The process involved in making a financial model involves decomposing the financial and operational values of a business into a collection of assumptions. These assumptions represent the inputs to the model that is processed to provide an output. The product usually takes the form of a report ready to meet the knowledge needs of the desired user.
The financial models will be used for various purposes, including:
Analysis of the financial impact of strategic choices.
Assessing investment opportunities.
Asset management valuation / requirements.
The capital structure needs evaluation.
Determine the value of a proposal.
Presenting the planned financial information to the regulatory or financing authorities.