Question

Question 1
Financial models are often use as decision-making tools.

(a) Illustrate three (3) situations in your workplace or personal experience where financial
modelling is used.

(b) Identify five (5) features of a good financial model.

Answer 1

(A) three situations were financing modelling are used in an organisation are as follows -

I. financing model can be applied in case of discounting of the future cash flows to the present and it is applied in my organisation in discounting the future cash flows at the present value.

II. Financing modelling is also used in mergers and acquisitions in my organisation to merge and acquire companies

III financing modelling also have applicability regarding to comparable company analysis in my organisation because financial modelling is used for comparing the various companies together

B. Five features of good financing model are as follows-

I.financial models should have adequate assumpptions which are followed in Real world

II. Financial models should be easy to understand and they can be easy to use

III. Financial model should be highly flexible in nature and they can be modified according to the need of the company

Iv.there should be a high degree of clarity in preparation of the financing model and they should be used in clarity regarding various complex procedure

V. financing model should have consistency in the applicability in the long run and they should not be highly fluctuating.