Building a financial model is essential for visualizing the potential financial future of a company. It translates detailed operational aspects into numeric forecasts, helping to predict profits, estimate costs, and assess the impact of economic changes. This tool is crucial for evaluating business valuations and planning strategic moves.
Investors use financial models to simulate various business scenarios, such as the effects of a 10% sales fluctuation on cash flow. These models provide crucial insights that guide investment decisions by illustrating potential financial outcomes under different conditions.