What Is Financial Modeling?



What Is Financial Modeling?

Financial modeling

Justin Bumann is a business leader and entrepreneur who functions as a managing partner with an advertising firm serving clients throughout the United States. Further to his expertise in integrated marketing strategies, Justin Bumann leverages financial modeling to help clients make sound business decisions and conduct their operations with confidence.

Financial modeling leverages mathematical calculations to help companies create financial representations of their various facets. Through these calculations, the model informs decision-making, with more complex models providing recommendations based on the available data. Several financial planning models exist, each focusing on different areas. For example, the Fed model helps users determine market direction and trends, thus helping companies developing advertising and product strategies.

The overall goal of financial modeling is to use data to create a forecast, often related to the future earnings of a company or the evolution of the marketplace. The key to a good financial model is the ability to capture as many variables as possible, thus accounting for every issue and trend that could affect the financial future of a company.

An Overview of Financial Modeling – What It Is, How It Works

Financial Modeling pic

Financial Modeling
Image: investopedia.com

Entrepreneur Justin Bumann understand the need for rigorous analysis and planning required for a successful marketing and business campaign. For Justin Bumann and his team, high-stakes situations call for high-level strategies involving processes such as financial modeling.

Using financial modeling, a company can gain new insights by creating a replica of its entire business – or any aspect of its business – down to a single identified investment. A piece of the financial model can additionally encapsulate a specific business event, such as return on investment or other aspects of portfolio management.

For any level in the business cycle, financial modeling offers the opportunity to use outcome-based information to provide strategic direction. Based in mathematics, financial modeling allows business professionals to leverage objective data to take charge of their own workplace operations.

The optimum financial model keeps things easy to grasp and focused on the basics. For example, using an Excel spreadsheet and only two data sets (past and current performance), a sales-oriented financial model can provide a formula for anticipating future performance of the same item.

Companies find financial models especially useful when they are contemplating entering new markets, acquiring new properties or divesting from existing ones, or seeking funding for expansion.