Use this financial model:

• To put numbers to or to quantify the ideas in your business model (BMC)
• To test assumptions in your business model with numbers
• To understand key consequences of assumptions on the viability of the business idea
• To help you iterate your business idea with an even higher level of confidence
• Is the business idea profitable and when? (Income statement or profit-and-loss statement)
• Will I have timely cash flow to pay my short term obligations? (Cash flow statement)
• What kind of financing is best for my business? What kind of financing can I get? Is my financial structure healthy? (Balance sheet)

The output of a financial model is used for decision making and performing financial analysis, whether inside or outside of the company. Inside a company, executives will use financial models to make decisions about:

• Raising capital (debt and/or equity)
• Making acquisitions (businesses and/or assets)
• Growing the business organically (i.e. opening new stores, entering new markets, etc.)
• Selling or divesting assets and business units
• Budgeting and forecasting (planning for the years ahead)
• Capital allocation (priority of which projects to invest in)
• Valuing a business