In financial models, what primarily drives calculations and outputs?

In financial modeling, calculations and outputs are fundamentally driven by inputs. Inputs refer to the specific numerical values, such as revenue projections, expense estimates, capital costs, or any other quantifiable metrics that are fed into the model. These inputs serve as the foundation for calculations performed within the model, influencing everything from cash flow projections to valuation estimates.

While assumptions, historical trends, and market conditions play important roles in shaping the inputs to the model, they are not the primary drivers of calculations themselves. Assumptions guide how you formulate those inputs — for example, you might assume a certain growth rate based on historical data. Historical trends can inform the inputs by providing context or data to support assumptions, while market conditions can impact inputs by influencing variables like interest rates or consumer behavior.

Therefore, inputs are the essential determinants of outcomes in a financial model, as they directly influence the calculations and resulting outputs.