From the course: Financial Analysis: Making Business Projections
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Explaining the top-down approach - Microsoft Excel Tutorial
From the course: Financial Analysis: Making Business Projections
Explaining the top-down approach
The top-down approach is tackling the same problem but from a completely different angle. It is a much simpler and less detailed. In the previous chapter, we went through a lot of detail down to individual transactions with the objective of including anything we know is happening in the company. With the second approach, it is more like an astronaut's view of the piano, focusing only on the big picture. And as I explain at the beginning of the course, the second approach is not one you can use on its own. As it's a way to high level. It is helpful though as an extra point of view the two will combine with our bottom-up approach. So again, why is there any added value in looking at the P&L from a very high level standpoint? Simply because when working in a decent way, we focus solely on the things we believe will happen. For example, we include only the exceptional elements that we know will be happening and expenditures that make sense with regards to the plan we have laid out. There…
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