From the course: Financial Modeling Foundations

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Forecasting in financial statements

Forecasting in financial statements - Microsoft Excel Tutorial

From the course: Financial Modeling Foundations

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Forecasting in financial statements

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- [Instructor] Once we've gone through and built out our financial assumptions based on the historical figures, it's time to move on to the forward-looking portion of those assumptions. I'm in the 02_06_Begin excel file. Now, we've gone through and computed various historical metrics for the firm, revenue growth, cogs as a percentage of revenue, SG&A as a percentage of revenue, etc. The point of doing that on a historical basis was not because it was fun, maybe it is, maybe it's not right, but instead, because it sets the ground rules for what we think will happen going forward. Now there's a few different ways that we could estimate what might happen in the future to this firm. Let's just look at revenue growth for example. The approach we've taken as a starting point is just to say, let's use the average revenue growth over the last four years. In that case, it's 6.3%. An alternative approach would be to say, alright, well let's see what we think will happen to say, our market…

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