Financial models are used for valuation, investment decisions, determining financing needs and budgeting. In a good model, assumptions are kept separate, the statements are linked to each other and scenario and sensitivity analyses can be run easily.
Related terms
Sensitivity analysisMeasuring the effect of changes in key assumptions on the outcome.Discounted cash flow (DCF)A valuation method based on discounting the free cash flows an asset or company will generate in the future to the present using an appropriate discount rate.Financial restructuringRescheduling a financially distressed company's debts in terms of maturity, interest or amount by agreement with creditors.Completion accountsFinancial statements prepared as at the closing date of an acquisition, through which the final price is set by net debt and working capital adjustments.Cost of capitalThe minimum rate of return investors expect from an investment in return for the risk they take.Earn-outA mechanism under which part of the purchase price is paid depending on the target company reaching certain performance targets after closing.
Last updated: October 22, 2026 · This definition is for general information only.