What is financial modeling primarily used for?

Financial modeling is primarily used to create a mathematical representation of company performance, which allows analysts and decision-makers to understand financial dynamics and project future financial outcomes based on various assumptions. Through financial models, one can simulate different scenarios, assess risks, and evaluate the impacts of various factors on a company's financial health. This process is crucial for preparing budgets, forecasting revenue, assessing investments, and making strategic decisions.

The mathematical representation of performance typically involves the use of historical data and financial statements, allowing for a thorough examination of revenue streams, costs, profits, and other financial metrics. By doing so, organizations can plan for growth, explore potential acquisitions, or prepare for changes in the market environment.

In contrast to this, other options focus on different areas of business management. Managing employee performance is centered around human resources and talent management, while analyzing market trends relates more to market research. Developing marketing strategies, on the other hand, is about positioning products and services in the marketplace. These activities may utilize insights gained from financial modeling but are not the primary purpose of it.