What is Financial Modelling?

Financial modeling involves creating an abstract representation of a real-world financial situation. This is typically done using spreadsheets or specialized software. Financial models are used for various purposes, including: valuing a business or asset, forecasting future financial performance, making investment decisions, analyzing financial statements, and planning capital structure changes. They often involve projecting a company's income statement, balance sheet, and cash flow statement under different scenarios to assess risk and potential returns.