18.3. Use of Financial Modeling in Practice
The use of financial modeling, especially a computer-based financial modeling system, is in wide use. The simple reason is the growing need for improved and quicker support as a management decision support system (DSS) and wide and easy availability of computer hardware and software.
Some of the functions currently served by financial models, as described by the users, are:
Projecting financial results under any given set of assumptions, evaluating the financial impact of various assumptions and alternative strategies, and preparing long-range forecasts
Computing income, cash flow, and ratios for five years by months, as well as energy sales, revenue, power generation requirements, operating and manufacturing expenses, manual or automatic financing, and rate structure analysis
Providing answers and insights into financial "what-if" questions and providing scheduling information, such as production planning
Forecasting the balance sheet and income statement with emphasis on alternatives for the investment securities portfolio
Projecting operating results and various financing needs, such as plant and property levels and financing requirements
Computing manufacturing profit, any desired processing sequence through the manufacturing facilities, and simulating effect on profits of inventory policies
Generating profitability reports of various responsibility centers
Projecting financial implications of capital investment programs
Showing the effect ...
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