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Mastering Financial Modeling: A Professional’s Guide to Building Financial Models in Excel by Eric Soubeiga

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CHAPTER ONEIntroduction to Modeling

1.1 DEFINITION

Modeling can be defined as the process of describing a business situation through the use of an instrument called a model. Models are built to provide a rational and rigorous basis for decision making.

1.2 EXAMPLES OF SITUATIONS REQUIRING THE USE OF A MODEL

The following are examples of situations in which a model can be of use:

Image A model can be used to provide a solid foundation that supports a structural business change. For example, behind every significant commercial deal (for example, a merger of two companies), there is a financial model.

A model can be used to help identify critical business ...

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