FM2

Question 1

Model Overview - Generic Definition

Answer 1

A representation of a thing, system, or theory such thatcharacteristics of the original can be examined or changed

Question 2

Model Overview - Business Definition

Answer 2

A computer program using structured logic to show the interactive relationships between dynamic variables,resulting in output to answer the questions of management

Question 3

Model Overview - Models are diferent from analysis

Answer 3

▪ Models are different than “ad hoc” analysis, where you must follow detailed preparatory steps to see output
▪ With a model, whenever you change the input and assumptions, your output will change automatically

Question 4

Why use a model?

Answer 4

Accuracy/precision - if an idea can be described, it can bemodeled
- nothing is to complex to be modeled

Efficiency - saves time on repetitive calculations
- simplifies business problems breaking it into parts
- document sources of data, assumptions and metedologies in one place

Interactivity- Produces “what if” analyses to check the sensitivity of solutions to business changes time
-Serves as a presentation tool, or directly produces
content for presentations

Question 5

How to
build a
model - Structuring and design

Answer 5

▪ Determine the model’s
purpose
▪ Define the output
▪ Identify the required data
▪ Define flow and content of
major sections
▪ Map the physical layout

▪ This step has high ROI
–Over 10 times return
on time spent
▪ This step can be a
deliverable itself

Question 6

How to
build a
model - Construction

Answer 6

▪ Establish assumptions
▪ Input required data
▪ Format model for easiest
use based on established
structure
▪ Test for errors

▪ With the proper structure
and design, the model will
write itself

Question 7

How to Build a model - Use and Care

Answer 7

▪ Test logic and limits
▪ Update and modify the
model as needed
▪ Memorialize the model
–Document it