The main ingredients of a financial model

First of all, there needs to be a situation or problem that requires you to make a financial decision. Your decision will depend on the outcome of two or more options. Let's look at the various aspects of a financial model:

Financial decisions: Financial decisions can be divided into three main types:

• Investment
• Financing
• Distributions or dividends

Investment

We will now look at some reasons for investment decisions:

1. Purchasing new equipment: You may already have the capacity and know how to make or build in-house. There may also be similar equipment already in place. Considerations will thus be whether to make or buy, sell, keep, or trade-in the existing equipment.
2. Business...