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Unformatted text preview: 1 Click to edit Master title style Business Analysis and Valuation Class 6: Prospective analysis Financial Statement Analysis Class 6: Forecasting Prospective Analysis ■ Prospective Analysis ■ Forecasting ■ Valuation ■ Forecasting Financial Statements ■ A simple framework ■ Forecasting process ■ An example: Wal-Mart Forecasting We have two classes of forecasters: those who don’t know, … and those who don’t know they don’t know. John Kenneth Galbraith A. Forecasting: Overview ■ Forecasting builds on what we have learnt: ■ Strategy analysis ■ Accounting analysis ■ Financial analysis ■ Forecasting relies on assumptions, and there is no “standard” way to make assumptions. ■ Sound assumptions must be ■ Based on good understanding of the firm’s operation ■ Based on valid expectation on economic and industry conditions ■ Internally consistent A1. Forecasting Framework 1 ■ Comprehensive forecasting produces ■ Income statement ■ Balance sheet ■ Cash flow statement ■ We focus on “key” drivers ■ Sales ■ Profit margin ■ Assets turnover ■ Capital structure ■ We focus on “condensed” financial statements ■ Fewer assumptions A1. Forecasting Framework 2 ■ Some common assumptions for companies with stable...
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This note was uploaded on 01/27/2012 for the course FINS 5511 taught by Professor Mike during the Three '11 term at South Australia.
- Three '11