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The Basics of Financial Modeling by Jack Avon

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CHAPTER 1

Financial Modeling: An Overview

This chapter serves as a background to financial modeling by providing a definition and describing the financial modeling environment.

Financial Modeling: A Definition

Modeling is a specific discipline that often but not exclusively uses spreadsheets. Financial modeling is, in fact, a part of financial analysis and emphasizes the interpretation and output of inputs and variables. A suitable definition should mention processes, variables, and quantitative relations, hence the following definition:

Financial modeling is a theoretical construction of a project, process, or transaction in a spreadsheet that deals with the identification of key drivers and cvariables and a set of logical and quantitative ...

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