Financial models are tools used to represent the financial performance of a business or project. They typically use mathematical formulas and historical data to forecast future revenues, expenses, and cash flows. These models help stakeholders make informed decisions about investments, budgeting, and strategic planning. Common types of financial models include discounted cash flow (DCF) models, comparative company analysis, and leveraged buyout (LBO) models. Each model serves a specific purpose, such as valuing a company or assessing the viability of a project. By providing a structured approach to financial analysis, these models facilitate better understanding and communication of financial information.