly emails the excel sheet she used, which is helpful. The one thing that distinguishes Ellery’s learning experiences with school is that Ellery really emphasizes applying the knowledge to real-life examples. I feel like I re-learned all my knowledge again just browsing through the steps of modeling.
We touched on both Discounted Cash Flow (DCF) and Leveraged Buyout Modeling (LBO); they are both widely used in the Finance world, where LBO is more frequently used in the Private Equity field. Both models are strictly follow a procedure that starts from assuming the company and then extracting information from their financial statements, the comparables’ information, or even the industry’s information. After inputting the existing and historical information, we apply assumptions to create future cash flow, and and model exit situations to conduct return analysis. Last, we aim to create a sensitivity analysis to test different scenarios. This is a comprehensive and complicated process and thankfully Beth and Orlando helped us work through and encouraged us to ask questions all the time to make sure we understand both the concepts and the practical actions in Excel. They also leave “homework” to ask us to build our own model from scratch–I guess this will take a decent amount of time, but this provides a unique opportunity to work through and build something of your own, and this modeling can be used for a long time.
This summer is approaching its end; I really cherish the time I spent with Ellery, and I aim to finish strong!