Financial modeling is the process of creating a numerical representation of a company's financial performance. This model helps businesses forecast future revenues, expenses, and profits by using historical data and various assumptions. It often involves spreadsheets where different scenarios can be tested, allowing decision-makers to evaluate potential outcomes and make informed choices. These models are essential for various purposes, such as budgeting, valuation, and investment analysis. For instance, a startup might use financial modeling to attract investors by demonstrating its growth potential. Overall, financial modeling serves as a vital tool for understanding and planning a company's financial future.