Reasons Why Financial Modeling is Compulsory for Businesses

Reasons Why Financial Modeling is Compulsory for Businesses

Financial modeling in Dubai is an important part of any company’s accounting process. The process involves identifying underlying factors, collecting data and creating a model. The model must then be tested and refined to find out any irregularities. The whole exercise is time-consuming and costly, and many companies do not have the resources to go through this process. Financial models are also limited in their applicability, limiting their usefulness for a business.

Helps business owners answer specific questions

A good financial model helps business owners answer specific questions. It includes various assumptions, such as revenue growth, financing rates, and even non-monetary values. A well-designed financial model helps companies make decisions, from expanding to merging to raising debt or equity. Stakeholders must understand the results of financial models to make the best decisions. And if a business is planning to raise capital, it is crucial to know whether the projected profit and loss figures are realistic.

Help forecasting

As a business person, you probably know the importance of financial modeling. Financial models help you understand the future potential of an organization’s financial situation. They are used to predict the financial impact of various changes in an organization. During financial modeling, you must make reasonable assumptions to get a clear picture of whether or not the investment is worth it. In addition, the more accurate your forecast, the more reliable your model will be.

Help budgeting

When starting a business, you need good data for making business decisions. Whether you’re looking for new funding, strategic exits, or mergers, you’ll need to know how your business will fare in the future. Financial modeling can help you make those educated guesses and make better business decisions. The benefits of financial modeling go beyond facilitating business decisions. Here are some reasons why financial modeling is mandatory for business.


There are many reasons why financial modeling is a must for business valuation. In addition to determining a business’s value, financial models are crucial for strategic planning. They can calculate the cost of new projects, set budgets and allocate corporate resources. The best financial models also provide sensitivity analysis and a series of basic assumptions. For example, a common line item that is forecasted is sales growth. Growth is defined as a percentage increase in gross sales over the previous quarter. There are only two inputs to the sales forecasting process for this model: the current quarterly revenue and the anticipated sales growth.