Supplement Highlights
A model is a purposeful representation of the key factors in a situation and of the relationships among them. It abstracts the real situation, incorporating those factors that are important to the decision it was designed to address.
The main types of models are mental models, visual models, physical models, and mathematical models. Spreadsheet models are essentially mathematical models and are the focus of this supplement.
Mathematical models translate inputs into outputs through a set of relationships. Inputs consist of uncontrollable inputs and controllable inputs, sometimes called decision variables. There can be many outputs of mathematical models, but often we are interested in a relatively small number of primary outputs.
The recommended spreadsheet modeling process consists of understanding the problem, drawing a sketch of the model, developing a base-case spreadsheet, testing the spreadsheet, using the model to perform analysis, and documenting the model.
Models should be correct, flexible, and documented. Correctness implies that the numerical calculations ...
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