Which Financial Modelling Techniques Are Used in Investment Banking?

You may have seen financial modeling in action if you’ve ever seen an investment banker work late into the night, staring at spreadsheets full of numbers, assumptions, and projections.

A carefully built Financial Modelling Techniques is behind every merger, acquisition, IPO, or valuation report. These models aren’t just Excel files; they’re tools that help professionals make decisions that can move millions or even billions of dollars.

So, the big question is: which financial modelling techniques are used in investment banking, and why are they so important? If you’re a finance student, an MBA graduate, or someone exploring high-growth finance careers, understanding the financial models used in investment banking can completely change how you see numbers. This blog explains what financial models are, what they are used for, the different types of financial models, and how real-world analysts use financial model example Excel files every day.

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What Are Financial Models? (Basics Explained)

• Before diving into techniques, let’s answer a very common question: what are financial models?
• A financial model is a structured representation of a company’s financial performance. It is usually built in Excel and uses historical data, assumptions, and projections to estimate future outcomes.

What Are Financial Models Used For?

In simple terms, financial models are used to:

• Value companies
• Analyze risk
• Compare investment options
• Support informed decision-making

The basic idea behind almost every financial model example Excel file is to convert raw financial data into meaningful insights.

Why Financial Modelling Is So Important in Investment Banking

Investment banking decisions must be driven by data. When billions of dollars are involved, intuition alone is not enough.

That’s why investment banks rely heavily on financial models to:

• Forecast cash flows
• Evaluate deals
• Justify valuations
• Present multiple scenarios to clients

If you search “Which financial modelling techniques are used in investment banking?” on Quora, you’ll find a consistent answer: mastering core financial models is the foundation of investment banking.

Types of Financial Models Used in Investment Banking

There are many kinds of financial models, but investment banking focuses on a specific set. Below are the most important ones, explained clearly and practically.

1. Three-Statement Financial Model

This is the foundation of almost all other models.

It links:

• Income Statement
• Balance Sheet
• Cash Flow Statement

Most financial modelling examples start here. A strong three-statement model explains how a business actually works and forms the base for advanced valuation models. Almost every financial model example Excel used by analysts is built on this structure.

2. Discounted Cash Flow (DCF) Model

• The DCF model is one of the most important financial models used in investment banking.
• It estimates a company’s value by forecasting future cash flows and discounting them to present value. Nearly every financial model example PDF includes a DCF model because it answers the core valuation question:
• What is this company truly worth today?

3. Comparable Companies Analysis (Comps Model)

This model values a company by comparing it with similar publicly traded firms.

Investment bankers use valuation multiples such as:

• Price-to-Earnings (P/E)
• EV/EBITDA

Comps are one of the most commonly used kinds of financial models because they provide quick, market-based valuations.

4. Precedent Transactions Model

• This model analyzes past mergers and acquisitions to determine valuation benchmarks.
• It is one of the most practical financial models used in investment banking, especially for M&A advisory. When professionals ask on Quora about financial modelling techniques used in investment banking, this model frequently appears in the answers.

5. Mergers & Acquisitions (M&A) Model

M&A models assess whether a merger or acquisition creates value.

They incorporate:

• Synergy assumptions
• Deal structure
• Financing mix

Many advanced financial modelling examples taught in investment banking courses include M&A models, often available as financial model example PDFs for learning purposes.

6. Leveraged Buyout (LBO) Model

• LBO models analyze acquisitions funded primarily with debt.
• These are among the most complex yet powerful financial models. They play a critical role in private equity transactions and are an essential part of the financial models used in investment banking.

7. Budgeting and Forecasting Models

• Not all models focus on transactions.
• Budgeting and forecasting models help banks and corporations plan expenses, revenues, and capital requirements. These models demonstrate what financial models are used for beyond valuations and deals.

How Investment Banks Use Financial Modelling in Real Life

Consider an investment bank preparing a company for an IPO.

Analysts typically:

• Build a three-statement financial model
• Perform a DCF valuation
• Use comparable companies and precedent transactions

All these financial modelling examples are connected within Excel. This is why proficiency in financial model example Excel files is critical for investment banking roles.

Why Excel Is Still the Core Tool for Financial Modelling

Even in 2026, Excel remains the backbone of financial modelling.

Investment banks continue to rely on Excel because it is:

• Flexible
• Transparent
• Widely trusted by clients

While professionals often share financial model example PDFs, real learning happens when you build models from scratch.

The Right Way to Learn Financial Modelling

• Financial modelling is a hands-on skill. Reading theory is not enough you must practice.
• Structured training becomes essential if you aim to work in investment banking or valuation roles.

Why GTR Academy Is a Strong Choice for Finance Learners

GTR Academy is widely known as one of the best online institutes for SAP and related programs, and it also emphasizes practical, job-ready finance skills.

GTR Academy focuses on:

• Real-world financial modelling examples
• Hands-on Excel-based learning
• Industry-aligned curriculum
• Career guidance for finance roles

If you want to understand what financial models are, how they are used, and how they apply in investment banking, GTR Academy provides a structured learning environment.

Financial Modelling as a Career Skill

Financial modelling is not limited to investment banking.

It is widely used in:

• Corporate finance
• Equity research
• Private equity
• Advisory roles

Understanding different types of financial models expands your career opportunities and strengthens your professional profile.

GTR Academy’s Top 10 Questions About Financial Modelling and Investment Banking

1. What are financial models?

Financial models are structured tools used to analyze a company’s historical and projected financial performance.

2. What are financial models used for?

They are used for valuation, forecasting, investment decisions, and deal analysis.

3. Which financial modelling techniques are used in investment banking?

DCF, M&A, LBO, comparable companies, precedent transactions, and three-statement models.

4. What are the most common types of financial models?

Three-statement models, DCF, LBO, M&A, budgeting, and forecasting models.

5. Are investment banking financial models difficult to learn?

They can be challenging, but structured training and practice make them manageable.

6. Is Excel still used for financial modelling?

Yes. Investment banks still rely heavily on Excel for building financial models.

7. Are financial model example PDFs enough to learn?

They help with understanding, but hands-on practice is essential.

8. Where can beginners learn financial modelling?

Institutes like GTR Academy offer guided programs for beginners.

9. Do investment banks test financial modelling in interviews?

Yes, modelling tests are common in investment banking interviews.

10. Why choose GTR Academy for finance training?

Because it focuses on practical, industry-relevant skills and real-world application.

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Conclusion: Learn the Models to Understand the Deal

• Investment banking is about making informed decisions under pressure, and Financial Modelling is how those decisions are structured.
• By learning which financial modelling techniques are used in investment banking, you gain clarity, confidence, and career power. From basic financial model example Excel sheets to advanced M&A and LBO models, these skills define success in high-stakes finance roles.
• Financial models are more than numbers they tell the story of a business, its risks, and its future.