BIS3589_ch05 - Chapter 5 Financial Forecasting The Importance of forecasting Financial decision making Valuation Stock valuation Company valuation

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Unformatted text preview: Chapter 5 Financial Forecasting The Importance of forecasting Financial decision making Valuation Stock valuation Company valuation in merger and acquisition Percentage of Sales Method This is a simplistic method with less data requirement It assumes that many items in I/S and B/S maintain a constant relationship to level of sales . Step in using percentage of sales Forecasted Sales is the sales figure forecasted from the historical data Percentage of sales for each item is the average percentage of that item for at least two periods of time Step in using percentage of sales The question “ is it likely that this item will change directly with sales ” must be asked! YES , then that item will be calculated by multiplying the percentage of sale by the forecast sales NO , look for relevant information, and then leave the item unchanged (equal to last period) Proforma Income Statement Sale determine it by forecasting technique like regression (trend analysis) Cost of goods sold...
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This note was uploaded on 01/11/2012 for the course FINANCE fin 3701 taught by Professor Tengihla during the Spring '11 term at Assumption College.

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BIS3589_ch05 - Chapter 5 Financial Forecasting The Importance of forecasting Financial decision making Valuation Stock valuation Company valuation

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