Financial Modeling Refers to the Creation of a Mathematical Representation

question 18

True/False

Financial modeling refers to the creation of a mathematical representation or model of the financial and operational characteristics of a business.

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Definitions:

Economic Profit

The difference between total revenue and the total opportunity costs (both explicit and implicit) of all resources used.

Productive Efficiency

A situation where goods and services are produced at the lowest possible cost and resources are utilized most effectively.

Allocative Efficiency

A state of resource allocation where goods and services are distributed according to consumer preferences and in a way that maximizes social welfare.

Marginal Cost

The uptick in cost associated with producing an extra unit of a product or service.