Learn about the basic components of a regression and the purpose of regression analysis.
- Predictions about the future…are quite often difficult to swallow.…Sometimes they're overly optimistic.…Other times, a bit too pessimistic.…It's difficult to find pro forma statements…or cash flows that are generally dead-on…about a company's performance for the next…three to five years.…You saw that there was a mix of hand waving…and raw data when dealing with pro forma statements.…A lot of uncertainty is involved when predicting the future.…However, we can attenuate concerns by using…a lot of past data, and extrapolating to the future.…
This can be done using a technique called linear regression.…The only condition in using this type of prediction…is that we have to assume stability.…There can be some volatility, but extreme deviations…from consistent trends will result in false reports.…We also have to make sure we're mapping the correct data,…looking at the right variables,…setting our units correctly…and watching for correct precision.…There's a lot to it.…I want to cover the basics of a linear regression…
- Explain the four different types of financial statements.
- Distinguish between the types of moving averages.
- Determine a seasonal adjusted trend.
- Break down pro-forma financial statements.
- Identify cash flows, and what increased liabilities and decreased earnings generally indicate.
- Tell what a regression is.
- Outline the naive approach.
Skill Level Intermediate
Finance Foundations: Business Valuationwith Jim Stice1h 39m Intermediate
1. Finance Basics
2. Simple Financial Forecasting
3. Pro Forma Financial Statements
4. Projecting Cash Flows
5. Introduction to Regression Analysis
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