Financial modeling is the process of creating a numerical representation of a company's financial performance. This model typically includes projections for revenue, expenses, and cash flow, helping businesses make informed decisions about investments, budgeting, and strategic planning. These models are often built using spreadsheet software, allowing users to manipulate variables and see how changes affect overall financial outcomes. Analysts use financial models to evaluate potential projects, assess risks, and support valuation efforts, making them essential tools in finance and investment.