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The Basics of Financial Modeling by Jack Avon

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CHAPTER 7

Financial-Based Calculations

If you recall from Chapter 2, one of the key modeling disciplines is the separation of inputs, calculations, and outputs. The outputs are linked to the calculations, and the calculations are linked to the inputs. Thus the calculations are in the middle—they are the link between the inputs and the outputs like the glue between two components.

I have purposely made sure that we only tackle the calculations once we have established both inputs and outputs because if you follow best practice, that is how the model develops. You want to start with outputs because they can be defined, follow up with the inputs because they originate from the drivers in the outputs, and afterward link the two elements with the ...

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