Which of the following describes the role of a financial model?

A financial model serves as a quantitative method for decision-making, which means it is specifically designed to help analyze financial data, forecast future performance, and support strategic planning. These models often utilize mathematical and statistical techniques to project outcomes based on various input assumptions, allowing businesses and financial analysts to evaluate potential scenarios and make informed decisions.

In the context of finance, a well-constructed financial model can simulate different business scenarios, assess the impact of changes in various factors such as interest rates or sales volume, and ultimately guide management in strategic decision-making. This analytical capacity is what distinguishes financial models from other tools or documents used in a business environment, as it focuses on numerical projections and the implications of financial trends.