The art of company financial modelling
In corporate finance, the term financial modelling denotes a widely used technique of comprehensive customised quantification of a company’s entire operations. Even though not mathematically strict, such models exhibit descriptive, explanatory and predictive qualities. The paper elaborates on the main steps and principles for building financial models of companies. It also identifies required assumptions and certain statistical properties of well-constructed models. Furthermore, it describes the use of such models for decision support purposes, supplemented by an illustrative example. Finally, it discusses general characteristics and concerns associated with appropriate model construction and use.
- Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution License that allows others to share the work with an acknowledgement of the work's authorship and initial publication in this journal.
- Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgement of its initial publication in this journal.
- Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work (See The Effect of Open Access).