A Financial Model is the tool that’s used to objectively quantify the financial future of an Investment, Home, Business or Financial Instrument. It includes detailed, situation-specific data for financial analysis and decision-making.
It’s a financial representation of some, or all aspects of a firm or given security. OR it’s a mathematical model of different aspects of the financial health of a given company.
Financial Modeling is the mirror which shows:
- Whether an organization needs additional funds (debt or equity)
- How a business will react in different financial situations or market conditions
- Which company to investment in for better returns i.e. comparative analysis
- An entity’s strengths, weakness, and risk level
- The value of a firm, business, or investment