Quick Question about Modeling Terminology

Operating model can refer to a number of things. In what context was the term used?

If it was referring to some portion of an actual model, then I'd most likely assume your friend was referring to the portion of a model that contains the P&L build-up and other income statement drivers. More broadly, the term is also used to refer to a company's business model.

it was referring to an actual model, he was talking about having to build an operating model in an interview..so basically the interviewer wanted to see how well he could forecast the income statement?

or it could mean a financial model that operates correctly based on the assumptions u put in.

The interviewer was probably more concerned with his approach to building out an income statement (e.g., he may have been asked to project revenue by product type, which could involve making logical assumptions around growth in unit volumes and changes to unit pricing for each of the product types).

When I think of operating model, I think about company/business models, i.e. P&L, balance sheet and cash flow, all of which are fully integrated, and perhaps a revenue or COGS build-up. So for the most part, if you're asked to build an operating model in an interview, they're probably just testing you on your modeling mechanics (how you build projections and basic formatting issues), as well as your knowledge of how the three financial statements link together.

Numi's description is how I tend to think of the term. I tend to interchange the term "operating" and "financial" model.