4-D Resources Advisory LLC

Within the investor role, at both the private equity level, for the general partner or portfolio company, or the public investor level, financial models are critical to the valuation, analysis and transaction execution processes. A probabilistic approach to financial modeling, versus the more traditional, static approach, will enhance the tools and data from which to make better decisions. Benefits from using a probabilistic approach, in addition to those previously noted for executive-based financial models, include:

• Allows the GP to better understand the relative risk and return of each company in their
portfolio, and where they fall on the portfolio’s efficient frontier
• A simple way to have portfolio companies use a similar financial model, as either a primary or
secondary tool, to ensure consistency of input and correlation assumptions, as relevant, across
the portfolio
•Facilitates greater inclusion of more data relevant to public company valuations, and supports more meaningful insight for comparable investment risk/return analysis
• A simple, cost-effective tool to provide consistent output data to facilitate quicker, better
operational and financial comparisons across the portfolio
• Introduces a rigorous approach to better quantify more qualitative variables in a manner that
supports a better investment decision-making process