A financial model can be defined as the collection of mathematical assumptions for the purpose of the results, financial position, and cash flow of a business in the future, often with a view to arriving at a value for the business. Building reliable assumptions is critical to the success of your model.
The following is a quick checklist for your assumptions:
- Based on actual historical figures
- Clearly explained
- Easily verifiable
- Properly documented
- Visually distinguishable in your model (usually with a different font) from calculated cells