What is the difference between a financial model and a financial theory

What is the difference between a financial model and a financial theory Introduction: The Significance of Financial Analysis Hello everyone, and welcome to today's video. In the world of finance, analysis is the bedrock of decision-making. It enables professionals to assess the viability of investments, predict market trends, and make informed choices. Two key components of financial analysis are financial models and financial theories. While they may seem similar, they serve distinct purposes. Let's explore their differences. Financial Models: The Blueprint for Analysis A financial model is essentially a quantitative representation of a real-world financial situation. It's like a blueprint that outlines the various components, variables, and relationships within a financial scenario. These models are often built using spreadsheets, with formulas and calculations that capture the intricacies of the situation. The goal of a financial model is to simulate the potential outcomes of a given scenario, providing insights into the financial implications. For instance, a company might create a financial model to project its revenue growth over the next five years, factoring in variables like market conditions, expenses, and customer demand. The Power of Financial Models: Scenario Analysis and Decision-Making